Reasons for Outsourcing IT are Changing

IT outsourcing has its roots in one simple business directive: save money. Early users of outsourced IT were looking to either lower their current costs, or undertake new initiatives based on the lower rates of offshore suppliers. As recently as 2005, a Gartner Inc. study found that, ". . . the majority of organizations worldwide are still focused on tactical IT outsourcing to achieve short-term, cost-focused objectives."

But over the last five years that thinking has been turned on its head and organizations today take a strategic view of outsourcing. At Coherent Solutions, we've found the reasons for outsourcing fall into four categories.

• Budget. Global competition has caused nearly every business in every country to look worldwide to source goods and services, and it is only natural that IT is part of this trend. But while Coherent Solutions' clients often state cost as their initial motivation for outsourcing, they grow their business with us as they see opportunities to realize other business benefits.
• Flexibility. The recent recession is only the latest reminder of the need to stay flexible in business. Rather than staffing up internally, many companies are choosing to use a strategic outsourcing partner to flex up and down with market conditions, thereby avoiding the financial and emotional toll of lay-offs.
• Expertise. Organizations have learned that going outside for some types of knowledge can be more efficient than bringing it in-house. Instances where such expertise is needed range from supporting a legacy system to getting specialized help with a new technology.
• Scale. Outsourcing can be a way to rapidly accomplish the scale needed to tackle opportunities and challenges presented by project work, product introductions, service changes, etc. in a way that is not practical through internal organic growth.

Relationships are Key

While outsourcing has gained traction for a number of reasons, the most successful operations emphasize relationships. A joint white paper published by LogicaCMG and the Warwick Business School noted that, "Outsourcing arrangements with well-managed relationships are more likely to be successful. Relationship management can create a 20% to 40% difference on service, quality, cost and other performance indicators."

"Those are powerful numbers," said Rob Duff, COO at Coherent Solutions. "And they bear out in our business. The biggest benefits of outsourcing accrue to our clients who work closely with us, taking advantage of the transparency we offer with our development team in Belarus."

To reach these performance levels, Duff suggests looking for the following traits in an outsourcing partner:

• Local account and project management
• Cultural similarities
• Excellent English
• Overlapping business hours

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