management: Nine Ways to Get More From an Outsourcing Arrangement
|In the mainframe sector, outsourcing is as common as shrinking budgets
and higher software costs. Many organisations have handed over their entire
mainframe hardware, operation and support to external providers; including
many Australian Commonwealth agencies. In fact only 79% of respondents to
the Arcati 2010 Mainframe survey ran in-house mainframe data centres.
Other organisations outsource only a part of their infrastructure or support,
such as their network infrastructure or COBOL application maintenance. Recent
offshoring developments have only accelerated outsourcing interest.
Organisations that haven't outsourced their mainframes may still face many
of the same outsourcing issues. Often one department operates the mainframe
on behalf of others; or blocks of work are given to different departments, or
even a division in a different country.
But regardless of how it works, outsourcing customers are paying for a group
or company outside of their control to operate, maintain or develop services
Many outsourcing customers are not satisfied with their outsourcing services
- as many as 30% according to a 2008 Deloitte Consulting report. However all
outsourcing customers can get more from their outsourcing arrangement: from
improved stakeholder experiences and reduced costs, to better provider relations
and service. This article shows nine ways that help make this happen.
In any outsourcing agreement the outsourcing customer will include
a large number of stakeholders, or staff that rely or work with the outsourced
services or systems. These include the more obvious stakeholders: end
users, help desk staff, applications developers, security administrators,
and auditors. Less obvious stakeholders include enterprise architects,
technical staff (and other outsourcing providers) supporting systems that
interact with the outsourced service, and developers of new solutions
relying on outsourced services.
1. Understand Your Contract
This sounds obvious, but many outsourcing customers don't fully understand
their contract. Some questions to ask are:
- What services are included?
- Are service costs fixed or usage-based? If usage based, how is the usage
measured, and who does it? Is the cost of measuring this usage included, or
does it cost extra?
- What isn't included, and how much does it cost?
- What additional costs (like software licensing, hardware support, environmental)
are paid by the customer?
- Can other providers be used, and if so on what terms?
- What services levels are to be provided, and what happens when they're not?
Again, who measures those service levels?
Just as importantly, the contract must be understood by all stakeholders.
Often stakeholders are unpleasantly surprised by unexpected issues (such as
downtime, reduced service levels, or unexpected problems) or extra costs for
services not included in the original contract.
2. Keep Stakeholders Informed
Too often stakeholders aren't kept informed about the outsourced systems. A
mechanism must be maintained to inform them about:
- The terms of the outsourcing agreement.
- Scheduled and unscheduled outages.
- Service levels achieved, and if they meet agreed service levels.
- Upgrades, changes or improvements before they occur, and what this means.
- Any changes in the outsourcing agreement.
- How to get help or assistance, and how much this may cost.
Regular contact with stakeholders is also important, getting feedback on the
outsourced services and other problems that may not have been reported.
3. Get Good Contacts
Every outsourcing customer will have a regular contact supplied by the provider
to answer questions, help with contract issues, and refer questions to
the relevant person within the outsourcing company. However this person is rarely
sufficient. Other contacts are often required: a new project needs input from
a technical contact, a technical team needs assistance with a performance problem,
or an auditor needs a security related contact. The more often such contacts
are needed, the more important it is to have them.
Not only do these contacts need to be quickly and easily reached, they must
be stable. Regular contact with the same person allows stakeholders to develop
relationships with provider staff. These relationships are important in a smooth
running outsourcing arrangement. Determine the contacts required, and insist
on stable contacts from the provider.
4. Plan Ahead
Requesting work from an external outsourcing provider is far slower than from
internal staff. More paperwork must be completed, quotes may be required, and
any costs must be approved. But it doesn't stop there. Once the work has been
completed, it must be verified, and any payments made. So any requests from
the provider must be planned ahead as far as possible.
Planning ahead also allows multiple requests to be batched together
it's quicker to do three small changes in one hit rather than separately. If
there are costs incurred for these changes, this will also save money.
5. Check What You Get
Regular audits of the outsourced services are essential. They make sure that
all agreed services are provided, and gives the outsourcing customer confidence
that the provider can continue to provide the services needed. Things to audit
- DR tests if they have been done, and if they were successful.
- Software products are they upgraded regularly?
- Backups is data backed up regularly, and are all offsite facilities
being used as needed?
- Service levels what is the response time? Are metrics being met?
- Provider staff are suitably qualified people looking after the outsourced
- Invoices double checking that all charged services and resources
- Hardware and resources is all agreed hardware provided? Is it up
to date and maintained? Is the hardware shared with other companies where
there can be a conflict of interest? (for example, does a competitor have
a CICS region running on the same z/OS)
6. Check Your Security
Regular security audits are essential. Some outsourcing arrangments will include
an independent audit as part of the deal. If this isn't the case, regular security
audits are even more important than audits of in-house systems.
7. Look for Ways to Save
Most outsourcing agreements have ways to minimise outsourcing costs. For example,
customers paying on a usage basis will be interested in minimising that usage.
Some other areas to look at include:
- Review vendors that the outsourcing provider may be using. For example,
different network providers or electrical contractors.
- Conduct a performance audit, and considering ways to reduce resource usage.
- Conduct an audit of all stakeholders, and confirm that they are making use
of all services provided as part of the arrangement.
- Review software licensing costs, and considering cheaper, equivalent software.
- Contract another external provider to perform services outside the outsourcing
8. Keep Records
Although outsourcing providers provide regular reports, these alone will not
be enough. Detailed records on the outsourced services provide a yardstick on
the provider's performance and how much it really costs. These records are also
invaluable for outsourcing agreement negotiations and renewals. Ongoing records
should be collected and kept on:
- Service outages when and how long.
- Problems experienced what, when, what was affected, and how long
- Work requested outside the contract what, when, and cost.
- Results of any audits performed.
- Statistics on performance, workloads, and any other relevant metrics.
- Any other incidents or issues that have affected the agreement.
9. Have a Second Opinion
Outsourcing customers rely on their providers for their technical expertise.
So it follows that customers rarely have that expertise in-house. This is why
an independent expert is invaluable for every outsourcing arrangement. This
expert can provide a second opinion, and can also:
- Provide an independent check of provider invoices and charges.
- Analyse and interpret provider reports and service levels.
- Audit part or all of the outsourcing arrangement, and confirm that all services
are being provided.
- Investigate problems.
- Act as an informed liaison between the customer and provider.
- Assist in managing the outsourcing arrangement.
- Provide independent advice on how to get the most from the agreement.