The contracts primarily follow a simple model: People x Rates x Duration.It is easy to understand why a people-based model is being used today, since outsourcing grew out of the Y2K era. Companies first engaged outsourcing companies in staff augmentation models to address their Y2K needs, and hence, all subsequent outsourcing models have been people-based. While outsourcing companies have grown in leaps-and bounds over the past three to five years in terms of their capabilities, there has been little evolution in deal structures. People-based outsourcing contracts are the equivalent of paying rent. The rent is due each month regardless of use. In a 'rental agreement' there is no mechanism or incentive to drive productivity improvements, efficiencies, higher-value-add services, faster time-to-market, and deeper cost cutting efforts."Continuous improvement programs throughout the life of a service agreement will ensure that a vendor is staying relevant to the IT organization, and that the IT organization itself is staying relevant to the business. Demand-based contracts and models are revolutionary and will drive unbelievable results if properly implemented, executed, and governed. IT organizations will become better-aligned with their business partners and CIOs will have much more flexibility in how they allocate and spend their funding.
6. Choosing based on price as the determining factor. This would seem obvious, but in today's business climate price has taken on a more predominant role in many company's decision-making process. That might be alright if you are comparing PC's or mice, but outsourcing is such a multifaceted service and needs to be a partnership between companies. The lowest price should be seen as a red flag - often the lowest price company either doesn't understand the full extent of work required, doesn't plan on providing good service, or plans to make up for the lost revenue via extra charges. If it seems too good to be true, it probably is. In some cases, the most expensive provider might also be the best value and could actually save your company money overall via lowering your overall IT operating expenses (e.g. using root cause analysis to find and fix the actual problems rather than constantly applying band aids). Buy quality - cry once. Buy cheap - cry again and again.
7. Paying on a per-ticket or per-incident basis. This seemingly innocuous choice automatically creates a conflict of interest between you and your outsourcer. They have absolutely no incentive to do any kind of root cause analysis or any other proactive steps to lower your ticket/ incident count. In fact, this arrangement is great incentive to turn one call/ incident into as many tickets as possible. Choose to go with a provider that bills this way at your own peril.
8. Falling in love with any one particular "shore". The right solution for you might be onshore support, offshore support, or a combination. Don't close your mind to any of these options. Today's business environment might cause you to lean towards one option, but who knows what kind of issues you'll be facing tomorrow? It is increasingly important to partner with a company that can seamlessly provide both options and dynamically adjust the ratios if your business requires it.
9. Allowing the outsourcer to define SLA's by themselves. Again, this sounds obvious, but it is common for companies to defer to the outsourcer's boilerplate SLA offering without customizing it to their own individual needs. If the outsourcer isn't flexible enough to customize their offering according to your needs, what else will they be inflexible about? Make sure you are actively involved in setting your own SLA's, customized to the needs of your business.
10. Not developing a Single Point of Contact service model. The concept of a Single Point of Contact (SPOC) service model has been around for some time, but few organizations do it. The idea is that events are handled at the lowest level possible, and that all information is funneled into a centralized location. This allows for two things; continuity and reduction in the total cost of ownership (TCO). Having a repeatable, mature process is at the backbone of the ITIL model, and without a centralized administration continuity cannot be achieved. It's a given that a seasoned engineer with 15 years of experience is a more expensive resource than a PC tech with less than 3 years in the IT field. A typical challenge in IT organizations is that the experienced engineer processes proprietary knowledge that has not been transferred to the less expensive employees. Without a centralized location for processes and procedures, actions cannot be tracked, information cannot be transferred and events cannot be handled in a more effective manner. Having a Single Point of Contact service desk allows for information to be tracked, categorized and ultimately documented for repetition, thus lowering the overall TCO.
11. Not understanding the true costs of IT Support. Most IT leaders can quickly determine internal hard dollar costs, such as dollar per hour or price of a PC. What are typically not factored in are soft dollar costs, such as employee loads or the cost of support. Typical load (the cost of benefits for an employee) is around 25% of the wage. A typical desktop priced around $800 will require an additional $5,867 in support costs for the life of the PC in an unmanaged environment. According to Gartner, effective management can cut total cost of ownership for desktop PCs by 42%. Understanding the true costs will allow IT leadership to make a more informed decision on whether or not to outsource a particular service.