The commitment risk – When IT outsourcing exposes shadow processes and loyal heroes

People working for a certain company tend to grow very committed to it. They are prepared to walk the extra mile to boost company success. In IT, it is not uncommon for IT operations staff to get up at 05.00 to check that all systems are working or answer the phone during out of business hours. Usually, people do this for free as they feel “it took only five minutes” or that logging these tasks would take more time than the actual task itself. These shadow processes are often an integral part of the IT delivery and without them the quality of the service would deteriorate. But what happens with these shadow processes in an outsourcing project?

How can loyalty and commitment be risks?

Loyal and committed people are at the heart of a high-performing IT organisation. Their work is invaluable – they are the backbone of critical transformations, major incident resolutions and daily operations. They possess intricate knowledge about the very fabric of the business and all its operations. They strive to develop extraordinary skills to complete tasks to exceptional standards.

However, as valuable as this tacit knowledge and commitment is, it can fast become a major business risk if not managed correctly. Especially in big changes, such as outsourcing parts of the IT service delivery, this commitment may become a significant risk. Those five minute tasks are often only known by certain people, as they are not documented in service management tools or brought into standard processes. Neither is the work of these highly committed employees captured in any statement of work.

In the early days of outsourcing, this risk was often ignored until it was too late. In some cases, this kind of inattention has led to costs rising to more than twice the original insourced delivery model not because less work was done earlier, but because it was done by committed and skilled people without any extra, visible cost. However, in an outsourcing transaction such costs are suddenly brought into light.

IT outsourcing vendors charge for all the work they deliver to their customers, and rightly so. They have to because they want to pay their employees what they deserve. Sometimes these tiny tasks become visible only after outsourcing, and “How can this be so expensive?” is a common response. Well, nobody is doing it for free any more.

In many cases, a main trigger for outsourcing has been an evaluation of the amount of people compared with the amount of documented work. Due diligence studies seldom reveal those tiny tasks why it’s easy to make a very intriguing outsourcing offer. As IT outsourcing matures and companies move into second or third generation outsourcings, this difference can often be partly quantified by looking at the initial differences between the incumbent vendor and the competing bids. The competing bids are often missing the shadow processes that the incumbent vendor takes into consideration. A key learning point is to pay meticulous attention to this – existing vendors likely know their customer very well at the end of an outsourcing agreement.

The process of scoping services needs to be based on relevant hard data

To monitor and manage the actual amount of work done by the organisation it’s essential to have well-defined and structured processes. This is also needed in order to scope the services and define the sourcing objects. A service and sourcing object definition must contain all the work being done in all relevant processes; everything from out of business hours support to “white glove” processes for key stakeholders. Establishing this baseline requires some effort but is an essential step in the IT sourcing preparation. It’s also imperative in order to craft a realistic business case, as the cost of the shadow processes will become visible shortly after service commencement with the outsourcing provider.

Not all services require full company commitment. Some mature IT areas have now become commodities that are more efficient when delivered by dedicated service companies. To pinpoint these areas it is important to clarify and classify the applications and services. As noted above, documentation of the IT services is a good base for an IT sourcing strategy. These service definitions help to evaluate each IT sourcing model and manage sourcing lifecycle decisions based on facts – without falling into the pit hole of commitment risk. Regardless of IT sourcing model, a company should always know the service parameters and act accordingly.

There are also other types of hidden costs in IT sourcing relationships such as underestimated needs for technical refreshes, poor transition or underestimating the retained organisation. Key to a successful IT sourcing initiative is a clear understanding of the baseline to establish a realistic business case and managing the project with care. IT sourcing is not easy, but done right it provides significant benefits.

Don’t let shadow processes overcome the value of commitment

Loyalty and commitment are key qualities that become susceptible to risks if not managed properly. Shadow processes can be mitigated if loyal heroes are made fully aware of the importance of meticulous documentation and why it is crucial for sourcing. Skilled and committed people are one of the most valuable assets in IT services and their efforts and contribution to the business should reflect accordingly.

Timo Hyvönen
MD Finland
timo.hyvonen@3gamma.com