IT Governance for SMBs Desiring to Outsource

September 19, 2009

IT Governance helps align IT activities to best meet SMB’s business requirements.  Most Governance methodologies start with alignment at the top.  This is a reasonable approach for all organizations where the traditional involvement of board-level executives in IT issues was to defer all key decisions to the company’s IT professionals. IT governance helps facilitate decision making across all stakeholders. This prevents IT from independently making and later being held solely responsible for poor decisions. 

From a IT Governance standpoint, Small to Mid-Sized Businesses (SMBs) differ from the larger firms in two important aspects:  One, they are more nimble and need flexibility, and second, they tend to focus on shorter-term issues.  For SMBs, the guiding principle is to deliver value to the business without injecting onerous controls that stifle productivity.   To achieve it, the IT Governance framework should provide complete transparency on IT activities and make it simple for users to make, monitor and prioritize IT requests.  In order to achieve transparency, SMBs will need to establish controls and processes to deliver quality technology solutions on time and within allocated budgets.  From a management perspective, it is critical to effectively allocate and track resources and costs. 

Outsourcing can actually enable effective IT Governance as it provides a scalable resource base to work in conjunction with internal IT resources.  To make outsourcing successful, the outsourcer’s governance framework must work seamlessly with the SMB’s IT Governance.  Mismatches in the Governance frameworks is one the principal causes of outsourcing failures.  Although mismatches can be best reduced by adopting a common process-centric framework, it is far from easy to implement common processes across two organizations.  A less expensive approach is to identify key risk areas in the process and establish clear mitigation strategies.


Outsourcing 3.0

September 6, 2009

Outsourcing 3.0 will lead the way for organizations to build and manage technology efficiently.  Traditional outsourcing (Outsourcing 1.0) was initially very successful as outsourcers learned to deliver IT solutions with the appropriate Service Level Agreements (SLAs) using attractive pricing models.  Outsourcing 1.0 was all about negotiating intricate, multi-party agreements which were very time consuming. Following the ignominious collapse of several major outsourcing deals, IT services providers and customers alike have had to revise their approach to the entire outsourcing business.

As organizations desired more niche and project oriented outsourcing, Outsourcing 2.0 came about as a natural step (analogous to Web 2.0).  Outsourcing 2.0 is not about SLAs or multi-party agreements, but collaborative rich mutually benefiting business arrangements, one that often requires taking the initiative (at higher degree), delivering very successful but non-repeatable results.  Smaller engagements were often outsourced through marketplaces such as eLance and Guru.  More sophisticated engagements required skillful brokers who engineered these engagements. The key drawback of Outsourcing 2.0 was the lack of repeatability and metrics.  An evidence of this drawback is the reluctance of Small to Mid-Sized Businesses (SMBs) to outsource their IT functions. 

Outsourcing 3.0 (analogous to Web 3.0) relies on semantic searches to identify niche outsourcers who best fit the objectives of organizations desiring to outsource projects.  It retains the metrics and structured processes of Outsourcing 1.0 combined with the identification of specific outsourcers who can collaborate and provide true value to the outsourcing organization.  The three ingredients required for Outsourcing 3.0 to succeed are: 1) a semantic search engine to link project needs to the appropriate outsourcer; 2) a highly collaborative workflow to ensure that the engagement process provides best value to the parties involved; and; 3) a knowledgeable network of brokers who understand information technology and outsourcing.