uGovernIT

A Practical Approach for IT Governance

Outsourcing for SMBs

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Following the ignominious collapse of several major outsourcing deals, IT services providers and customers alike have had to revise their approach to the entire outsourcing business. The trend towards more small projects is gaining momentum, and it further reinforces the need for organizations to develop an IT governance methodology for small projects. SMB CIOs have an alternative solution in extending their resource capability using project-based sourcing. Project-based sourcing is a convenient way to balance the need for reducing costs and maintaining core competence in-house.

While outsourcing makes good sense, organizations, particularly SMBs (Small to Mid-Sized Businesses), simply maintain status quo. Either they cite lack of expertise in managing off-shore engagements or perceived quality issues to not engage in off-shoring. To a large extent, their fears are justified. Tier-1 outsourcers seek outsourcing of entire functions – not the ideal method for SMBs which seek help for specific projects.

When outsourcing the projects, the overhead gets accented as procurement and sourcing decisions have their own components of fixed costs. The lack of a well-established Service Provider network that deliver project-based offshore solutions adds to procurement costs, often negating the benefits of outsourcing. The challenges with small-project sourcing from a SMB perspective are three-fold:

  1. Management issues leading to gaps between expectations and delivery. Businesses are not adept at managing global sourcing for smaller projects.
  2. The sheer number of projects with a large pool of smaller outsourcers makes the job of connecting the “right” provider with the projects extremely challenging.
  3. Even though the IT projects are small, the procurement logistics are still time-consuming and complex.

Fortunately, web-based brokerage solutions are emerging. These solutions are built on a solid pre-credentialed Service Provider network to ensure that lower cost is not negated by poor quality. These web-based solutions benefit both the SMB as well as the Service Provider. SMBs benefit from low administrative costs and accelerated contracting. They also benefit from selecting a vendor from a pre-credentialed network. Many Tier-2 and Tier-3 offshore Service Providers have the ability to provide niche IT solutions that match SMB project needs. Having a single consolidator like UsourceIT that manages the smaller outsourcers provides an efficient mechanism to implement small-project sourcing.

Written by Subbu Murthy

April 15, 2010 at 7:02 pm

Posted in IT Governance

Tagged with , ,

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