Mah Outlines Steps To Mitigate Outsourcing Risks

Partnership is essential in expanding and creating a successful business--no one company can handle all facets of a business without compromising efficiency and its core competency. Consequently, outsourcing is a complicated matter that businesses face rather than a simple one-dimensional "make or buy" decision. There are risks in outsourcing, and understanding those risks is the first step to mitigating them. IT metrics expert Michael Mah says that setting realistic goals for your outside supplier will provide the most promising results.

At the recent Cutter Consortium Summit 2000, Mah told the audience that, "Outsourcing relationships are high risk because each side has a completely different set of goals. The client wants to save money. It also wants to find a high productivity partner to decrease its IT backlogs, get rid of its biggest IT headaches, and slim its operation down to its core competency. The supplier wants to make money by growing its business, making high-profit deals, and leveraging its position in the market."

There were a number of important steps that Mah pointed out in choosing the right outsourcing relationship:

* Create a strong internal sourcing group, then a governance group.

* Assemble an internal metrics SWAT team.

* Benchmark your IT capability to establish a productivity baseline.

* Ask your service provider to show you their productivity benchmarks. If they are reluctant, carefully weigh the risks involved with selecting a provider with no metrics.

* Get an outside advocate to help you through the contract and initial management stages. Determine your priorities with regard to schedule, effort and defects.

* Update your baseline periodically to assess whether contract goals are being met for each dimension of your balanced scorecard.