IT outsourcing – the high road or the low road?

Case study and success factors

Kai Bender, Julia Hörauf, Alexander Mahr

2007

At one time or another, every CIO is faced with the question of whether IT outsourcing would be beneficial for the company. Experience shows that weighing this question is no easy task, from deciding which IT areas can be outsourced and largely standardized, to how the relationship with the service provider can best be directed.
Oftentimes companies want to optimize already concluded outsourcing contracts and amend them to set them back on track.

It's clear that IT outsourcing is not always a magic solution for cutting IT costs, increasing cost transparency or making services more flexible. Clear rules and success factors can be developed based on experience with both successful and unsatisfactory outsourcing projects. These conclusions can then in turn serve as the framework for a successful approach to similar deliberations and projects.

These rules and factors include, for example, an exact analysis of total cost of ownership for achieving the necessary cost transparency, as well as a detailed definition of units to be outsourced. To avoid excessive transportation costs, the transport, including specialist departments, must be mapped out precisely, and a corresponding personnel/change management must be implemented. The desired degree of standardization is in this case decisive for potential cost reductions.

Based on the rules and success factors, the authors have developed two models, which can be used as guidelines for implementing IT outsourcing projects.