Tuesday, September 12, 2006

No Outsourcing Without ITIL

by: Arno Inker & Irma Stroet

How the IT manager prepares for the futureOutsourcing is now a trend that no IT manager can ignore. Complexity of the environment, the tremendous flexibility that the business requires, ever-shorter life-cycles of business applications combined with the tight labor market means that, sooner or later, the IT manager is faced with the choice of doing things himself or buying the services from a specialized firm.

But how can the IT manager prepare himself for this? How do you choose the right supplier? And what kind of role does ITIL play in it? This article indicates that outsourcing must be managed, and that ITIL can help in doing so.Since the publication of the ITIL documents in England, ITIL has gained enormous popularity in the Netherlands.

Today, there is rarely a single self-respecting IT organization that does not at least have the ITIL booklets on the shelf. Most IT organizations have also invested substantially in applying the ITIL principles. This has been done most successfully in the "operational processes". Now that processes have reached a particular level of maturity, there is more time and attention available to improve the tactical processes. The main advantage is probably that ITIL has ensured that a large amount of standardization can take place in the implementation of IT management processes.

However, in many countries outside the Netherlands, application of the ITIL processes is by no means advanced. At the same time, the Netherlands is definitely not leading the way in terms of outsourcing. While a few years ago in the USA, the term "application service provision (ASP)" had already entered the vocabulary, the average Dutch IT manager was still looking around cautiously to see if it made sense to have an external firm manage his desktops.

The anxiety over the negative aspects of outsourcing (security, lack of supervision, being tied to a supplier) seemed to have outweighed the positive ones in recent years. Very recently, the market for the outsourcing of integrated IT services and processes seems to have moved up a notch. Now, even insurance companies, local authorities and other government bodies have "farmed out" substantial parts of their IT services in the last year, and more and more large and small firms are following their example.

One IT supplier in the Netherlands after another is setting up special outsourcing or tender departments. Recent figures from research organizations shows that the growth in sourcing sales forecast for the next 5 years is about 15-30% per year.The IT manager's dilemmaKeeping the above-mentioned developments in mind, everyday practice shows that many IT managers are currently faced with a difficult dilemma: Do I go along with all the outsourcing hype, or do I retain my independence and ensure that I arrange for the services we provide to be properly managed.

The dilemma is made worse by the IT manager's principals: top management or business managers. They can also see market direction, and are afraid of losing out by keeping "their" IT in-house.

Additionally, they find the idea of being released from all the hassle of running their own IT department very appealing. They are often the ones who put pressure on the IT manager.

OutsourcingThe risk is that the IT manager will in under pressure from the business management. Outsourcing is often seen as a miracle cure: "The IT manager was struggling to run his department, and by bringing in a professional firm, we have eliminated all the hassle in one fell swoop".

Such cases inevitably prove the industry saying "never outsource a problem". The IT manager was probably in a weak position in such a situation, and is now forced to enter into difficult agreements with an external firm about the necessary service provision. Exactly what service provision the business wants was not always clear to the IT manager even before the change. The outsourced supplier is not able solve this problem either, and therefore, the service provision is rather vaguely defined in the contract, possibly stating: "we will work it out later".

In addition, many IT managers are very worried about the role of their own staff after the outsourcing: who should stay to continue monitoring the services by the supplier, and who will find themselves out of a job? With an unclear supplier contract and the uncertainty among the staff, the problem of failed outsourcing is conceived, and it tends to grow all on its own without much feeding. Within a very short time, the costs of the outsourcing get out of control, or the principal does not receive the quality that was expected.

And then it is no longer clear who exactly wanted the outsourcing in the first place.ITILAn alternative for the IT manager is to push the idea of "buy" aside, and devote his energies entirely to the "make" idea. This, of course, also has sizeable consequences for the internal organization. Training all staff, large-scale recruitment campaigns, attracting expensive specialists, achieving ISO certification etc., are among some of the necessary activities. All the stops are pulled out to guarantee optimal IT service provision for the business. Consultants are brought in to develop custom software and the operational processes are streamlined to conform fully to ITIL.

The introduction of ITIL processes seems in turn to work like a miracle cure: "once we have completed the ITIL implementation project, everything will run smoothly". The risk inherent in this is that some IT Managers get carried away with their own problem, and pay little attention to things going on around them. Which, strangely enough, has a negative influence on the services provided by the department. Flexibility decreases and the quality certainly does not improve. Not a very pleasant scenario. Particularly for the business manager, who fails to understand why so much money needs to be pumped into IT.SynthesisThe above-mentioned contrast challenges us to seek the solution to the IT manager's dilemma not in alternatives, but in the synthesis of these two solutions. The following two propositions form the point of departure:

  • a. sooner or later, both small and large IT organizations are no longer able to guarantee their service provision by relying completely on in-house solutions;
  • b. operational and tactical processes are increasingly interconnected: outsourcing is moving in the direction of the purchasing of integrated processes (i.e. services) and no longer towards (parts of) hardware, software or netware.

In general, the business management is aware of these trends, and is looking for ways to get a clearer picture of the advantages and disadvantages of outsourcing, where quality, continuity and money are used as the most important criteria.This is where the challenge for the IT manager comes in! Instead of adopting a defensive attitude, the art is in knowing how to switch to a proactive frame of mind. Not in being frightened of having a smaller department or limited influence as the result of outsourcing, but retaining control by making it clear to the business manager the true effect of outsourcing, and the implications for the organization.

The consequence of this approach is that the knowledge of the staff within the IT department becomes even more important, and they even take on a management function: they convert the wishes of the business into the efforts of external parties, and they ensure that both parties provide the desired provision of services. But how can you achieve that?

Knowledge of and experience with ITIL can offer enormous advantages. By working with ITIL principles, the IT manager quickly gains insight into the service that needs to be provided, and the associated costs of that service. The control of the external supplier can then be aimed at assessing monthly service reporting to give insight into the incidents, production, changes and configuration items. Using availability, capacity and security management reporting, the weaknesses and strengths of the infrastructure can be identified. In-house knowledge is essential for that purpose.

Sound financial management means knowing the various cost elements of the service provision, and also enables the IT manager to adopt an active management of the supplier.Concerning the principles and the conceptual framework: Perhaps not everything works perfectly at the outset, but the combination of this knowledge of the internal service provision using ITIL with a pro-active attitude to outsourcing changes the IT manager's dilemma into a challenge.

Which supplier can improve the current service provision, at what cost, so that the business ultimately becomes better? There is no better way to answer this question than with the same conceptual framework (ITIL) of both customer and supplier. This means that the supplier must divide its tender using the ITIL processes as the potential customer requests.

Experience shows that many suppliers have great difficulty in doing just this. They are inclined to divide their tender using their own, tried and true methods. In fact, both parties benefit from a clear tender wherein the modern IT manager obtains a "recognizable" tender, and the supplier knows what is expected.

In this way, ITIL can become an instrument to form the basis of a mutually successful outsourcing agreement.ConclusionIn today's outsourcing hype, it is the IT manager who has to make the next move. He or she should ensure that:

  • a. the in-house IT organization adopts ITIL principles;
  • b. the future suppliers make offers in terms of output that is related to ITIL processes and that are recognizable to the organization;
  • c. the consequences of the outsourcing in money and quality can be conveyed to the business management.

About the authors:Dr. Arno IJmker is a Senior Consultant at Quint Wellington Redwood. Dr.Irma Stroet is head of IT at the Local Authority of Zaanstad.


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