Example cases

Learn valuable lessons from these organisations: 

IT Outsourcing grows into a valuable partnership

Outsourcing in India by LeftHand Networks was initially undertaken to save costs. However, the arrangement quickly became a strategic partnership and international staff were integrated into LeftHand’s team. The outsourcer was able to provide advanced testing procedures and software coding expertise, which led to the arrangement growing steadily into a valuable partnership. Every 3 months or so, Indian and US engineers worked together to introduce new projects, learn about new technology or simply to refresh their knowledge. The outsourcer’s engineers also undertook LeftHand’s formal training programmes. LeftHand’s core intellectual property (IPR) was developed and remained in Boulder. Despite incurring additional expenses related to offshoring, LeftHand saved 50% on costs, including salaries and operational efficiencies, and lab testing was available around the clock. The viability of the outsourcing arrangements depended strongly on data security. The outsourcer also underwent independent audits twice yearly. [19]

Information Technology United Corp, Beijing

 Offshoring – challenges to overcome

China offered Information Technology United Corp (ITU) a new opportunity by having the right skills at the right price. However, unlike India’s thriving IT outsourcing industry, China’s was immature and fragmented, with few companies having attained high-level international certification. In addition, the majority of the IT outsourcing in China at the time was for its domestic markets, i.e., the financial services sector. ITU reported the following challenges:
• Communication: A good mixture of Western and Chinese managers was required (ITU used English for business within the office)
• Cultural differences: Could complicate communications, since disagreeing with any ideas presented was culturally difficult
• Training: Helped employees understand that group reviewing and corrections were not criticism, but served to improve the project. This took time to achieve
• Retention of skilled Chinese employees: Turnover rates for IT professionals averaged 15% to 20% in China. [20]

Intermec Technologies Corp. USA

Offshoring using embedded contractors

In order to get products out on time and continue growing, Intermec enlisted the services of an outsourcing organisation with more than 3,000 IT workers available worldwide. Since it was wary of sending work into a “black hole,” Intermec started offshoring slowly and embedded contractors into its own teams. This allowed the contractors to gain a sound understanding of company procedures. Intermec provided between 10-12 weeks training was given to five contractors from Bangalore. Four of them returned to Bangalore to oversee a 22-person team, while one remained in the US and liaised with Bangalore staff. Intermec management believed that empowering people to work well together accounted for 80% of the success or failure of outsourcing projects. As a result, Intermec experienced a 35% increase in its capacity, as well as shaving three months off a twelve-month project. [21]

Medicall, Philippines

Managed Services save time

Outsourced medical services were provided by Medicall via a nurse-based communications centre located in the Philippines. Experienced health care professionals addressed inbound/outbound patient communications, which ranged from new member welcome calls, health risk assessments and compliance calls to disease and case management support services and patient satisfaction follow-ups. To accomplish this, the outsourced organisation’s toll-free numbers, Web links, and email addresses were directed to Medicall’s Web-based communications centre. Calls from clients and physicians were then managed using VoIP, Web chat, Web call-back, e-mail and faxback services. Doctors and nurses were also able to use the toll-free numbers to dictate patient records for transcription, decreasing the amount of time spent on this task by up to 70%. Medicall’s Network Operating Centre was hosted in Salt Lake City, and patient records could only be reproduced in the US, which provided patient information security. [22]

Exostar LLC, USA

Outsourcing IT security

Exostar LLC, a US online exchange for the aerospace and defence industries, outsourced some of its IT security functions, as the company believed that it was better to have a single managed security service provider (MSSP). However, before making the decision about its supplier, the company carried out due diligence. To reduce its risk, the company took out ‘hackers’ insurance to protect against losses in its internal network. Since the work was outsourced to a MSSP, the company was able to claim a discount from the insurer. The supplier agreement covered the outsourcing of monitoring, firewall and IDS management, as well as maintenance for the corporate network, but not its hosted applications. Exostar also did not hand over security control of the IT infrastructure or of any areas that might be of competitive advantage. [23]

MemorialCare Medical Centers, USA

Outsourcing IT services – choosing vendors

An existing outsourcing arrangement in use at MemorialCare hospital was not satisfactory because:
• Agreements were too rigid and inflexible
• The provider was not familiar with hospital procedures
• The provider had little incentive to meet evolving needs or provide new technologies
• Control was lost over the direction and quality of services.
A new IT vendor was chosen and the following vendor attributes proved to be of benefit to MemorialCare:
• Excellent knowledge of the industry and products
• Developed a win-win agreement
• Agreed to strong incentives for performance
• Showed a willingness to adapt to changing needs
• Provided information relating to best practices, economies of scale, disaster-recovery capabilities, the smooth implementation of new software and hardware technologies, the ability to manage relationships with suppliers and access to specialised IT resources
• Offered positions to on-site staff from the original outsourcing vendor. It was calculated that outsourcing provided annual savings of some 6% or $270,000. [24]

KONE Inc., North America

IT Outsourcing Benefits

As part of a globalisation strategy, Kone Inc. sought to focus its corporate resources on its core competencies and to implement standardised best practices across all operations. Hence, a standard IT environment was required for every region in which Kone conducted business. An outsourcing partner was selected along with a proprietary integrated IT solution that supported all aspects of the company’s operations and facilitated business re-engineering. Outsourcing produced the following benefits:
• Major time and resource drains were eliminated
• The IT environment could rapidly evolve with company changes
• Higher technical competence was provided, along with access to emerging technologies, which were seen as essential for long term growth
• Rapid implementation was achievable
• Reduced and more predictable operating costs
• Service level agreements that met the business needs and drove down costs
• A high-quality reliable environment. [25]

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