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There are some special considerations to be taken into account when outsourcing IT.

Business processes

It is common for outsourcers, customers and consultants to view outsourcing in terms of business processes, so that an entire business process is outsourced by the customer, with the outsourcer responsible for deliverable a specified business outcome.

An example of this would be a toy manufacturer which realizes that its core business is actually marketing toys. It could then outsource the entire manufacturing process, with the outsourcer responsible for the delivery of inventory.

This picture may be different with information systems, as a set of applications could each support a different business process. It might be thought that each application could be outsourced together with the process that it supported, but, increasingly, the applications may be "integrated", so that they run on the same computer hardware, over the same networks, using the same communications devices, and, mostly importantly, accessing the same databases.

On the other hand, the entire IS function may be outsourced, so that the outsourcers who run the individual processes have to depend upon the outsourcer who runs IS for their information needs. To them, the IS outsourcer will be a third party, beyond their control.

Historically, the greatest failures in outsourcing have occurred in information systems, and most often through a complete outsourcing of the IS department, including its staff, hardware, software and premises.

Today, we tend to prefer "selective sourcing", with separate outsourcing contracts for each of several functions within the IS department. These contracts can be with the same outsourcer.

The functions within an IS department are

• management of the IS function
• management of customers and their requirements
• provision of services
• management of assets
• management of suppliers
• assessment of the market and future trends.

All of them operate at two or more levels in the organization, where those levels are

• strategic planning
• planning and control
• operating.

Outsourcing activities

Outsourcing can be applied to the various functions and levels as follows.

Strategic level

This should remain in-house. It covers

• IS strategic planning (in the IS management function)
• IS service marketing (in the customer management function)
• service planning (in the service provision function)
• business information planning (in the asset management function)
• outsourcing strategy (in the supplier management function)
• opportunity analysis (in the market assessment function).

It is a general rule of outsourcing that the strategic level should remain in-house. In the past, this has been ignored and the strategic activities of the IS department have been outsourced.

Planning and control level

Some activities at this level should be retained in-house. They are

• work planning; investment appraisal; personnel management (in the IS management function)
• customer account development (in the customer management function)
• applications co-ordination (in the service provision function)
• data administration (in the asset management function)
• relationship management; contract management (in the supplier management function)
• technology, service and product evaluation (in the market assessment function).

Some activities could contracted out, such as

• quality management (in the IS management function)
• business requirements analysis (in the customer management function)
• project management (in the service provision function).

Those that could be outsourced are

• operations management (in the service provision function)
• asset planning (in the asset management function).

Operating level

Activities suitable for contracting out are

• procedures and standards development (in the IS management function)
• application development (in the service provision function).

Activities suitable for outsourcing are

• help desk; user support (in the customer management function)
• application enhancement and maintenance; operations; contingency management (in the service provision function)
• asset installation and maintenance (in the asset management function).

Activity packages

The "activity packages" for outsourcing will therefore be

• central operations (operations management; operations; contingency management)
• assets (asset planning; asset installation and maintenance)
• support and local operations (help desk; user support)
• application enhancement and maintenance.

Impacts

The areas likely to be impacted by outsourcing these activity packages are

IS organization

With an increased workload, there will be no need for an increase in the number of staff employed by the customer.
There will be changes in the structure of the IS department, especially given the departure of operations (both centrally and locally) and of application enhancement and maintenance.
There will be some new roles created, especially in the contract management area.

IS staff

The skills mix will be different and will be more oriented towards the strategic and planning and control levels.
The major focus will shift from technology towards the business and its information needs.

IS customers

Customers of IS services will agree service levels.
They will also have direct contact with suppliers of IS services.

Assets

The organization's hardware may move to a remote site.

Suppliers

Suppliers will become closely involved in the provision of IS services, and will provide and manage operational services.

Quality

Quality will have a stronger emphasis throughout the IS department, especially through the implementation of service level agreements.

Costs

Costs will increasingly be directly related to the level of service being provided.

IS department structure

It is worth adding a further note on the structure of the IS department, which is likely to be

• management and administration
• strategy and planning group
• customer management group
• service development group
• service management group.

This is markedly different from the traditional "IT shop".