Gartner Says Companies Must Invest in New Skills and Staff to Benefit from the Move to Outsourcing
Shortage of skills to manage IT outsourcing partnerships poses critical threat to European businesses
Egham, UK, 1ST October 2003 — European businesses must change their management structure and invest in new employee skills to successfully manage their growing network of outsourced relationships, Gartner urged at a Sourcing Roundtable in London today. Gartner said that companies should invest at least 5 - 10 per cent of the value of an outsourcing deal in building and skilling an internal team to manage outsourced relationships effectively. It warned that reshaping internal capabilities has become a business critical priority and without sufficient management and measurement processes, many outsourced projects are failing to meet their objectives and risk negatively impacting the success of the business.
The outsourcing management skills gap
The trend towards outsourcing IT services has accelerated very quickly in the last 18 months. By 2005 Gartner predicts that the majority of spending on IT services in Europe will be via outsourcing. However, Gartner said that to date most businesses have not adequately developed their management infrastructure to manage these relationships, and research has found the great majority of European businesses do not know how much they spend managing outsourced partners. Gartner warned that a gap in companies' internal capabilities and failure to invest properly in relationship management skills and processes will lead to project failures. This will have a direct impact on the success of the business in lost productivity and competitive disadvantage. Corporate satisfaction with outsourcing deals is currently running at less than 50 per cent. Gartner estimates that poorly managed relationships are wasting in excess of ?6 billion per year for European businesses.
"While there is a lot of focus on reduced headcount as result of outsourcing, contrary to popular belief, enterprises must gain staff and add new skills to make outsourcing work," said Ian Marriott, VP of IT Services and Sourcing at Gartner. "It is now a matter of priority for business leaders to identify where they lack the skills, and invest appropriately in building a relationship architecture. We have not come across any company in Europe that has a formal architecture in place yet. Those that exist are highly dependent on a few good people doing the right thing for now. This is both fragile and unsustainable, and a lot of money is being wasted as a result."
No career path in IT for outsourcing managers
Gartner said it has found a consistent misalignment between the terms of external contracts and the changing requirements and expectations of business units that commission them. A principal weakness in the strategic sourcing equation is that the internal team is often under-skilled, under-staffed and under-valued. The skills and processes required to manage service providers can often not be found within the organisation.
This is because there is currently no career path in a traditional Information Systems department to develop and maintain the skills required to manage a portfolio of external service providers for the benefit of the business. According to Gartner, businesses must invest in a new management structure that incorporates four essential functions:
1. Decision-making
Lead the team, set strategy, direction of agreements, policy, service scope and funding.
Relevant experience will come from relationship management, IT management and consultancy. Highly effective business communicators.
2. Design authority
Finalise requirements, evaluate change, maintain standards and ensure integration.
Relevant experience will come from solutions managers who combine experience in human resources, technology, finance and commercial management
3. Business office
Contract management, risk management, auditing, forecasting and reporting.
Relevant experience will come from experienced business analysts or program manger with reporting and management skills
4. Delivery
Keep overview of the individual delivery streams; project implementation, operation support and manage resources, costs, risks and contingency.
Relevant experience will include commercial as well as technical and management project and operations expertise.
Invest in "Corporate Glue"
"A primary task is to establish the business case to the board of management for investing in the skills, resources, process and tools needed to restructure the internal team", said Steve Prentice, GVP at Gartner. "The majority of companies will most likely need to look outside their business to find the right skills. This new organisational architecture will act as the 'Corporate Glue' that binds the organisation's network of business units, business partners and service providers together effectively."
"Businesses must address this problem now," continued Prentice. "Outsourcing business processes is a vital part of becoming a Real Time Enterprise, which makes businesses more efficient, more agile, and more competitive. Every industry sector will be looking to benefit from outsourcing in the next 12 months."
The move to global outsourcing
Gartner said that as technology skills improve worldwide, government support for IT services grows, and international providers establish track records of reliability, companies will be looking at increasingly complex and global delivery models. Combine this with the move to more real time business, and companies that don't invest in the capabilities to establish and manage their portfolio of outsourced relationships will be left behind.
"The world is a many-patterned fabric of cultures and working styles," noted Gartner's Marriott. "When considering outsourced delivery models, especially offshore, enterprises need the particular skills and knowledge required to manage their relationships with each country effectively."
Gartner analysts will provide additional analysis on strategic sourcing issues during Gartner Symposium/ITxpo 2003, which will be held November 4-7 in Cannes, France. Gartner Symposium/ITxpo is the IT industry's largest and most strategic conference, providing business leaders with a look at the future of IT. For more details or to register for Gartner Symposium/ITxpo 2003, visit www.gartner.com/eu/symposium. Members of the media can register for the event by using the press registration link on the website or contacting carina.swedemyr@gartner.com.
About Gartner:
Gartner, Inc. is the leading provider of
research and analysis on the global information technology industry. Gartner serves more
than 10,000 clients, including chief information officers and other senior IT executives
in corporations and government agencies, as well as technology companies and the
investment community. The Company focuses on delivering objective, in-depth analysis
and actionable advice to enable clients to make more informed business and technology
decisions. The Company's businesses consist of Gartner Intelligence, research and
events for IT professionals; Gartner Executive Programs, membership programs and peer
networking services; and Gartner Consulting, customized engagements with a specific
emphasis on outsourcing and IT management. Founded in 1979, Gartner is headquartered in
Stamford, Connecticut, and has 3,700 associates, including more than 1,000 research
analysts and consultants, in more than 75 locations worldwide. For more information,
visit www.gartner.com.
