Challenges to consider when outsourcing technology

T here are a number of reasons to consider outsourcing technology, and in my view, the most obvious ones are where the technical resources don't exist (and could not easily be brought in) or where the organisation buying the service is small, and thus cannot justify a technical resource. In both these examples, outsourcing is more or less the only way to procure the technology resource that is required. For every other circumstance, careful consideration and a qualified process should be applied in order to initially make a decision on the viability of outsourcing, and secondly to find and contract the correct resource. The notion of careful consideration varies greatly, and often the results follow the quality of the initial process. Outsourcing failures teach us that there are a number of factors to consider that may not be so obvious, or easily made implicit, but can have a substantial impact on the results.

Loss of specialist skills

If your firm has developed its own software, or heavily customised, integrated or conditioned third party software, you are most likely to have a team in house that deals with it. Outsourcing can destabilise this, leading to a loss of resource and a non performing or underperforming key system.

Hidden costs

Outsourcing agreements need to have a detailed list of services provided, and at what level. These need to be backed by service level agreements that encompass as many eventualities as possible, and Key Performance Indicators that provide meaningful and measurable data. An in-house technical function is easy to take for granted, and unpicking its activities into an agreement is complex. Where the correct detail is not included in the agreement, additional costs will be incurred. These tend to be expensive, and if you get it badly wrong, extensive.

Quality problems

It is relatively easy to express quality in a quantitative format within a service level agreement, but it is much more difficult to measure the non-quantitative aspects. The definition of quality is very variable, and outsourcing providers, in a bid to ensure their short term profitability may well cut corners.

Ability to react to change

An outsourced service is likely to have provisions for re-instatement of systems when problems arise, but is highly unlikely to include reactions to substantive changes in business conditions. Quick fire mergers, short term opportunities and the like can be much harder to provision through an outsourced provider, as well as adding expense.

Financial status of supplier

Law firms major on due diligence exercises, and this hopefully is the case when they buy technical services. With the advent of cloud computing, the financial due diligence exercise needs to go beyond the immediate supplier and include all their providers. This can be time and resource consuming, but might help avoid a disaster. Google "2e2 collapse" for an idea of what can go wrong. The cost of wresting your data and systems from a cloud company in administration is fairly eye-watering, and generally many times more than the cost of decent due diligence.

Difficulties with moving contracts

Outsourcing providers tend to look for long contracts in order to maximise their return and minimise their exposure to change. What happens at the end of these contracts, or when a contract fails mid-term can be extremely difficult to cope with as there is a likelihood that in house resources required to qualify technical contracts have long since disappeared. In some cases, where a contract has failed or finished, the service is brought back in-house. This in itself can be a very difficult process.

Cultural differences

The difference in culture between a law firm and an outsourcing provider can bring problems such as prioritisation of responses. All service providers give response times and proclamations of the customers importance, but experience tells us that they help their most important customers first, and that might not be you

Security and confidentiality

This is of paramount importance to a law firm, and needs careful consideration on every level when considering outsourcing technology, including due diligence on access and control of systems and data at every level.

If you are considering outsourcing purely to try and save money, consider how a profit making organisation is going to provide the service for you at the quality you expect or are used to. Providers have to make money, and if they are doing it using the same equipment, the savings are generally on staff costs, and this can have wide ranging repercussions. Whole life costs of outsourced functions are rarely the same as the initial contract cost.

By Damian Blackburn, Director, SFLTech

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