Companies in this country don’t do badly at all when it comes to making IT outsourcing arrangements work, according to one Canadian industry analyst.
The assessment contrasts strongly with the opinions of others, elsewhere.
After researching Canadian IT outsourcing attitudes among businesses here, IDC Canada Ltd. analyst Leslie Rosenblood learned that corporations in this country are pretty good at devising sustainable contracts with service providers. It seems our oft-noted conservative approach to business — a tortoise’s pace beside the States’ hare-like method — serves Canuck companies well. The majority (of Canadian companies) are either pleased or very pleased with the services they have with an outsourcing provider.Leslie Rosenblood>Text
While — compared to the U.S. — a smaller percentage of corporate Canada outsources, companies north of the 49th parallel generally take the time required to hammer out and manage IT service contracts properly, Rosenblood noted. As a result, “the majority are either pleased or very pleased with the services they have with an outsourcing provider,” and Canadian companies usually stick with providers they signed on with in the first place, he said.
Rosenblood’s appraisal of the Canadian situation certainly differs from what other industry observers say of outsourcing in general. For instance, neoIT, an advisory firm in San Ramon, Calif., pointed out in a recent statement that in 2005, up to 40 per cent of global outsourcing projects are bound to fail.
According to neoIT, outsourcing often doesn’t achieve desired results because it lacks executive buy-in — the C-suite must believe — it lacks resources to support the effort, the corporate governance around planning and implementation falls down, and companies mismanage or have “misguided” expectations.
Predicting outsourcing failure isn’t new. Murray Hill, N.J.-based financial services firm Dunn & Bradstreet way back in 2000 said 20 to 25 per cent of outsourcing arrangements collapse within two years, and half fail within five years.
Canadian companies are hardly immune to the outsourcing curse. Rosenblood said some enterprises here also experience difficulties. And when Canadians have a bad time of it, they tend to walk away from outsourcing altogether.
“Of those that are displeased, for whatever reason, more companies will bring those services in-house rather than go to another provider,” Rosenblood said.
Outsourcing can be painful for businesses, he said. From needs analysis to process documentation, vendor selection and contract negotiation, it can take a company 18 to 24 months to iron out potential wrinkles from its relationship with a service provider. Two years, during which time some of the company’s execs will be tied up in talks with providers — time that might otherwise go towards the firm’s core competency.
So why should companies bother to outsource IT? Because the effect on a corporation’s pocketbook can be significant, Rosenblood said. And “if you realize 30 per cent savings on an ongoing basis, this is worth dedicating a team of professionals” to the endeavour, he said; still, preparing to outsource critical technology is not only time-consuming, “it’s expensive.” Know what you’re getting into beforehand, he advised.
How can companies ensure their outsourcing projects succeed? “There’s no magic solution,” Rosenblood said. “Be diligent. Make sure you know what you want. Make sure that whoever you select can provide it. Make sure you invest in the relationship with the supplier, because no matter how diligent you are, your needs will change. Your company will evolve over the course of the three, five or 10 years the agreement will be in effect for. Build in flexibility.
“And it’s worthwhile to make sure all parties benefit,” he continued. “If you browbeat your provider into razor-thin margins, when you want to make a change two years later, there’s going to be a lot of resistance. If someone’s providing an essential service, you want to be on good terms with them.”
Rosenblood collected this outsourcing information for his report, the Canadian IS and Network/Desktop Outsourcing Competitive Analysis, 2004. For more information, visit www.idc.com.
