Outsourcing can be a big step. Handing over the stewardship of business-critical software applications, in particular, can be positively daunting. What should IT teams expect from IT outsourcing? What should they look for in a provider? How can they get the most out of the relationship?
“Many organizations think of outsourcing as a transactional procurement process,” says Bharat Suraiya, an Application Outsourcing Principal for HP. “They define their high-level requirements, and then seek the lowest cost.”
In doing so, they can miss an opportunity, Suraiya suggests. A focus on upfront cost can overlook innovation and ongoing maintenance requirements. And the strengths, experience and strategic guidance of the provider tend to be undervalued.
“Most applications and IT services have a three- to five-year lifecycle,” says Alex Bouma, Practice Principal for Application Services within HP’s Consulting and Integration group. “They live in multifaceted environments, touch many infrastructure elements, and changes are inevitable. We recommend that organizations consider maintenance, support and change processes in addition to the initial price tag.”
IT teams should partner with the provider, Bouma suggests, and take advantage of its unique expertise and capabilities. “By telling a provider what to do and how to do it,” he says, “organizations stand to miss out on the experience and wealth of knowledge the provider brings to the table.”
Suraiya and Bouma agree on several best practices when searching for a partner: focus on strategic business goals versus initial price tag; envision the desired end state; align outsourcing requirements with IT and business plans; and evaluate the capabilities and experience of vendors while being open to strategic recommendations.
The benefits of experience
In 2004, WestLB—one of the largest banks in Germany—launched an initiative to strengthen its position and business agility in the global financial marketplace. Driven and supported by WestLB’s Managing Board, the initiative envisaged the outsourcing of core IT functions in order to achieve greater flexibility and agility. Outsourcing was also aimed at aligning IT with business needs and reducing the costs of IT services.
“The key drivers of WestLB’s IT outsourcing project were the need to focus on core competencies, greater flexibility and higher cost transparency,” says Dr. Wolfgang Fendel, Contract Manager for WestLB. “The quality of IT services provided by WestLB Systems was certainly not the issue. However, we would have been hard-pressed to reallocate resources to different geographies at short notice.”
“While all four contenders on our shortlist scored well in our assessment, HP clearly had the highest overall rating,” adds Klaus-Michael Geiger, CIO and member of WestLB’s Managing Board. “HP’s professionalism, strong motivation, in-depth experience in the banking world and low risk were very well received. Our vote for HP was unanimous.”
Today, HP is responsible for running WestLB’s global banking infrastructure, including Wintel/Unix® operations, operation of the global network, desktop services, help desk services, telephone services, non-banking application development, Web services, printing services and global data center operations. Hundreds of applications are kept in the desired state by means of HP Configuration Management.
“An outsourcing project on this scale calls for a great deal of communication,” says Dr. Fendel. “Overall, the transition went smoothly and the project has delivered the right results. Cost reduction is on track. And we are pleased with the service quality and cost transparency provided by HP Services.
“The HP Services team assigned to WestLB is able to draw on the resources of a global player in the IT industry,” Dr. Fendel continues. “For instance, if we need to expand our business presence in the thriving Asia-Pacific region, we can count on HP Services to deliver the underlying IT capabilities. Regulatory compliance and security are other issues that HP Services has helped us to address. To give you another example: our New York data center was relocated recently, and HP Services ensures that the required security standards as well as pertinent revision tracking regulations are consistently met.”