Pros, cons of outsourcing IT management

In the ongoing quest to stretch the IT dollar, the idea of outsourcing IT management has become appealing. It offers the possibility not only of saving money but also of allowing the IT team to concentrate on projects with strategic value. However, it does not come without risks.

Two different views on IT management outsourcing are presented by Glenn O'Donnell, a senior analyst at Forrester Research, and Terry Flood, president and CEO of Logicalis, in a feature at NetworkWorld.

In O'Donnell's view, it may make sense to let third parties handle "commodity functions," or jobs that don't provide much business advantage. Commodity tasks such as monitoring basic infrastructure can probably be handled more cheaply by a third party. However, tasks that offer strategic value, such as managing the service portfolio or coordinating automation initiatives, should stay in house.

O'Donnell warns that outsourcing does not necessarily reduce the strain on the IT budget. The cost of managing vendors and paying for "out-of-scope work" can be higher than initially anticipated. "If your only goal for outsourcing is to save money, you will be disappointed," he writes. "Almost all who pursue this myopic approach spend more in the end. In fact, many eventually learn they are spending more than they did before they entered into the contract."

From Terry Flood's perspective, however, outsourcing IT management tasks on a selective basis provides important benefits aside from cost savings, including decreased downtime, greater efficiencies and access to experts as needed. What's more, the IT department can be more productive by shifting resources from day-to-day functions like answering user calls to working on projects that contribute to business value.

While it may seem risky to hand over the company's data to a third party, the managed services market is sufficiently mature and competitive to handle it, Flood maintains. Nonetheless, with many managed services, such as security, help desk, and server back-up, the customer remains involved and in control. "The intelligent force behind the evolution of outsourcing services is customer demand," he writes. "The ability to customize all aspects of selected services gives you the flexibility to develop coverage that fits your unique situation exactly, and then change the coverage as your situation changes."

For some tips on how to eke greater innovation out of an outsourcing contract--such as improving change management, governance or skills--take a look at an article by Stephanie Overby in CIO. Customers need to approach the traditional procurement process differently, starting with how they gather requirements and issue RFPs. Once a contract is signed, if innovation is not already required it is unlikely to happen because both customers and providers will be focused on stability, she writes.

For more:
- see this NetworkWorld article [1]
- read this CIO article [2]