Outsourcing: A symptom of poor Governance!

In their book entitled “IT Governance: How top performers Manage IT decision rights for Superior Results,” Peter Weill and Jeanne Ross list some of the symptoms of poor IT Governance.

Notably they cite “Senior Management Sees Outsourcing as a Quick Fix to IT Problems” as one of these symptoms.

The thrust of the book is that IT Governance mechanisms should be aligned with the desired outcomes of the business itself. The inability to articulate these desired outcomes in a clear way is one reason why the mechanisms may be misaligned in the first place.

Outsourcing of specific IT functions ironically requires that these outcomes be defined in a greater degree of clarity than would be required if they were provided by an internal department.

So we find that when we approach an outsource provider for a report that “we always used to get from the internal department” they give us a quotation for providing that report. Now this is as a result of not being unable to specify exactly all of the detailed specifications of the tasks being outsourced.

So in order to effectively outsource a function, a very detailed analysis of the steps and responsibilities for that function needs to be done – by the enterprise, before outsourcing that function. Failure to do this will result in the enterprise paying more for tasks that were left out of the outsource deal, and should have been included.

That detailed analysis of the function may very well be what is required to enable the old internal provider to justify needed training or additional resources to be able to provide it effectively… or simply to realize that it is providing that function in a way that is incongruous with the organization’s needs. What prevents that from happening is called poor IT governance.

Senior management can no longer live with the function performing poorly, so they outsource it. What that achieves (if they are lucky) is the surfacing of all the issues that should have been dealt with by effective leaders and managers within the organization.

Oh dear!

Now the enterprise is worse off than it was before, and it probably costs more to get what they had before they outsourced.

So my counsel is to get IT Governance right before doing any outsourcing, having noted that the actual desire to do outsourcing is a possible symptom of poor IT Governance!

Getting IT Governance right starts with clearly articulating what the Enterprise needs from its IT function and translating that into IT Governance mechanisms. Doing that is a lot easier than sufficiently articulating every detail of even one outsourcing contract, and will pay much greater dividends in the long term.

Technorati Tags: Outsourcing, IT Governance