22.12.2023

Successful implementation of IT outsourcing

Onwords into the future IT outsourcing

Digital transformation is a key objective for many companies today. The idea of redesigning existing business models and processes from scratch in order to optimise resources and costs is inspiring the business world. The essential basis for this and therefore also the foundation of most modern companies is the necessary information technology.

The design of IT is the linchpin here. Compared to individual, complex IT solutions, modular and standardised IT landscapes prove to be conducive to innovation and are both resource- and cost-saving. Efficient IT sourcing is crucial here. As the path to standardisation is sometimes easier with outsourcing, many companies are now outsourcing their IT or parts of their IT. Reasons for IT outsourcing include focussing on the core business, a lack of expertise within the company and the desire to reduce costs.

Before and during outsourcing, companies need to consider which parts of their IT can and should be outsourced, which processes and competences are crucial for managing the outsourcing and how the IT landscape can be specifically designed.

IT outsourcing involves more than just IT

IT outsourcing refers to the relocation of a company's IT services to another company that provides them as a service. In addition to software and hardware, these IT services also include the associated contracts and assets, as well as the personnel involved.

Three parameters must be analysed in advance as the basis for IT outsourcing:

Target organisation

The relocating company must decide to which target organisation the IT should be relocated. Should the IT services be relocated to one or more companies? Are these companies external service providers or internal companies, such as group IT service providers? Are these companies located in Germany or can they also be located abroad?
Scope and depth of integration

Depending on the business model and degree of standardisation of IT in the company, a suitable scope for outsourcing must be defined. At the highest level, a distinction can be made between the areas of workstation and application operation, as well as between the infrastructure (IaaS), operating system (PaaS) and application (SaaS) levels.
Migration type

In addition to the target organization and scope, the type of migration also has a major influence on the relocation. Does a "lift and shift" transfer, i.e. the pure relocation of an IT service, take place or is a transformation to the target organization necessary? In the case of a transformation, should a decision be made as to whether this should be carried out before, during or after the transfer?

All three parameters must be analysed in a due diligence phase in order to define a suitable target image of the IT landscape for the company and select the appropriate service providers.

Irrespective of the target image and individual characteristics of the parameters, four subject areas from our project experience and best practices have proven to be absolutely essential for the implementation phase of IT outsourcing:

Four Subject Areas from Our Best Practices

Technical Migration

IT Governance

Staff

Legal, Compliance and Procurement

The implementation of IT outsourcing can prove to be a good opportunity to clean up and modernise the current IT landscape. As part of the relocation, companies must therefore decide whether parts of their IT should be transferred, reorganised or decommissioned. This includes not only hardware and software, but also the migration of data and the handling of archiving and backup. In the course of the transfer, investments are often also made in modern and future-proof IT (e.g. cloud). In addition to setting up interfaces between the companies, suitable IT security measures must also be established.

Suitable IT governance must be established to ensure that the service provider is managed during ongoing operations. The necessary roles must be defined within the IT organisation (e.g. provider management, controlling, etc.). To ensure successful collaboration between the two companies after outsourcing has been completed, a collaboration model including a mutual role model and committee structure should also be developed. In addition to this model, all processes relevant to the management of IT (e.g. incident management and change management) and the associated tasks and responsibilities should be clearly defined. Ideally, a service management tool (e.g. ServiceNow) can be established here, which can be used by both companies.

IT outsourcing usually involves personnel changes that need to be communicated and implemented within the company. This involves defining which role profiles are required after the relocation. Based on this, decisions are made regarding staff reductions, increases or possible staff transfers. Sensitive stakeholder management is necessary for these changes, especially with those affected, managers and, if necessary, a works council. The personnel changes are implemented through contractual adjustments (e.g. employment contract, works agreement). The corresponding onboarding must also be planned in the event of a staff transfer. Good change management is crucial here in order to avoid potential uncertainty or resentment among those affected and to closely accompany the change.

In order to outsource to other companies, legally binding contracts must be concluded between the companies. On the one hand for the outsourcing project itself - the so-called project contract - and on the other hand for the ongoing operation - the outsourcing contract. When drafting the contract, regulatory requirements (significant or non-significant outsourcing) must be taken into account, especially for regulated companies. Depending on the scope of the IT outsourcing, approvals must sometimes be obtained from the regulator, for which corresponding lead times must be planned. For contracts that are to be relocated as a result of outsourcing (e.g. licence agreements), it must be checked whether contract terminations are to be carried out or whether regulations on contract takeovers can be agreed. With the transition, a comprehensive, structured and orderly asset list and subsequent maintenance is just as important.

The subject areas provide an overview of the issues that arise. Depending on the IT outsourcing project, other overarching topics such as authorisation management may need to be considered.

The main challenges companies face in an IT outsourcing project are:

The biggest challenge of an IT outsourcing project usually lies in the complexity and multi-layered nature of IT. Many, often unknown dependencies prevent companies from having a clear overview and thus make a transfer more difficult or delay it.little experience with IT outsourcing, coupled with scarce resources, prevent companies from taking the step of outsourcing.outsourcing not only influences the culture of the company itself, but can also pose a challenge in the co-operation between the companies involved.

Intero Consulting accompanies your IT outsourcing from the initial consideration of the project to the successful completion of the implementation

Successful IT outsourcing through a structured approach, standardised tools and methods based on experience and best practices from various projects:

We support you in setting up a project or programme structure for your outsourcing project and taking all necessary topics into account accordingly. From the strategic decision in favour of outsourcing to the migration and handover of the project to the line, we are at your side as an experienced partner.

We recognise the importance of transparent and continuous communication both within the project and to all relevant stakeholders. This is given appropriate attention in the management. With a proven approach, we support you in anticipating the challenges and risks and lead the project to success together.

You benefit from our best practices from various IT outsourcing projects and our technical expertise in the areas of IT governance and procurement.

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