Outsourcing IT to a shared services model can help you reduce costs, improve efficiency, and access specialized skills. However, it also involves some challenges and risks, such as loss of control, coordination issues, and security concerns. How can you effectively outsource IT to a shared services model and avoid these pitfalls? Here are some tips to guide you.
Before you decide to outsource IT to a shared services model, you need to assess your current and future IT needs. What are your core competencies, strategic goals, and competitive advantages? What are the gaps and pain points in your IT functions? How much IT support do you need internally and externally? How can you measure the value and performance of your IT services? These questions will help you determine what IT activities you can outsource and what you should keep in-house.
With new technology (or info on what technology can do for everyone) getting closer to everyone, technology as a solution for every business issue without looking internal processes and data availability & quality makes IT Managers life stressful. In this scenario, outsourcing IT services to experts make sense but either dedicated or as shared services, unless the client IT has strong governance capabilities, it will be a major challenge to meet the business expectations and this will lead to even more stress to IT CxOs. Build strong governance capabilities and outsourcing (dedicated or shared) will be a smoother. Without internal capabilities to govern and proper org change management, any kind of outsourcing will be a major challenge.
In my experience, outsourcing IT to a shared services model requires first understanding fully what you mean and what you intend to do. Is the intent to shift responsibility for IT service delivery away from business/country operations to a captive shared services delivery organization? ... to an external service provider? … to something in-between? … to just support captive shared services? If this is not clearly known, then the path forward will be as confusing as the rest of the article as the considerations and concerns will differ based on the intended outcome.
Involves careful planning, clear communication, vendor management, and leveraging standardized processes to optimize cost, enhance efficiency, and ensure seamless collaboration between internal teams and external service providers. It requires a strategic approach to align business goals with the capabilities of the outsourcing partner, continuous monitoring of performance metrics, and adapting to evolving technology landscapes while maintaining a focus on data security and compliance
Feels like a section "1.5 Decide what to outsource" is missing in this article. Any IT function that is a core strength of the company, a differentiator and a competitive advantage should NOT be outsourced in my view. It's OK to use external companies to ramp up resources for development, or do so in partnership but ownership of all decisions for mission critical applications should stay in-house. That way the subject matter expertise and knowledge remains with the company.
Choosing the right provider is crucial for a successful IT outsourcing to a shared services model. You need to find a provider that has the expertise, experience, and reputation in your industry and domain. You also need to evaluate the provider's service quality, delivery model, pricing, and contract terms. You should look for a provider that can offer you flexibility, scalability, and innovation, as well as align with your culture and values. Additionally, you should check the provider's security policies, compliance standards, and risk management practices.
The provider should reflect the ability and desire of your organisation and stay relative in size and opportunity- in my experience a provider too large for your business will result in lack of attention, a provider too small will hinder growth.
Communication and collaboration are essential for a smooth IT outsourcing to a shared services model. You need to establish clear and frequent communication channels with your provider, as well as with your internal stakeholders. You need to define the roles and responsibilities of each party, the scope and expectations of the IT services, and the reporting and feedback mechanisms. You also need to foster a collaborative relationship with your provider, based on trust, respect, and mutual benefit. You should involve your provider in your strategic planning, problem-solving, and innovation processes.
Establish clear communication channels and governance structures for regular monitoring and management of the services. This ensures alignment with your business goals and timely resolution of issues.
Managing the transition from your in-house IT to a shared services model can be challenging and disruptive. You need to plan and execute the transition carefully, with minimal impact on your business operations and customer satisfaction. You need to prepare your staff for the change, by providing them with training, support, and incentives. You also need to monitor and evaluate the transition process, by tracking the milestones, deliverables, and outcomes. You should be ready to address any issues or conflicts that may arise during the transition.
The shared model will be as good as the knowledge transferred and process/procedure agreed for use. Your internal and external customers may or may not be aware of shared change, this is at company discretion, however their ability to continue operations and complete tasks must not be impacted, continual operation will decide the success.
Optimizing the outcomes of your IT outsourcing to a shared services model requires continuous improvement and adaptation. You need to measure and review the performance and value of your IT services, by using relevant metrics, indicators, and feedback. You also need to adjust and optimize your IT services, by identifying the best practices, opportunities, and challenges. You should seek to enhance your IT capabilities, by leveraging the provider's expertise, resources, and innovation. You should also maintain a strategic alignment with your provider, by revisiting and updating your goals and expectations.
Although point 5. attempts to mention outcomes. But it’s essential to map the existing shared service outcomes with business outcomes. SLA mapped to business SLA further mapped to business outcomes is key . After mapping; one must build the ability to measure, improve and co-create value for business while partnering with shared service provider is key. Savings from shared service cost needs to invested in better observability of service outcomes.
Feels like this article is mixing creating shared service model with outsourcing to an external company. I built shared services at my prior company, and common/shared/global services can be created using internal teams or with help of an external company. And you can outsource IT services even if a service is not shared within the company by multiple group. They are two independent strategy decisions.
You may need to alter and adjust your processes and expectations to align with shared service. The fact that it is shared means that not everything can be bespoke and customized to your needs. This service works well for more standardized way of operations. Security is another critical component to consider as you share with multiple other customers.
To effectively outsource IT to a shared services model, clearly define goals and service scope. Select a reliable provider with relevant expertise and establish detailed SLAs. Plan the transition carefully to minimize disruption and ensure regular communication. Set up governance for oversight and insist on compliance with regulations. Encourage a partnership approach, allow for flexibility in the contract, and focus on continuous improvement and risk management. Provide training for staff to adapt to the new model.