IT outsourcing in 2009 and beyond: Lessons learned for the new year

IT outsourcing in 2009 ebbed and flowed with the economic recession. What lessons did enterprise CIOs learn that they will carry into their IT outsourcing plans in 2010 and beyond?

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CIOs learned a lot in 2009 about the pros and cons of IT outsourcing. We checked back with some of the IT executives whose IT outsourcing arrangements we profiled in 2009 to find out which lessons they will carry forward into 2010.

IT outsourcing in 2009 ebbed and flowed as the recession-challenged global economy contracted IT budgets before loosening its grip a bit toward the end of the year. Along the way, many in-house IT jobs were eliminated, and many enterprise CIOs looked outside the office walls for IT outsourcing partners who could replace lost skills and globalize organizations as they anticipate a more hopeful 2010.

 Create an effective IT outsourcing governance body.

CIO Manfred Immitzer of telecom giant Nokia Siemens Networks B.V. said he would reuse the governance model behind the selection, and now management, of his firm's new three-year contract with Accenture PLC.

Although Immitzer will oversee the IT application management services agreement, a board-level governance body chose Accenture after evaluating a number of contenders, not just outsourcers who built the applications.

The governance model ensures that all stakeholders -- including procurement, business leaders and board members -- play a role in IT outsourcing decisions, he said.

"The governance structure worked very well, and the process we used I would keep or advance," Immitzer said. "I think it's the key to be fast and compliant and efficient in this economy."

Achieve economies of scale in your contract if you can.

Nokia Siemens' need for consolidating and outsourcing IT application management stemmed from the merger of Nokia's Network Business Group and Siemens AG's COM division two years ago. Accenture will manage applications related to Nokia's human resources and finance and control functions, as well as Nokia's corporatewide tools and platforms. IT application management around these functions was previously outsourced among a number of vendors.

Immitzer said that the outsourced management services, which include maintenance, monitoring and enhancements for Nokia Siemens' systems where appropriate, benefitted from bundling a number of application platforms into the deal. Thanks to the economy of scale, "the cost reduction compared to the base line we have today is very significant," he said.

Do even more due diligence on IT outsourcing partners.

"With the economic downturn, it makes it doubly important to do your due diligence on your outsourcing vendors to make sure they can weather the storm, especially if someone is a relatively young company," said Craig Wheeler, director of system development and information services at Marine Resources Group Services Inc. (MRG). Last fall, MRG chose to adopt Azaleos Corp.'s hybrid managed email outsourcing model.

The governance structure worked very well … it's the key to be fast and compliant and efficient in this economy.
Manfred Immitzer
CIONokia Siemens Networks B.V.

 For MRG, a Seattle-based holding company that oversees seven tug, barge and marine transportation companies, partner reliability was key. A series of mergers and acquisitions had left its companies running three Microsoft Exchange Server 2003 systems and four POP email programs, so the company wanted to collapse all of these systems into a Microsoft Exchange Server 2007 installation.

"Email is one of those things that either it works or it doesn't. As long as it's working, that's all users care about," Wheeler said.

From a financial standpoint, particularly during tough economic times, due diligence means asking your potential vendor direct questions about a series of things, Wheeler said. These include its ownership, source of financing, its three-year plan for growth, how it plans to grow from a staffing standpoint, its contingency plans should growth lag, and more.

Azaleos passed the test.

"I think it was a very strong decision on our part, and I'm very happy we chose to go in that direction," Wheeler said.

Build on your experiences.

With outsourcing success comes more comfort with the idea of more IT outsourcing. For instance, MRG is looking at replacing its payroll systems next year, and is questioning whether it should build them in-house or consider an outside provider.

"The experience I've had so far will reinforce my inclination to look for outsourcing opportunities as they come up," Wheeler said.

Let us know what you think about the story; email Rachel Lebeaux, Associate Editor, or follow her on Twitter @rlebeaux.


This was first published in December 2009

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