IT service outsourcing for SMEs
IT service outsourcing for SMEs
6. October 2021
Reading time: 6 minutes
Greater efficiency, expertise and flexibility, focus on core activities and access to more resources - these are the benefits that IT service outsourcing promises. What has been common practice for large companies for decades is far from being the norm for small and medium-sized enterprises - but it should be. In the following, I will show, why this is the case, how IT services can be successfully outsourced, and for which IT services this is particularly interesting.
Challenges & benefits for SMEs
In the short term, IT service outsourcing involves a high investment. In the medium and long term, however, it not only reduces your operating costs but also creates urgently needed capacity to focus on innovative business models. It is, therefore, all the more important to take this step away from being a cost factor and towards becoming a business enabler right now. For SMEs in particular, the "war of talents" also plays into this decision. As a small or medium-sized company, you face the challenge of becoming cost-inefficient by having too large a headcount. In practice, you will not employ dedicated experts for various specialist topics in-house but will cover them with all-rounders. This is precisely why it is increasingly attractive for SMEs to outsource commodities that can be purchased from external specialists not only at lower cost but also in better quality. There are essentially three service levels in IT outsourcing:1. Infrastructure outsourcing: At the infrastructure level, for example, server services, cloud services, networks, workplace and desktop management or data centers are outsourced.
2. Application outsourcing: At the application level, for example, software solutions and development, website development or store systems are outsourced from within the company.
3. Business process outsourcing: At the business process level, for example, accounting services or online marketing services are sourced externally.
In the remainder of this article, I will focus on infrastructure and application outsourcing.
As a starting point, I recommend outsourcing only the two or three infrastructure/application services that make the most sense for your company - either because this is where the greatest cost savings potential exists or because you lack internal expertise and/or capacity in this area. In the long run, on the other hand, the goal should be to fully outsource operational activities while continuing to deal with conceptual issues internally. IT architecture and IT security, in particular, are of high strategic importance and should therefore remain internal, at least as far as the strategic, conceptual level is concerned - since you ultimately have overall responsibility for IT security, for example, and there should be at least a "basic know-how" internally.
Successfully outsourcing IT services
The notion that outsourcing relieves you of the burden of making the organization "ready" to deliver the service in question is a fallacy. Let me put it this way:
When you outsource your IT services, you have to make sure, a fortiori, that the associated processes are embedded in the organization and that roles and responsibilities are clearly defined - otherwise, you're creating a recipe for operational chaos.
You don't need to have the technical expertise in the same depth as your service provider, but it's essential that you know your own requirements and terms. That means you need to know what should and should not be provided by the supplier. Only when you have clearly defined and communicated what outcome you expect from your partner will you get excellent IT services.
So how do you create this service excellence? Clearly, you need an interface that ensures the quality of the services delivered, escalates when necessary, and communicates new requirements back to your supplier, for example, when market conditions change. This interface can be staffed internally but can also be taken over by an external service manager.
In numerous projects, I accompany customers during the outsourcing process, coach the internal person in charge and then hand over to operations when service excellence has been ensured in the long term. The following approach has proven to be successful:
Process maturity: The basic prerequisite for outsourcing is a high level of internal process maturity. In particular, the interfaces to other services as well as process flows, roles and responsibilities must be clearly defined. An assessment can show whether these conditions are already sufficiently met and what measures can be taken to get there if they are not.
Definition of results: If the organization is basically ready for this step, the result desired by the supplier must be clearly defined. It is important here to leave as little room for interpretation as possible and to clearly describe the requirements for both sides.
Request for proposal: The desired service is put into a request for proposal (RFP); suppliers are evaluated and the preferred one is selected.
Introduction & transition: The service is introduced as part of a project. It is important here to clearly state the results and responsibilities in the service contract.
Project example: Outsourcing digital workstations
I am currently supporting a project with the aim of providing employees with a new digital workplace operated by an external supplier. The approach described above was used. In the following, I would like to provide a more detailed insight into the individual steps based on the specific project example:Process maturity
Previously, the workstation was provided by the central IT department, which meant that the processes and procedures were very well documented and also implemented accordingly. In the course of the transition phase, one or two gaps became apparent, but this can never be completely ruled out in advance. Overall, the level of maturity of the organization in terms of processes, roles and responsibilities was very high - basically good conditions for IT outsourcing.Definition of results
The first step was to define and document which results the supplier should deliver or achieve in the context of the digital workplace. The following dimensions had to be defined: Technical requirements, e.g., device types, profile synchronization, security requirements, etc. - many of these topics can still be worked out in detail during the design phase, but the most important technical requirements should be clear from the start.
