4 outsourcing myths for CIOs to avoid

Rumi Contractor President & COO

In today’s highly competitive business environment, CIOs are constantly under pressure to achieve optimum business efficiency. But, no matter the size of an enterprise, the need to outsource IT services will inevitably surface, whether it be due to a problem that rears its ugly head, technology upgrades mandated by the C-suite, constant innovation in the technology industry, or other mission-critical needs.

When faced with the prospect of IT outsourcing, I’ve found there are several common myths that CIOs may want to reflect upon and possibly avoid. Each one of these myths – if bought into – can have a profound negative impact on the business, both short- and long-term. I speak from first-hand experience as a veteran CIO who at times came dangerously close to mistaking some of these myths as facts.

Myth #1: the safe bet is going with the biggest IT service provider

While contracting a large IT firm may feel like a low-risk play, the reality is that a lot of these providers have grown so big that they have lost customer-centricity, which can make them prone to losing touch with the actual problem. That’s because the bigger a company gets, the more standardized it becomes by nature, resorting to the same cookie cutter processes and methodologies to every problem.

In today highly complex IT universe, most problems can’t be solved using a standardized toolkit. Forward-thinking CIOs understand that a problem doesn’t go away with cookie-cutter solutions, but demands a more personalized approach with a true IT partner.

Myth #2: outsourcing IT services, development programs, or processes will fix all my problem

No matter what the challenge, no CIO should assume a problem will disappear just by handing it over to someone else if the problem is truly yours to fix. In my years of experience, this “outsourcing strategy” will fail most of the time or create lots more confusion than you were prepared to handle. Clearly articulating and managing the process of outsourcing is key to successful outcomes. Accountability has to stay with the owner and not be gifted to an external party or service provider. Customers can outsource services, processes, and projects, provided they have done their homework and know how to govern, break down the phases, and be prepared to share the responsibility and the accolades for the success of the outcomes.

At Quinnox we have always tried to encourage a thorough identification and breakdown of the problem by collaborating with all involved parties – CIO, IT team, IT service provider and business leaders. This is followed by assigning roles and responsibilities, breaking down a complex problem into easy-to-manage components, and establishing an appropriate level of governance and measurement.

Myth #3: size doesn’t matter – it’s okay if my IT provider is colossal compared to my company

When a mid-sized company partners with a large-scale tech services provider, it’s really not an equal partnership, but a match of “unequal” and the bigger guy usually wins. In this case, it is the mostly the IT services provider, and not the client. In my view, if the client is a lot smaller than the service provider chosen, chances are the client is going to get what the provider wants to give, not the other way around. It’s a one-sided deal, and the loser is usually the client – the street is littered with many such examples.

So, it’s critically important for CIOs at mid-sized companies to partner with a right-sized tech services provider. It’s like picking a friend that shares the same understanding and expectations. In addition, big IT firms are accustomed to working with Blue Chip clients (and billing accordingly), often bringing the same kind of structure and process to smaller engagements. These solutions usually do not fit, or are grossly over-engineered, ending up costing a ton and crippling the smaller-scale organization.

Myth #4: if I engage someone for a fixed price project, there will be no cost overruns or project delays

Nothing could be further from the truth. Completely relying on a legal document that fixes the project costs to ‘X and assures delivery of the end result in ‘Y’ timeline is ill-advised. To reiterate, unless there is a clear understanding of what has to be done and how no fixed or time-and-material contract can stop the bleeding on both costs and timeline fronts. We have seen many companies going into ‘fixed price’ engagements without fully developing or fixing the scope of change. This results in massive cost and time overruns, putting the focus on legal and administrative issues rather than on the project itself.

Do any of these myths sound familiar? In my more than 30 year career, I’ve personally witnessed IT professionals at every level thinking they’ve found a golden unicorn or won the jackpot, buying into one or more of these myths and paying huge consequences that weaken the organization. Being a CIO in today’s high-stakes corporate world is a tremendously challenging job. That’s why it is very important to be aware of these myths and embrace an enlightened approach to outsourcing – a realistic, methodical, and collaborative partnership of equals.