To Outsource or Not to Outsource, That Is the Question
The options for moving technology and technology management out-of-house (or “outsourcing”) are more numerous than ever. The draws of these services can be enticing, especially for an institution that is short on capital, dealing with personnel freezes and cutbacks, or facing the replacement of obsolete technology. Since many colleges and universities are raising the question of whether to outsource technology services and support with increasing, here I hope to provide some key considerations when determining how outsourcing best fits into your technology management strategy.
Outsourcing: In and Out of Favor
First, it’s important to understand that outsourcing trends are cyclical. In the 40+ years I have been an independent consultant to higher education, I’ve watched the outsourcing pendulum swing in and out of favor several times. Companies once made millions of dollars taking over computing departments. Ten years later, many institutions moved IT back in-house, citing higher costs, lack of flexibility, and lack of vendor responsiveness. Institutions are currently largely favoring the outsourcing side, driven by real and compelling factors: economics, changing technologies, and institutional attitudes.
Let’s Talk Cost
Outsourcing can be a cost-effective method of supplementing in-house capabilities. It can provide additional expertise and allow an organization to concentrate its limited resources on efforts that most greatly support its strategic mission.
However, outsourcing is not an all-or-nothing decision. The question is not whether to outsource technology services. Rather, the question is what and how much to outsource. An organization must decide not only whether to outsource a function, but often which specific tasks within that function to outsource.
With outsourcing, costs change, but don’t necessarily decrease (and may even increase). Capital and personnel costs become operational costs which may offer some funding advantages. In any case, we’re talking about different pockets on the same pair of pants.
EdTech: A Set of Unique Challenges
University technology is not generic. Each campus environment, infrastructure, network and culture is unique. External vendors frequently don’t understand this.
Technology reaches every location, activity and constituency of the institution. While certain functions can be easily segregated and outsourced, treating all of IT as if it were self-contained and able to be outsourced is short-sighted and dangerous.
Technology is (or at least should be) a key component of an institution’s strategy. It is a fundamental, mission critical function of the school. Outsourcers do not necessarily see it in this light.
While vendors can frequently bring more and broader expertise to a given technology than is available from in-house personnel, in-house personnel have a better understanding of the culture and politics of the institution. This strength should not be ignored.
Conduct an Assessment
So, how can you start an outsourcing assessment? Begin by considering the following questions:
- What problem(s) are you trying to solve? Are you trying to save money? Improve service? Fill open positions? Provide more or better service? Why do you think outsourcing is the answer?
- What does an external vendor bring to the table that your institution does not have in-house? Does outsourcing make sense in terms of the institution’s stability, size and culture?
- Can the outsourcing company provide equal or better flexibility in terms of types and levels of service, hours of operation, etc.?
- How much control would you lose or gain by outsourcing?
- How will performance (of the vendor and of your team) be measured? By whom?
- What are the pros and cons of having your staff working with the staff of another external company? Who will be in charge? How will problems be resolved?
- Can present assets and investments be transferred to the outsourcer? Sold? Re-deployed?
- How standard are your institution’s technology implementation and infrastructure? Do they lend themselves to be easily understood and managed by outside management?
- Can the outsourced service interconnect and interoperate better with present and anticipated campus technologies?
- To what extent does your outsourcing decision limit or expand your choices in the future?
These answers will help you determine if outsourcing is the best direction for your institution.
Compartmentalize and Prioritize
If there are areas where a vendor can provide the best value through outsourcing, start looking at areas where you are facing challenges and have the least internal capability to address those needs. This increases the likelihood that outsourcing will solve real problems and provide a win-win for IT and your users.
Once you’ve decided to outsource, there are still some important questions to ask to help determine the right vendor for your needs:
- How will customer service be handled? Will the change improve or degrade customer service on campus?
- How will security be handled? Think about not only protection of personally identifiable information and data back-up, but regulatory compliance and records retention as well.
- How far away are the vendors located? If you need them on-site for any reason, will they be available? On how short of notice?
- What is your recourse if the vendor is not working out? Are performance penalties and/or performance bonuses addressed in the contract? Can services, and more importantly your data, be easily captured and moved back in-house?
- Are there limits on price increases at the end of the contract term?
- What has been the experience of other organizations that have used these companies?
- How will disaster prevention and recovery be addressed?
- Are there clearly spelled out service level agreements defining the rights, responsibilities, and expectations of all parties? Are they fair and enforceable?
Any assessment of what to outsource and what to keep must start with a thorough understanding of the services you offer, what they really cost, their value to the institution, and the impact that moving them out would have on your department and your users.
Manage the Relationship
Contrary to popular belief, outsourcing doesn’t eliminate the institution’s need to manage; it just changes the nature and level of management. Someone still must manage the outsourcers, the contract, the interface with the school, and other critical tasks. Failure to manage is the single most common cause that outsourcing endeavors fail.
A major caveat: make sure that you keep people on your staff who are knowledgeable and experienced enough to properly interact with and supervise the vendor, ask the right questions, and be a liaison between the vendor and your organization.
Conclusions
Outsourcing has its strengths and its shortcomings. Outsourcing can work successfully for an institution in certain circumstances and for certain functions. It cannot be viewed as an across-the-board cure-all for the ills that plague IT in higher education.
Overall, long term strategy generally favors a prudent balance of outsourcing and in-house management. Needs also vary from institution to institution. Properly applied, outsourcing offers many benefits. Improperly applied, it brings even greater risks.
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This post was authored by Executive Strategic Consultant Geoff Tritsch, who advises clients on technology planning, cost analysis, business continuity planning, and the convergence of voice, data and video technologies. Geoff previously contributed to the blog post “Insights from Geoff Tritsch’s 40-Year Consulting Career,” which highlights the most important lessons Tritsch has learned providing exceptional services to institutions of higher education.