Alfredo Saad – IT Outsourcing Consultant
There are similarities and dissimilarities between the contracting of cloud services and the contracting of “traditional” IT outsourcing services (both ITO and BPO). One of the similarities is the relevance of managing the risks on each of the 6 steps of the process (namely, identification of applicable business drivers; definition of organization’s sourcing strategy; provider(s) selection; contractual negotiation; services transition; and contract governance).
In both cases, managing the risks is mandatory if we want to achieve the intended potential benefits over the business motivators of the decision. These drivers are not mutually exclusive and may include cost pressure, agile achievement (or recovery) of competitive advantage, focus in core business activities, penetration in new markets and speed up of time-to-market.
The sourcing strategy of the organization may embrace any combination of ITO, BPO and cloud services, as it takes into account factors such as the organization profile (i.e. its revenue, profit and geographical distribution), the complexity of its IT environment, the prioritization of business drivers, the intended timeframe to achieve results, the level of competitiveness in its vertical industry segment, the organization culture and its propensity to face risks.
The above factors will define which sourcing alternatives suit better to each workload or segment of the organization’s IT scope.
We should remember that if risks are not adequately managed in each of the 6 steps of the process, the probability of failing to reach the intended results will increase exponentially. The reason for that is simple and straight: if they are not eliminated or at least have their impacts or probability of occurrence mitigated, secondary and interdependent risks will probably arise, with a cumulative effect, in a later step. Such late treatment will undoubtedly become much more complex and costly to offset.
In a follow-on article we will discuss the dissimilarities which exist between the risks inherent to each of the steps both to “traditional” outsourcing and cloud sourcing. This last one, as the one which more recently reached the outsourcing market, still lacks some maturity (both for providers and – mainly – for buyers) and stability, as its solutions portfolio, tools, prices, providers list, etc is rapidly evolving. Such discussion will show that the risks to be considered will embrace three categories:
- Risks which currently exist for “traditional” outsourcing and keep existing for cloud sourcing, although with different and evolving characteristics
- Risks which currently exist for “traditional” outsourcing, but do not exist for cloud sourcing
- Risks which do not exist for “traditional” outsourcing but have arisen for cloud sourcing
Do you agree with these concepts? Send your comments!
Alfredo Saad has been acting on IT Strategic Outsourcing Services area since 1997. In 2006 he published the book “IT Services Outsourcing” (Brasport Publishing House). Risk Manager of all IBM Strategic Outsourcing contracts in Brazil (2009-2014). From March 2014 on, he has been acting as an independent consultant, lecturer and writer on IT Outsourcing as the principal of his own company, Saad Consulting.