INCREASINGLY, companies are outsourcing IT projects to enhance their competitiveness and resilience, and set the stage for greater innovation. This goes beyond achieving operational efficiency and cost. As a result, more and more clients are seeking value-added relationships with their IT partners.
According to a study in 2005 by IBM on 'Business Impact of Outsourcing - a fact based analysis', IT outsourcing is a proven business tool and an effective management strategy which can lead to better bottom-line results. They include lower expenses, higher return on assets, and higher earnings before interest and taxes.
The foundation for successful outsourcing is an ongoing commitment to align the relationship between the client and its IT partner. For example, IBM works closely with our clients on governance models to systematically manage the strategic and tactical elements of the relationship. This involves clarifying priorities, responsibilities and decision making; having in place a communications plan to facilitate timely and accurate flow of information to team members and other stakeholders; establishing feedback process to regularly assess the health of the relationship; and measuring and managing performance to service-level agreements. Being constantly tuned-in to our clients' evolving needs and environment enables us to collectively and speedily capitalise on emerging opportunities and adapt to changes.
Girija Pande
Executive Vice-President & Regional Director
TCS Asia Pacific
COMMON pitfalls which lead to failures of IT projects include lack of planning, ineffective programme management, loosely defined requirements, and poor management of cross-cultural and geographic issues. Because of the adverse business impact of these failures, companies now demand a level of certainty in the delivery of outsourced IT projects.
Collaborating with the right partners will ensure the success of companies' IT investments and prepare them for tomorrow's challenges. The right partner should bring not only technical prowess but also business domain expertise, and should have scale to customise, and capabilities to provide services at the global quality standards for the industry.
Also, in today's environment, clients need domain-specific business innovation to integrate with existing enterprise systems. Therefore, IT vendors must look to drive innovation in multiple dimensions - business model innovation, services innovation, and delivery innovation. This leads to improvements in productivity and agility, delivering business benefits to customers.
Poh Mui Hoon
CEO
Nets
IMPLEMENTING IT solutions, particularly in large organisations, requires close coordination between the company and vendor to reap the full benefits. Essentially, there needs to be a clear implementation plan tailored to the company's business, while not leaving out the employees who are the end-users.
When Nets introduced an IT service management solution two years ago to support our rapid regional expansion, our team relied on a process and methodology comprising a set of guidelines to manage the implementation effectively with the vendor. Anticipating some initial staff resistance to abandoning long-established work routines, our strategy was to run training like an exercise, instead of giving staff lengthy manuals to read. The purpose was to engage them by showing that smart and savvy use of technology had to exist not just in Nets' business model, but also in our internal work processes.
These efforts translated into more precise measurements of our service operation's performance and overall organisational effectiveness - outcomes that delivered on the promises made. To this end, IT vendors can help by aligning IT with the organisation's business processes and objectives.
Glenn Tan
Group CEO
Motor Image Group
COMPANIES should give vendors a clear brief of requirements and business objectives. Both sides must agree on the deliverables and timeline, which should be reasonable and realistic. Once the project kicks off, there should be regular progress reports to keep the project on track. From our experience, when vendors run into roadblocks and miss deadlines, the client has to take charge and step in to fix problems quickly to prevent further loss of time and money.
In business, you need to respond quickly to changing market conditions to survive. What a client needs is a strategic partner who understands this and can adapt quickly to changing business needs.
Lim Soon Hock
Managing Director
Plan-B Icag Pte Ltd
THE issue is not one of lack of knowledge or know-how with respect to what needs to be done, as most of it is well expounded and widely exhorted: users' involvement, change management, project management, project accounting and the all -important CEO involvement.
The underlying problem is lack of discipline. Both the company and IT vendor need to cooperate to ensure stringent application of the basics, and that there will be no compromise on this front.
A company must provide sufficient budget for an IT project based on a sound and defensible value proposition, which the IT vendor can help articulate. The cheapest choice often leads to a solution which is less than satisfactory, and the opportunity costs incurred by the company in missing out on a timely exploitation of IT as a strategic and business tool, invariably far exceed the anticipated cost savings for the project.
IT vendors need to develop the discipline to walk away from taking on a project if the costs or deadlines or both cannot be met. This is often a tough call for many vendors, given the pressure to deliver numbers.
In essence, it can be a win-win situation for both parties if they adopt a 'part of the solution and not part of the problem' approach. As I have also found out from my years at Digital, Compaq and SITA, this mindset is key to moving an IT project forward and towards a successful implementation.
Derek Goh
Executive Chairman / Group CEO
Serial System Ltd
OUTSOURCING is often an option chosen by companies that find it more cost-effective. However, in doing so companies may lose in terms of quality control or business control. Thus, at the outset, companies outsourcing their IT projects should have the relevant IT management expertise to manage or interface with the IT vendors.
