Today, whether they like it or not, financial services organizations are technology companies. Data capture, record keeping, stakeholder communications, and internal operations square off against regulatory and security concerns; combined with the need for absolute accuracy and data integrity, IT management can demand a huge percentage of resources. However, diverting resources from the core mission to running a full-fledged IT organization also brings with it steep costs in time, money and resources.
An alternative for many companies is to outsource IT functions to a partner that can handle the infrastructure side as well as application development. Obviously, many companies choose to keep IT operations in-house. According to Ludge Olivier, CEO of The Cornerstone Professional Group, LLC (Cornerstone), this makes sense if it doesn’t take away from a company’s core focus. As an example, he pointed out Microsoft’s decision to outsource the production of the Xbox to a partner. While they certainly had the financial resources to invest in producing products internally, they reasoned that doing so was a “non-core” function.
“Whether infrastructure oriented or software oriented, IT needs to be a critical lever within the enterprise,” Olivier said. Otherwise, he explained, outsourcing some or all of the IT function should be seen as a way to manage resources more effectively.
While more often, it’s a smaller business that chooses to outsource IT, because of the financial and personnel commitment of bringing that capability in-house, there’s more to it than a money issue. Olivier explained that keeping IT as an in-house function takes a 100 percent commitment to hiring and training the right number of skilled people and maintaining infrastructure while staying ahead of rapidly changing trends.
The Key to Successful Outsourcing
It’s one thing to consider outsourcing IT, but another to actually implement it. Change can be difficult, and the key to a successful engagement is trust. According to Steve Dassoulas, Cornerstone’s COO, it starts with communication. “Does the partner listen to me? Do they really understand what I’m saying? And, beyond that, do they understand my meaning? Because sometime what people say and what they mean may be different.”
For companies who are thinking about outsourcing some part of their IT, it’s often best to start small, Dassoulas suggested. “Don’t start by giving that partner the crown jewels of the organization. This gives you the chance to test the waters, to see how you work together, and how responsive they are.” Only then, he explained, will a business leader feel confident in turning over some level of control.
Olivier agreed, adding that providers need to invest in the relationship, as well. “I need to show that I have your best interests at heart, that I have a keen understanding of your business and those core drivers that are important for the enterprise.”
When identifying an outsource partner, companies frequently have to choose between providers with expertise in a specific market or with specific technologies… but not always both. Olivier said the answer is not always obvious. “We’ve been in both scenarios. Instinctively, people think that market experience is the way to go, as it may shorten the learning curve. But having the technical chops and capacity to address a business problem is just as important and can also reduce the learning curve. It comes back to the issues of trust and the importance of building a good relationship.”
Dassoulas pointed out that in either case, it’s important to remember the goal, which is to solve a business problem, not just implement new technology. “Sometimes, companies have prescriptive solutions for whatever the problem is, and they make the client fit their solution, instead of trying to understand their situation and then tailoring or customizing the solution,” he described.
Change management plays a large role in moving to an outsource relationship, Dassoulas noted. Trust plays a large role in the outsource relationship, as culturally, it can lead to a perceived loss of control along with some territorial feelings from company insiders. “The elephant in the room is the idea – perceived or real – of displacement. Some people may view an external subject matter expert or resource as a threat to their own standing, and that’s not what we are trying to do,” Olivier explained. “We’re here to be a trusted advisor and value-added partner.”
Dassoulas added that the root cause of most challenges is not setting clear expectations, along with poor communication. “Both providers and clients should be open about what they need… and be honest about errors,” he said. “It’s essential to make sure everyone knows what they are there to accomplish and how the relationship functions.”
There’s another, positive aspect to the outsource relationship: perspective. Olivier described a conversation with leaders from a Fortune 100 company who were planning for some process improvements. “We talked with them about a host of things we do for various clients, and they were visibly in shock,” Oliver said. “We were trying to gauge what was wrong, but the CIO said, ‘This is why it behooves us to work with groups such as yours. It’s the cross-section of technology and experiences, as opposed to our internal folks who are highly capable, but who only see our enterprise.’ That broad base of exposure to different environments and challenges lets an outside advisor bring a fresh, objective frame of reference to the equation. ”