One of the best parts of my job is meeting with IT leaders—from the CEO of a Fortune 500 to the CIO at a small company—and discussing how they drive innovation into the business. Though their end goals may vary, I’ve found the best run IT organizations have a healthy relationship with some form of outsourcing. And those that don’t, struggle with the rising costs of IT, a lack of IT stability and quality, and bandwidth, expertise and time constraints.
This got me thinking… while many organizations embrace outsourcing, too many are reticent to cast an eye towards a business model that has long been avoided like the plague. Let me back up…
Outsourcing: A Look Back
Early in my IT career, outsourcing was the rage. Large companies signed enormous deals with companies like Computer Science Corp, Andersen Consulting, EDS, and ICCS. These outsource contracts ran into the billions of dollars and were predominately a balance sheet transaction. Many times, the outsourcer would come in and acquire the current IT assets for cash, hire their employees, use the tools and processes and run IT the exact same way. Outsourcing wasn’t about helping the business run IT more efficiently. Rather, it was about improving the quality of the income statement and balance sheet.
As outsourcing evolved, it meant moving IT functions offshore which meant a loss of IT jobs, reduction in quality, an increase in hidden costs and a loss of managerial control. Once again outsourcing might improve the income statement but had little effect in improving the efficacy of running and supporting IT operations.
As a result, the term outsourcing became a big, bad, dirty word in corporate America.
So, with such negativity surrounding the practice of outsourcing, organizations would vacillate between outsourcing and insourcing every three years or so. Or they avoided outsourcing altogether, trying to deliver high-quality IT operations all with in-house staff and resources. But this indecisiveness meant businesses never realized cost savings or the experienced breakthrough IT performance.
Outsourcing to Out-tasking
Over the last decade, this all or nothing outsourcing model has evolved. Like many other business leaders, IT is beginning to carve out specific functions and then partnering with a third-party provider to reduce costs or improve efficiency. These “out-tasked” operations are contracted out and can be performed either onsite, offsite or even offshore.
Out-tasking has been a common practice in business over many years. For example, though few companies outsource their entire finance operations, many out-task their financial audits and tax return processing. Similarly, human resources departments have been out-tasking payroll and 401K management for years. And marketing departments have been out-tasking graphic design, website development, and management.
With out-tasking as a possibility, the question becomes: why invest in people, processes, and technology to execute these functions when you can get the economies of scale in working with a third-party provider that has already made these investments?
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In IT, managed service is the practice of out-tasking a specific IT function on a proactive basis. The managed services provider delivers expertise and experience in operating, monitoring and maintaining a particular IT function such as email, security, help desk, desktop support and infrastructure management, with the expressed intent to improve operations and reduce expenses. As outsourcing has evolved to become more of an out-tasking, managed services model, businesses have been able to reap a set of new benefits including:
- More Time on Core: In one of my previous blog entries (click here), I discussed the notion of core versus context activities. Core activities are your organization’s key differentiators, whereas context activities are everything else—or the noise. Managed services allow a company to target broader, strategic business issues, while leaving operational details to an outside expert.
- Cost Savings: Fierce competition has led many organizations to restructure and downsize staffs to save money. By teaming with the right managed service provider, organizations can save money by maintaining leaner organizational structures, reducing overhead and taking advantage of a global 7×24 delivery model. Moreover, managed services providers use lower-cost labor pools more aggressively and, with the help of modern telecommunications, can access talent in lower cost areas.
- Operational Excellence: The practice of out-tasking allows organizations to bring world-class standards into their existing IT environment. By embracing the right model of managed services, businesses can enjoy improved quality standards because third-party SLAs inherently increase accountability and deliverability.
- State-of-the-Art Talent: The volatility of information technology can make IT skills obsolete. Often, software is updated and replaced rapidly and by the time an entity invests in and trains its full-time staff, the technology may no longer be state-of-the-art. By out-tasking, organizations can take advantage of the latest technologies and work with professionals who have the most up-to-date skill sets.
- Enhanced Flexibility: There are tremendous risks associated with the investments an organization makes. But when companies out-task, they become flexible, dynamic and better able to adapt to changing opportunities. They access a wider range of resources, skills, and capacities through the managed services provider.
Today, IT professionals must decide what functions they will out-task, rather than if they will outsource. Gone are the days of purely outsourcing with a focus on buying assets and completing balance sheet transactions. It’s about making IT better. Business leaders who are still trying to do everything themselves—even in the face of consumerization, digital transformation and the rising cost of IT—need to begin evaluating the new outsourcing landscape, defined by the power of managed services and recognize how their organization is positively impacted with this model.
Ready to embark on your business transformation journey by outsourcing run tasks? Inquire today about Carousel’s award-winning managed services.
Simply put, for businesses to drive towards innovation, IT leaders need to embrace managed services. Managed services, and the process of out-tasking is the end game for forward-facing companies. And the benefit in so doing is business transformation.
Stay tuned in the coming weeks as I dive deeper into how to embrace a managed services offering in your organization and primary criteria to consider when choosing your partner.