Support requirements such as: When must support be available, how quickly should faults and outages be resolved, or how quickly must the supplier respond?
Availability and capacity requirements for workstations and associated backend systems, e.g., for virtual workstation, software distribution, etc.
Type of services (e.g. delivery of equipment, software packaging, etc.) which must be provided by the supplier and with which response time, so that the customer can be provided with the best possible service.
Request for proposal
The above results and requirements were transferred into an RFP and sent to potential suppliers. To ensure an objective assessment, the criteria and their weighting were clearly defined from the outset. A bid template, which was made available to the suppliers, also served to make the bids comparable during the evaluation.Introduction & transition
Currently, the introduction and transition to digital workplaces are still in full swing. The following topics are being considered: Development and coordination of detailed technical concepts
Documentation of services and service variants from the customer's point of view
Agreement of the services and conditions within the framework of a service level agreement with the customer
Service design and agreement of the conditions in a contract or service level agreement with the supplier
Definition of the processes, roles and responsibilities as well as the interfaces to the operational processes (incident management, problem management, service request fulfillment, etc.), and implementation in an IT service management tool
Setting up reporting to measure service levels - only by measuring service levels and discussing them with the supplier can the service be improved
Planning the rollout or transfer to operations
The IT organization of the future
The question of what the IT organization of the future might look like is so extensive that it could be covered in a separate article. The trend will certainly be to outsource some areas completely and instead have only service managers or service owners internally who manage these suppliers and services. This means that the internal IT organization will move from "doing" to "managing".
The workplace service is a good example to explain this. For example, the service partner can take over the following activities:
Engineering of the operating system including regular updates
Packaging of the applications/software
Staging of the equipment and delivery/installation at the customer's site
Inventory of the assets
Incident & Problem Management (also "on-site support")
When all these activities are handed over to an external service partner, the own IT organization can focus on "business-IT alignment" and "managing the supplier".
"Business-IT alignment" means, for example, that one can focus on issues such as service roadmap, identification of new requirements and aligning with business representatives. On the other hand, the IT organization then "only" has to take care of managing the supplier, i.e., holding regular service review meetings, monitoring service levels (e.g., availability, resolution times of faults and fulfillment time of service requests) and controlling costs. Among other things, this IT outsourcing can save costs (e.g., small IT organizations would need to keep at least two experts per subject area on standby to maintain operations in case of vacation or illness) and focus on creating the greatest possible value for your core business.
However, internal relief and stable IT services are not the only benefits. In a cooperative relationship, IT outsourcing provider and customer bring together their specific knowledge and experience and work together on new ideas and improvements to provide the best product or service for the customer. This drives innovation and brings significant benefits to both parties.
"Business-IT alignment" means, for example, that one can focus on issues such as service roadmap, identification of new requirements and aligning with business representatives. On the other hand, the IT organization then "only" has to take care of managing the supplier, i.e., holding regular service review meetings, monitoring service levels (e.g., availability, resolution times of faults and fulfillment time of service requests) and controlling costs. Among other things, this IT outsourcing can save costs (e.g., small IT organizations would need to keep at least two experts per subject area on standby to maintain operations in case of vacation or illness) and focus on creating the greatest possible value for your core business.
However, internal relief and stable IT services are not the only benefits. In a cooperative relationship, IT outsourcing provider and customer bring together their specific knowledge and experience and work together on new ideas and improvements to provide the best product or service for the customer. This drives innovation and brings significant benefits to both parties.
Author
Thomas Scherzinger
Thomas' consultancy focus lies on the introduction and improvement of IT service management, IT project management and the implementation and continuous improvement of sustainable new services for a modern workplace.
Thomas Scherzinger
Thomas' consultancy focus lies on the introduction and improvement of IT service management, IT project management and the implementation and continuous improvement of sustainable new services for a modern workplace.
