Don’t make these 6 mistakes when outsourcing IT

Contracting out information technology can include equipment, manpower, the cloud or all of the above. Look out for the common pitfalls if you decide to go this route.

Tags: Best practices, Cybersecurity, Technology
Published: November 14, 2018

Information technology outsourcing has become a mainstay of modern business — 72 percent of companies outsource IT functions, according to a global 2016 Deloitte survey.

Despite its popularity, using a vendor for IT doesn’t mean automatic success. Failed arrangements are common, and many companies never realize the performance gains or cost savings they anticipated. Here are six mistakes to avoid when preparing to outsource your IT:

1. Setting expectations without knowing the costs of meeting them

Top-notch IT performance is expensive, whether it’s handled internally or outsourced. When you’re collecting bids from vendors, make sure costs are mapped to specific targets in terms of security, performance and reliability so you know what you’re paying for.

Christine Waldron, chief global strategy officer of U.S. Bank Global Fund Services, shared her perspective. “Deciding to outsource IT shouldn’t be a reactionary, off-the-cuff decision by leadership, thinking a vendor can magically offset poor strategy or out-of-date technology,” she said. “That’s a recipe for disappointing results and out-of-control cost overruns.”

Based on her experience, a more calculated approach always works better. “Involving the internal IT team from the start can help set project parameters and expectations. That way, right out of the gate, everyone involved has a firm understanding how much they need to spend and what they’re getting for that money.”

2. Failing to engage your chief technology officer (CTO) in the vendor selection process

It’s important your technology personnel is present during vendor selection conversations. This team will be able to evaluate the vendor’s capability of system integration and data delivery.

Waldron explains that service providers have seen a shift regarding the teams that engage with their clients on a regular basis. “Today, our technology team interfaces just as much with the client as our relationship managers and accountants,” Waldron says. “They are maintaining an ongoing dialogue with our clients’ CTOs.”

Having IT personnel present also helps overcome any miscommunication that may stem from the highly technical-based nature of the conversation.

3. Disregarding the need to map out responsibilities

It’s critical to specify the scope of an IT vendor’s responsibilities and to make sure you’re prepared to address any gaps internally. For a technology solution to be successful, you need the involvement of subject matter experts who understand data requirements alongside developers who can deliver that data in a customized manner to meet your and your clients’ needs.

“A cross functional team of business people and technology experts who work hand in hand is essential to delivering a comprehensive solution,” says Waldron.

4. Overlooking the vendor’s technology roadmap 

In an industry that is constantly evolving due to regulatory changes, product trends and client demand, you need a vendor that is committed to advancing their offering while adhering to stringent requirements.

Does the provider have a roadmap to address changing regulations and system enhancements? A regulatory update can significantly affect the data points you need. Your provider should serve as a partner to help you strategize on regulations and trends impacting the business.


5. Assuming your vendor’s security efforts are sufficient

Many IT service providers will tell you they’re strong on security, but not all of them mean it. Ask prospective vendors to explain their information security tools, cybersecurity framework and business continuity plans. Make sure the answers are geared toward the security landscape of 2018, not 2008. That means an emphasis on threats such as data stolen from mobile devices on unsecured networks, for example, and less focus on old standbys such as antivirus software.

“Choosing a vendor with a rigorous security framework that is run efficiently and effectively is critical to your success,” says Waldron. “Our clients can leverage the significant investment we’ve made in information security to meet the heightened standards you would see inside of a bank.”


Choosing a vendor with a rigorous security framework that is run efficiently and effectively is critical to your success.


6. Hiring an overseas vendor without considering challenges

Abroad IT firms are known for attractive pricing and can do good work. They also can be risky because of language and time zone issues at play. The day-to-day working relationship between your team and your vendor is critical to your IT success, and it’s an unavoidable challenge with overseas vendors.

“Having a small, tactical team with the ability to implement quick, rapid changes, has evolved our offering faster than our competitors,” says Waldron.

You may run the risk of inefficient operations when working with a vendor in a different time zone.

IT outsourcing can produce cost savings and performance improvements for your organization — but only if both you and your vendor are positioned for success. By applying the principles discussed in this article, and giving the proper time and attention to the selection process, you can bypass many potential obstacles and bring into effect the benefits of a strong, lasting partnership.


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