Making IT outsourcing work

Nigel Lowe

IT-as-a-service (ITaaS) has been a key feature of the IT world since its outset. In the beginning when computing power was scarce and expensive, companies turned to specialist bureaus for data processing. Today, we have come full circle with all aspects of ITaaS and the core IT organization is devoted to service management and integration with technical expertize.

In-house IT organizations are going through a dramatic change as the industry follows major trends. These include:
Virtualization of infrastructure; turning fixed assets into variable costs,

The emergence of application platforms (often on a software-as-a-service basis) to provide standardized low cost operations

The rise of the digital business model; driving innovation in how business interacts with its customers and stakeholders by leveraging data using analytical tools and AI

This next wave of IT investment has to be funded, and many executives treat IT outsourcing as a cost-reduction initiative. IT outsourcing should instead be seen as a transformation of core IT services, creating low cost delivery platforms to support a digitally enabled and agile business. This requires a change in mind set, new processes and adoption of new ways of delivering IT services and support. This cannot be done without change management.

Understanding processes: Without fully understanding the people and organizational ramifications of outsourcing, companies may run the risk of creating an experience that could negate the intended IT benefits and deter business leaders on further outsourcing.

Organizations also need to understand new processes and tools, and develop new relationships with counterparts from the outsourcing partners. For instance, the in-house IT team will need to emphasize on areas like supplier relationship, governance, and service management, some of which are completely different from their pre-outsourcing responsibilities.

Re-positioning IT outsourcing as a change management initiative: The most effective IT outsourcing assignments are planned and executed as change management enterprises.

In addition to the IT specialists required to design an effective technology solution and processes, additional change management experts are required to create a partnership with business leaders and users—one that has a clearly defined IT service idea and success measures that are already agreed upon.

This kind of partnership works to:
•    Help guide and support IT leaders in predicting and addressing internal resistance and barriers

•    Help teams from different cultural backgrounds collaborate as a single team

•    Establish a powerful coalition of client-side change agents who can drive adoption locally

•    Analyze the impact of changes on different teams and define a targeted change plan

•    Define new roles and responsibilities for the retained IT teams

•    Partner with HR to support people takeover

•    Set up processes to ensure long-term sustainable success

Impact of IT outsourcing on multiple stakeholders: Different teams have varied impacts of IT outsourcing.

The focus of change management team will be building awareness about the future mode of IT operations and creating feedback loops. The retained IT team will witness new roles and responsibilities, new IT tools and processes and fresh relationships with outsourcing partners. The same team will also need to pay attention to the design of the retained IT organization as well as training of teams on emerging processes and tools.

Finally, the newly instated IT team will have a significant impact of facing concerns over rebadging processes and new roles. There needs to be coordination with HR to ensure smooth rebadging experience.

For IT outsourcing to succeed, the transition must be treated as both an IT project and a change management project. Driving ownership and adoption of new IT service models between business users and IT communities enables a project’s longer term benefit. It also helps companies gain a competitive edge in the marketplace.

The article is authored by Nigel Lowe, Global Organizational Change Management Practice Partner, Consulting Services, Wipro