SIDEBAR: Risky Business

Costs, quality and the relationship of IT to the overall business strategy are critical factors in deciding whether or not to outsource. But other nontangible risks must be factored into the business case as well. According to outsourcing consultancy Ventoro, they include:

EMPLOYEE IMPACT Outsourcing can affect employee morale and productivity in the short and long term.

CUSTOMER IMPACT Decisions to outsource may have a negative effect on customer opinion and ultimately on revenue.

PARTNER IMPACT An outsourcing deal may force process and system changes on other vendors with whom you work.

LAWS AND REGULATIONS Outsourcing can affect your ability to comply effectively with laws, regulations and other standards. Compliance in an outsourced model can also cost more.

SECURITY AND INTELLECTUAL PROPERTY PROTECTION Outsourcing can impact system, facility and data security and may increase the potential for IP theft, fraud or other problems.

BUSINESS CONTINUITY AND TERMINATION An outsourcing deal that fails can interfere with day-to-day operations.

PERFORMANCE AND SUPPORT Outsourcing can affect real-time systems performance, IT support costs and technology integration.

SIDSEBAR: Don't Just Say No

So what do you do if your CEO, CFO or COO does fall under the spell of a vendor salesman and asks: "Why the heck aren't we outsourcing this?"

A defensive or emotional response will only hurt your case. Responding in a calm, fact-based manner is your best bet both from a political and an effectiveness standpoint. "Position it in a way that makes it clear that you're not outright opposed to the idea," says Jeffrey Kaplan, managing director of IT consultancy ThinkStrategies. "If you go into self-preservation mode, it looks bad."

What you say will depend in part on how prepared you are. Here are three ways to respond when the "O" word is uttered.

If you have a solid sourcing strategy and decision-making framework in place and an accurate understanding of costs, service level and other considerations, you'll want to inform the CEO and let him know you're evaluating the options:

"I'm glad you asked. Here's the framework we've created for deciding what to outsource and what to keep in-house, and this is how it ties into our overall business goals. We don't outsource X because that allows us to do A, B and C without the risk of X and Y. We'll review our overall strategy again at the end of this fiscal year and update our cost and service level benchmarks. We'll certainly look into those options."

If you're developing your sourcing strategy and getting a handle on internal and external costs, service levels, and other considerations, you want to get buy-in for that process and buy yourself more time to complete it:

"As a matter of fact, we're taking a look at the entire IT operation and the opportunities that might exist for outsourcing. We're using a very specific process to make our evaluation in a way that will minimize risks and optimize benefits for the company. This is our time frame for completing the process. May I show you what's involved?"

If you have not yet started to develop an overarching strategy and have little visibility into internal and external costs, service levels and other considerations, turn this into an opportunity to do so:

"That's a good question. What I'd like to do is take a look at the entire IT operation and the opportunities that might exist for outsourcing. It would take about X months. We would be using a very specific process to make our evaluation that will minimize risks and optimize benefits for the company rather than jumping into something we haven't fully evaluated."