Application SupportCIOGeneral ITIL DiscussionIT Outsourcing and ITILITIL V3 for Application Support

How to Avoid or Minimize the Hidden Costs of IT Outsourcing: Part 7

When adding up all the “hidden” costs of IT outsourcing you may find that it costs more to outsource that it did before you started. What may have really happened is the costs were hidden and moved around to other IT functions and business users. If this is not bad enough, you may also be dealing with some very unhappy business users.

How do we avoid or at least minimize these hidden costs? How do we get early warning before we get to the point where the cost IT outsourcing far exceeds the “value” being delivered?

The following are field-proven techniques that if implemented will significantly reduce the “hidden cost” of IT outsourcing for both IT and business users:

1. Any contract for outsourcing IT support services must contain SLA’s within the statement of work that are agreed and signed off by IT, user stakeholders and the vendor.

2. If CMMI Level 5 is part of your selection criteria, make sure that the vendor actually uses the disciplines. Ask for a list of their last 15 software projects, pick 2 or 3 at random and audit them.

IMPORTANT NOTE: Vendors indicating compliance with CMMI standards must have process thresholds (size – hours, cost, and business importance) imbedded within their process. If work falls outside defined threshold limits, the process should have the capability to eliminate unnecessary steps. It is too easy to add process that increase cost, delay time-to-market and do not add value.

3. The transition of services from current staff to the vendor staff requires a comprehensive project plan with clearly specified deliverable artifacts and target dates.

4. Train the vendor team in the business functions and terminology they will needed to support the application and business users. Identify key application user contacts.

5. Team Lead and Application knowledge notebooks document relevant knowledge required to support the application. Before production cut-over the vendor’s application knowledge and business knowledge should be tested and signed off by all key stakeholders.

6. Communication between the IT organization and the Vendor Team (video conference or meetings), work status reports, metric reports, schedules and key people involved must be identified, tested and in place before transition begins.

IMPORTANT NOTE: This is particularly critical in a split team or off-shore environment where you may be communicating around the world across multiple time zones is a requirement.

7. Standard work processes and mechanisms for enforcing appropriate process disciplines across the vendor team must be in place and verified.

8. Software tools must be available for capturing data, time, resource usage, and tracking as work is performed. This is a critical component within any outsourcing engagement in order to produce meaningful work status, time, resource loading and SLA compliance reports.

9. Timely and accurate data are necessary for visibility into the activities and resources within the support environment. Without data you are flying blind and at the mercy of the vendor!

10. External Quality Assurance (QA audit) process must be in place which insures the Vendor’s team is complying contractual and process requirements. The QA process provides early warning before things go wrong and insures that the vendor’s performance is compliant with SLA services performance, work product quality and customer satisfaction goals agreed in the contract.

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