Clear definition of IT requirements and business-IT alignment are necessary to achieve the desirable outcomes. IT vendors have a crucial role in education and training of their clients on the achievable and desirable outcomes, as well as the cost benefits of the different options. An IT-savvy environment in the client companies will foster greater participation and contribution to more satisfactory outcomes.
Harish Nim
CEO
Emerio Corporation Pte Ltd
AN IMPORTANT reason for IT projects failing is the nature of relationship between the client and the IT partner. The client must believe that outsourcing is actually a team game and that only a win-win approach will ensure success.
Choose an IT partner that has had multiple successes with each client, rather than many one-off projects with many clients, because chances are that projects have been delivered well and repeat business has been given. Choose a partner who will value your business and who is looking at a long-term relationship with you. Choose a partner who is flexible, as you will need that flexibility during the projects.
I would also suggest that clients should choose one partner and stick with them, because the partner who works with you comes to know your processes and environment and will then be more effective when delivering projects for you. Above all, treat the IT vendor as a partner.
J Anton Ravindran
Group CEO & Co-Founder
Genovate Solutions
THE survey indicating 74 per cent of IT projects not meeting customer satisfaction levels could be a very generalised view. The percentage of acceptance could be much higher in industry segments like banking and financial services. The attributable reason behind these higher success rates based on industry specific surveys is the user being IT-savvy and also being used to a system environment. Their counterparts in the manufacturing segment may not be used to system environments and chances of IT project failure are much higher.
Collaborative partnerships between the client and vendor are critical to the success and not a client dominant arrangement. Before embarking on the IT project, the vendor should ensure that the business stakeholder's interests are well understood and documented. Clients should ensure that the partner evaluation criteria are more aligned with business and its crucial staff, and also have to be drafted taking into consideration evolving market dynamics rather than static terms and conditions.
Some of the reasons IT initiatives fail are due to mismatch of expectations, scope of work being poorly or vaguely defined, and relationship between vendor and client being not convivial.
A tool used to effectively manage expectations in outsourcing arrangements is a well-crafted service level agreement which provides clear targets and KPIs for measuring performance of both parties. Effective change management acts as a key business enabler to ensure that employees understand and appreciate the system and its business value. It ensures commitment, motivation, stability and productivity of the workforce.
Tan Tong Hai
President & CEO
Singapore Computer Systems Ltd
COMPANIES must not view outsourcing as a means to cut costs to justify their business cases. Other factors like access to talent and capabilities, flexibility gains and adoption of best practices should be considered. Companies must adopt a collaborative partnership approach - have transparent dealings with IT vendors, make decisions for mutual benefit, establish effective joint governance structures, and share risks and rewards.
IT vendors like SCS, with a large, experienced talent pool leveraging world-class business processes, can assist customers to build their business cases for outsourcing beyond cost savings and ensure success through effective governance and genuine reciprocity to share risks and rewards.
VR Srivatsan
Vice-President, South Asia
Business Objects Asia Pacific
PERHAPS the most under-rated element to achieving success in IT projects is about building a truly trusted relationship between customers and vendors. Understanding that IT projects require ongoing commitment beyond the 'go live' date is fundamental to their overall success. Another key component is for companies to be able to articulate what they actually want to achieve - what their key performance indicators are - from their deployments so that vendors can stay focused on delivering to those indicators.
At Business Objects we place a strong emphasis on customer care and ensuring that our customers see a tangible business return from their IT investments as soon as possible. Part of this is ensuring that deployments are completed on schedule and that relevant staff within our customers' organisations are trained to extract the best out of their Business Intelligence solutions.
Steve Russell
President and CEO, Asia Pacific
salesforce.com
ORGANISATIONS sometimes face the difficulty of aligning their business strategies with the objectives of their IT projects. There's also increasing pressure to squeeze more from allocated IT budgets. Companies should look to IT vendors who can help tailor IT projects to business needs, to maximise their investments.
Off-the-shelf products may not necessarily offer the level of customisation an organisation requires to achieve those business targets, and investment, time and resources end up wasted. IT vendors such as salesforce.com give companies the flexibility to customise applications to best fit their unique business goals.
Software-as-a-service - applications and services delivered on-demand over the Internet - ensures more positive outcomes for IT projects, because it offers organisations, regardless of size, fast deployment, support for deep customisation, scalability, reduced risks and automatic upgrades that don't impact IT resources. IT departments can then focus on the challenges of innovation and business strategy rather than management and maintenance.
George Wong
Managing Director, Asean
BEA Systems
BUSINESSES need to plan and invest to clearly define objectives and detail requirements before embarking on any major project. Often, tender documents lack such relevant information, resulting in IT vendors bidding on fixed prices and delivery times which might not reflect accurate bids. As a result, IT vendors are set for failure from the very start - and will likely result in delivery delays and budget overruns.
IT vendors too can help bridge this gap by increasing training investments in critical skills areas such as project management. This will result in an ability to better construct structured approaches to requirements definitions, contribute to expectation management and ultimately, success outcome of IT projects.
