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Avoid These 6 Risks When Outsourcing IT Services

Business transformation strategy.

Mitigate Risks in Business Transformation ICT

Have you been considering outsourcing some of your business IT services? Then you are probably already aware of the numerous benefits including lowering your operating costs and allowing you to focus on core business competencies.

However, as beneficial as outsourcing may be, there is the potential for negative consequences. Don’t ignore the risks.

  1. Compromising Quality: There could be unintended effects on business processes, customers and brand reputation
  2. Cost Increases: If outsourcing your services doesn’t pan out as expected, there could be additional hidden or unforeseen costs resulting in a failure to achieve the expected savings
  3. Poor Customer Experience: A lack of customer focus by your outsourced IT provider can result in customer service dissatisfaction. Your company has put in great efforts to create positive experiences, so it’s important to keep standards high.
  4. Data Security: The risk of exposing confidential data, such as business financial information and HR databases, can heighten with outsourcing.
  5. Speed and Efficiency: On-time delivery performance and service quality issues could be jeopardized if service agreements aren’t properly in place and maintained.
  6. Pushback: Internal employee resistance could be overlooked entirely. Ensure you focus some attention on your internal teams to keep them onside.

Mitigating These 6 Risks

Follow the right steps to proactively avoid or eliminate these risks altogether. This process begins well before you higher a provider to help out, and planning is key to ensuring you'll get what you need out of the relationship.

Set Goals

Begin by clearly defining the goals of your outsourced relationship.

Keep in mind that just identifying the services to be outsourced isn’t the same thing as defining your end result. Go further and focus on your desired benefits from outsourcing some of your services. This could be freeing up time to work on core competencies, adding capacity to your business, increasing efficiency or lowering costs.

Clearly define the scope of outsourced IT services and map out the intended benefits. This is the most important step to avoiding potential risks as it sets the tone for your entire outsourcing relationship. And remember to have a balanced set of end goals. It’s enticing to focus only on costs, but that single-minded approach may lead to an unhappy outsourcing experience.

Assess Your Options

Once the scope and objectives are defined, perform a thorough assessment of potential partners. This process should begin with identifying those providers who have the ability to meet your IT service requirements.

Evaluation of providers needs to include their experience and qualifications. Ask for references and call each of them to gain an understanding of the vendor’s quality of services, customer support, ability and willingness to give the necessary attention your business requires.

If your outsourced service will involve transmitting sensitive information, such as the sharing of confidential customer data, then it’s imperative you ensure the provider has the appropriate security accreditations.

Some business may also have additional requirements such as ensuring no data is stored outside of Canada. Check if your potential provider can adhere to this if it applies to you.

Negotiate the Right Contract

Once you’ve selected a provider, contract negotiation will be a critical step in securing a long-term service delivery success.

All components of service delivery need to be clearly defined, documented and agreed upon. This includes price, billing, Service Level Agreements, and change management.

Ensure that you explore all regulatory issues that may affect the relationship including access to and ownership of proprietary information. Then create documented procedures to handle any potential disputes or breaches.

Speak the Same Language

Finally, ensure you develop good communication channels with your provider. Test these channels out and make sure you’ve got a solid two-way communication plan in place. Both sides need to have regular communication schedules and know the process for ad-hoc communications in the event of unforeseen events and issues that may arise.

Understanding each other’s communication practices is a necessity, as communication (or the lack of it) can single-handedly make or break an outsourcing relationship.

By addressing these risks proactively, you will ensure that your outsourcing relationship starts on the right foot and is setup for long-term success.

What challenges have you faced when outsourcing services, and how did you overcome them? Tell us in the comments below.

Mark Carriere

Mark is a 25 year veteran of the IT world. In his current role as a Change Maker, Mark continually seeks to improve IT governance through formal change management practices. Mark has also worked numerous years as a network architect, and IT Security analyst. Outside the office, he enjoys travelling the world climbing rock and ice, and sailing with his wife.

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