As it matures, Information technology continues to transform itself into a valuable part of modern-day organizations.  During this evolution, there have been many debates regarding how to best manage costs and associated resources within IT.  The technical part has been relatively easy; companies held off purchasing equipment or negotiated lower prices with vendors.  Traditionally, the difficult part has been understanding what to do with the human resources component of the cost structure, despite its ability to appreciate in value if properly managed.

IT Resource Cost Scenarios
On paper, going through a cycle of hiring and terminating employees sounds like the best way of managing these costs – simply hiring when they need employees, then terminating when their work is complete. In reality though, this does not work.  People are the organization, and when they leave, they take with them an abundance of knowledge and organization-specific information.  Additionally, the company’s employment brand could suffer damage.

Instead, organizations have attempted to balance resource and cost requirements by using some form of outsourcing.  Typically, three types of outsourcing are attempted.  The first is off shoring, which utilizes foreign labor in an attempt to lower the organization’s IT labor cost.  The second is near shoring or using U.S.-based employees who are located in a lower labor cost area.  The third is outsourcing to a company that specializes in managing IT resources.  

All of these types of outsourcing have drawbacks.  The biggest downside to off shoring is the language barrier.  One noted industry author, Stephan Spencer stated, “The lack of language skills among the outsourced employees can lead to misunderstandings, lost credibility, customer service complaints and missed opportunity.”1 Near shoring can eliminate many of the cultural and language issues that can develop when off shoring, but does not address any future potential issues with labor availability in the location selected.  There may not be enough skilled workers in the near shore location to support the organization.

Outsourcing is a legitimate means to control costs.  The concept is very simple:  Let a professional that does this all of the time do your work for you, so the company can focus on its core business.  If an organization lacks sufficient IT resources, it will outsource to a company that specializes in IT.  The plus side is that the outsourcing company focuses on technology and is able to attract highly skilled individuals in the IT field, whereas the core organization may have a harder time attracting the same resources.  

The potential negative side is that cost containment can be harder to manage.  In order to prevent out-of-scope cost overruns, one must know the details of the outsourcing agreement prior to signing.  For example, a contract that covers day-to-day support might not include required software or development updates, which would then require the organization to pay extra.  The result is a contract that inadvertently costs the organization more to support than if it had its IT team in-house.

Measurement is Key
The key to successfully managing IT resources is to have solid metrics and measurements in place.  The only way to establish these solid measurements is to develop consistent processes.  Many organizations assume outsourcing IT is the answer, but without proper metrics and measurements in place prior to outsourcing, they do not have any way of validating their assumptions. Prior to any cost or resource management decision, a successful IT organization will have its policies, processes and procedures developed and tested so when the “work” goes to an outside organization, there are clear instructions for maintaining the organization and for incorporating improvements.

Best Practices in Practice
The ITIL^® framework sets up a consistent way of managing resources so that true costs are measured.  For example, one company had approximately 30 different helpdesks scattered throughout its organization.  Some of these helpdesks were typical in that they were comprised of several individuals working in a call center environment, supporting multiple users.  The majority of these helpdesks ended up being one or two individuals who answered the phone and then dispatched a teammate to the end-user.

Prior to implementing the centralized service desk system, the company lacked an enterprise view that showed how many people were performing the helpdesk role and were involved in Incident Management. In addition, there was not any way to tell how much work IT was performing in supporting the company. As a result, the company created a project to consolidate all of these “helpdesks” into three service desks using a single enterprise support tool.

Within two years, this project had successfully standardized the Incident Management process and the Service Desk function, leaving only three service desks to support the organization. Overall, the results of this project enabled the company to save millions of dollars in labor costs as well as significantly increase customer satisfaction since someone was always available to answer the phone. Later, when the decision was made to outsource a portion of the service desk functions, the proper measurements were in place to allow the organization to track whether the outsourcing company was managing to the standards set by the internal service desk.  If they had simply thrown their hands in the air and said, ‘let the outsourcer do all of this!’ they never would have known whether they were saving money or not.  The key to their success was standardization.  By building on the ITIL^® framework and developing standard processes, they were able to determine areas requiring improvement, and then they made those improvements prior to outsourcing.

Conclusion
There are many options for controlling costs and managing resources, both technical and human, within IT.  Setting up standardized processes and then measuring how IT performs against the metrics is the best way to determine the true cost of delivering IT services.  Only by building on a set of standard processes and then continuously improving those processes can an organization expect to succeed in managing their IT cost and resources.  

About the Author:
David Whitten is a senior consultant with Plexent, an IT service management (ITSM) company and leading provider of ITSM-focused intellectual property, itDNA_^®.  He has more than 15 years experience in the IT field with more than 20 years experience in continual process improvement from implementing and improving processes for Fortune 500 companies. 

¹Reference:   Stephan Spencer, MarketingProfs Daily Fix, “Drawbacks of Outsourcing to India or China,” May 8, 2008



Previous Article | Next Article