Historically, IT management outsourcing involved organisations “throwing everything over the fence”, with whole departments being outsourced. That model has changed significantly.

In today’s IT world, monolithic contracts are being broken down with a drive towards multi-contract, multi-sourcing. So, the in-house departmental role is much more about contract management. A good example is data centre services being outsourced to one supplier, while desktop services and service desks to another.

The challenge of multiple outsourced contracts is that, even when using the same outsourced contractor, they are often negotiated at different times by different in-house teams. The result is ambiguities and can require mediation.

Many first and second generation outsourced contracts have failed to live up to clients’ expectations. In many cases there is a lack of recognition that, while suppliers do a lot of things well, certain services are weak links in the outsourcing chain. For example, information systems (IS) strategy, commercial management, governance and contract management are best retained in-house. After all, a company will always know its business better than anyone else, regardless of how embedded outsourced suppliers are.

Without this internal scrutiny, organisations are often left, at best, questioning if they are receiving the services that they signed up to receive; at worst, hiring additional resources to cover the gaps they perceive to exist in the retained suppliers’ skills and services.

So, whenever organisations are looking to renew contracts or go out to market again for their IS services, very careful consideration should be made as to what services are best suited to be outsourced and the split of these services between partners.

When selecting the services to outsource, a number of questions should be asked, including:

• Are the services commoditised and repeatable?

• Does the proposed supplier have a track-record in delivery this service?

• Does the proposed supplier have a vested interest in delivering quality service levels?

• Do other partners rely upon the output of this service and are their services potentially impacted by poor service delivery?

An approach, which takes-in the entire operational design and delivery of IS services (both retained and outsourced) is often very powerful and beneficial, focusing on ensuring an holistic view and understanding of the services. Specific attention to detail is required around the hand-off points between retained organisation(s) and partners, and between partners themselves where relevant. These hand-off points are often the areas that cause angst when it comes to the period of actual operation. Taking the time to get these right at the outset will pay dividends later on.

Operational design is essential to ensure outsource contracts are set up for success. The in-house team needs to take a step back and map everything required to deliver the best service to the business and determine whether it should be managed in-house or externally. Companies need to recognise their strengths and weaknesses. This, in turn, helps in identifying what is required from outsourced suppliers.

In Xantus’ experience, “honesty” and “trust” are great words, but are not always adhered to. Organisational design is often the aspect that is missed out, with people perceiving structure and design as names in boxes. In reality, the process starts further back, requiring an understanding of the necessary services before names are considered. It’s not groundbreaking, but is often forgotten or left until the last minute. Failure to take this approach means the surprising appearance of gaps and ambiguity between clients and suppliers and, more importantly, between suppliers themselves.