Canadian CIOs are more likely to be disappointed by investments in outsourcing than to be overly pleased, according to IT World Canada’s annual CanadianCIO Census report.
Twenty-five per cent of respondents said that outsourcing fell below expectations, compared to just 12 per cent that said the same for cloud.
The results add to that narrative that outsourcing relationships for traditional infrastructure aren’t working out as many CIOs might hope. Hyper-scale cloud providers are having a big impact on business infrastructure, with half of CIOs saying they have a direct relationship with these players. They seem to hold cloud in high regard, while outsourcers are viewed with less esteem. Last year, the CanadianCIO Census results were much the same.
Twenty-eight per cent of CIOs surveyed said that outsourcing relationships have fallen below their expectations, compared to 50 per cent saying the relationship met expectations, and 10 per cent selecting exceeded expectations. Another 12 per cent of CIOs said it’s too early to tell if their outsourcing relationship is going to meet expectations or not.
While trends such as “as a Service” computing are replacing traditional outsourcing relationships in some ways, and data indicates that more CIOs are building up their skills in-house, traditional outsourcing remains a growing market globally. In June, a report from IT consultancy Gartner predicted growth of 6.3 per cent annually to $363 million by 2020.
So are traditional outsourcers slipping when it comes to providing good service? Not necessarily, says Michael Hart, managing partner at Toronto-based Merit Outsourcing Advisors. It may be that the businesses hiring the outsourcing providers are thinking of the relationship as “set it and forget it,” when it’s really one that requires ongoing attention and care.
Typically, there’s a focus on getting a transaction done between the outsourcer and the business, he says. The correct service and support levels are researched and established. The pricing structure is set. Once that’s done, clients tend to sit back and tell their outsourcers to go to work. But they’re forgetting one of the most critical steps – transition planning.
“Typically clients don’t spend a lot of time putting simple project management resources on all these things that should be approved for a transition through to day-one solution delivery,” Hart says. “The big risk is the knowledge transfer element.”
An outsourcer pitches standardized processes to their clients, but those often need to be customized to suit how the client really works. The trouble comes when a client must explain why a certain process is done a specific way – often documentation is lacking or inaccurate. As a result, the outsourcer must create new documentation to fill the gap. That can result in a bill that’s higher than expected, or a project that takes longer than estimated, or both.
“The provider had to spend a bunch more time documenting the process rather than delivering the service,” Hart says.
Working with cloud providers involves a different delivery model. Instead of requiring the vendor to spend time in a business’ environment, all the assets live in the service provider’s environment. Rather than needing to build a model to consider risk management and security, that gets baked into the vendor’s existing systems.
Here’s how CIOs viewed the potential benefits of the cloud in 2018 compared to the previous two years of our census: 
The effort to achieve a successful relationship between a client and an outsourcer is not new. Many researchers have been developing maturity models with measurable indicators to help CIOs assess whether their organization is ready to transition certain tasks to an outsourcer. An approach to developing such models is put forward by the Carnegie Mellon University Software Engineering Institute.
Hart has experience applying Carnegie Mellon’s Capability Maturity Model to businesses. It ranks a capability as being at one of four simple levels: incomplete, performed, managed, or defined. The higher the degree of the institutionalization of a process, the more stable and repeatable it becomes.
If you want to improve your business maturity rating on this model, Hart offers three areas to focus:
- Business should train their people on how to collaborate with outsources and demonstrate documented business processes to them.
- Create a governance structure such as a management committee, with a charter that defines what metrics they are going to track to know the health of the outsourcer relationship, and what actions they can issue to remedy problems.
- Put in place “relationship managers” that have agreed-upon governance and manag0ment processes. Have them report back to the business once per month.
For the full details on the CanadianCIO Census 2018, tune into our webinar Nov. 27 at 1 PM ET.
