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How to Mitigate IT Outsourcing Risk Factors

Outsourcing Risk Mitigation

Change is always difficult. Add to that any risk factors when considering outsourcing to a third-party IT provider and it can become downright scary. While there are many benefits for companies to outsource their IT needs, naturally there are going to be outsourcing risks with the process. These risks may include loss of control of processes and management, impact on overall quality, and hidden IT outsourcing costs.

The IT outsourcing world is changing rapidly with more and more providers of all sizes and types. To add to it, many companies use more than one IT provider. So what should a business do in order to prevent possible IT outsourcing risk factors? It’s worth contemplating risk factors and ways in which solutions can be acted upon before unnecessary crises occur.

Risk: Loss of Control of Key IT Processes & Management

Business managers will naturally lose some control over IT processes when they enlist an outsourced IT provider. Here internal IT staff is no longer managed by the company itself. This can be a natural adjustment when business owners or other key staff feels that they are missing out on decision-making processes and directly overseeing IT functions. But is it really that drastic?

Read More: Best Practices for IT Outsourcing in 2016

Potential problems between businesses and outsourced IT providers are most likely to occur early on during the IT provider process. Fears can turn into realities when businesses and IT providers aren’t working together to achieve the same IT outcomes. Risk factors can escalate and communication may be challenging, or even limited between businesses and outsourced IT providers.

Solution

Risk prevention is important due to the loss of control (real or perceived) when hiring an outsourced IT provider. That is why it is important for businesses to put together an agreed-upon plan with their IT providers. Some of these items should include:

  • Timelines for meetings
  • Updates and issues that the provider or business owner(s) might be having.
  • Any pertinent changes or inabilities with either party to help meet business and operational goals.
  • Identifying key staff to be in touch with the IT provider(s).

It cannot be stressed enough how IT outsourcing risk assessment and mitigation should occur at the initial outset of utilizing an outsourced IT provider. Furthermore, an organization who has just hired an outsourced IT provider may consider placing an employee with the outside IT staff, especially in the beginning. This benefits the organization in that they can see exactly how the IT outsourcer works. Knowing the IT consultant well is the ultimate key in mitigating the risk of change, along with updating one’s staff about what the outsourcing team is doing and keeping communication open.

Risk: Compromising Quality

No one knows their business like a business owner, key personnel, and administrative staff. Just like a mother knows most every aspect of her child, so does the business owner as to what is best for their business. When it comes time to consider hiring an outsourced IT provider, an uneasy sense of skepticism can settle in. A business using an outsourced IT provider might find itself wondering whether the provider is going to deliver the same type of quality as does the business.

Solution

A way to eliminate some of the risk when hiring an outside IT provider is for a business to do their homework. Most any IT provider is going to ensure high quality, but where’s the proof? Organizations shouldn’t hesitate to speak with at least three-to-five of the IT provider’s clients, current and past. Past clients are especially important to speak with because they have nothing to lose by telling the truth.

If a prospective IT provider doesn’t provide references, consider this to be a red flag and just the opposite action of the all-important risk mitigation. Rather, partner with an IT provider who is transparent. Defining and gathering information about the consultant’s quality of work is crucial.

Hidden Costs & Risk Assessment

One of the more obvious reasons as to why businesses hire an IT provider is due to cost control where in-house IT personnel are no longer needed. Another reason is to eliminate overhead costs for hardware, and to reduce IT maintenance costs.

Risk assessment here once again has to do with doing your homework. Ask about hidden fees for new software, hardware upgrades, any onsite troubleshooting, and charges for after-hours services that weren’t agreed upon or outlined in the original contract.

Solution

Service Level Agreements (SLAs) are imperative when it comes to mitigating risks and risk factors associated with an outsourced IT provider. The following questions should be addressed:

  • Does the IT service provider offer after-hours service? And if so, what do they cost?
  • Are hardware or software upgrades included in overall cost?
  • Have they ever had situations where it was necessary to visit a worksite? If so, what were/are the costs?
  • Does the overall consulting cost include new software and/or new hardware?
  • When/if necessary, will staff training be provided by the IT consultant(s)? What is that cost?

Doing the homework for a business is paramount in order to avoid risk factors. Employment contracts are also vital so as to determine the length of consultancy.

Outsourced IT Providers & Legal Issues: Important Risk Factors

When an outsourced IT provider is hired by an organization, it is imperative to protect the organization’s Intellectual Property (IP). It can be anxiety-producing when considering that a consultant could actually steal IP or trade secrets, but it is better to deal with these matters, albeit rare, well before there is any potential for them to occur. Intellectual property includes anything that a company has written on its own and has either branded it, trademarked it, or otherwise deemed it uniquely theirs.

Solution

A confidentiality agreement should be signed by the IT provider to ensure precious business information is safeguarded and kept out of the wrong hands. Almost every type of consultant is asked to sign a Non-Disclosure Agreement (NDA). Why should an IT consultant be any different?

A detailed NDA signed prior to an outsourced IT provider beginning to work with a company lessens this type of undue risk. It is fair to say that a great deal of vetting needs to go into which IT consultant(s) to hire. That and a hefty dose of trust.

Don’t hesitate to ask a potential IT outsourcer, “What is it about your company that compels me to trust you with our intellectual property?” A decent, trustworthy IT provider will be able to give an honest answer and sign an NDA, or any other employment contract.

Risk Assessment Early On

Risk assessments should be made, and risk factors that result, should be dealt with in the very beginning. There are a lot of worthy IT providers out there. It is the company’s job to do homework, before hiring an IT consultant.

Always remember: these actions taken sooner rather than later will prove to be prudent when organizations actively assess IT outsourcing risks. Don’t just make it a leap of faith. Make it your job to combat IT outsourcing risks.