Outsourcing – What Makes Sense?

1. Outsourcing – What Makes Sense? Charles R. Williams Benedictine University

2. Why Do We Outsource? • Lack of In-House Skills • Operating Efficiencies • Cost Savings • Access to Innovative Service C. R. Williams

3. What Do We Outsource • IT Infrastructure • Application Management • Application Services • Distributed Services • Business Processes • Processing Services • E-Learning/Distance Learning C. R. Williams

4. Problems with Outsourcing • Lack of Cooperation Among Internal Units • Vendors Don’t Fulfill Their Promises • Implementation Takes Longer Than Expected • Project Goes Over Budget • Technical Problems Make It Impossible to Meet Expectations C. R. Williams

5. Problems with Outsourcing • Vendor Is Unfamiliar with the Needs of Higher Education • Flawed Process • Resistance from Collective Bargaining Units C. R. Williams

6. History • Benedictine Outsourced IT in the Late 1990s • Also Outsourced Security, Campus Services, Bookstore, and Food Service • Vendor Provided All IT Staff • CIO Initially Reported to the Provost then to the Executive Vice President • Joint Faculty-Staff Governance Committee C. R. Williams

7. Reasons That Benedictine Reconsidered • Inconsistent Alignment with the University’s Strategic Direction • Lack of Tight Integration Between IT and Other Departments • Staffing Stability • CIO Turnover • Control over Vendor’s Staff • Lack of Expected Cost Savings C. R. Williams

8. Inconsistent Alignment with the University’s Strategic Direction • Started with Tight Alignment • University Staffing Changed • CIOs Changed • Led to Vendor Governance Model • Led to … C. R. Williams

9. Lack of Tight Integration Between IT and Other Departments • An Ineffective Governance Structure • Shadow Systems Completely Outside of the ERP System • Functions Retained in IT C. R. Williams

10. Stability of Staff • Presumed Benefit – More Professional Staff • Small Client => Training Location for Vendor Staff • “It’s never long before any HR problems your supplier has trickle down to you.” – Susan Overby, CIO C. R. Williams

11. CIO Turnover • Continuity in This Position Is Important • Alignment with Senior Administrators Is Important • Initial Vendor CIO Is a Sales Representative/Turnover CIO • “A lot of the complaints you hear from people who have outsourced is actually disappointment in the level of quality of the outsourcers’ staff.” -- Orlov C. R. Williams

12. Loss of Control Over IT • Turnover at the CIO Level • Turnover at the Senior Administrator Level • Led to Lack of Continuity • Led to the Use of Vendor Policies & Procedures • Led to Ceding the Responsibility for IT to the Vendor • Led to Loss of Control C. R. Williams

13. No Longer Seeing Cost Savings • Cost Savings Existed at the Beginning • The University Desired More Services • The Vendor Was Willing to Sell More Services • Led to Increasing Payments for Staff • Led to Loss of Savings to Reinvest in Better Uses of Technology • Led to … C. R. Williams

14. A New RFP • Solicited New Proposals • Range of Cost from About $1.4M to $5.6M • Led to an Evaluation of an In-House Department • Led to the Termination of the Contract to Outsource and the Creation of an In-House IT Department C. R. Williams

15. Issues to Consider • The Timing of the Change • The Hiring of New Staff • The Transition Time & Staffing • The Loss of Institutional Memory • The Cost of the Transition • The Problems the Vendor Will Have with Its Staff C. R. Williams

16. The Timing of the Change • Critical to the Success of the Transition • Constraints on Timing • Contract Termination Clauses • Cost to Buyout the Contract • Required Notice of Termination • Use the Period after Notification Wisely • Hire Staff (Even from Outside Education) • Begin Knowledge Transfer C. R. Williams

17. The Hiring of New Staff • No Compete/No Solicitation Clauses • CIO Who Reflects Institution’s Goals and Style Is First Priority • If You Have Time, Design the Organization (A Luxury) • Direct Reports Next • Use Them to Help Hire Additional Staff • “New Leader in Town” Issues Too C. R. Williams

18. The Transition Time & Staffing • Ideally Transition Should Be a Year • Not Likely – Too Expensive • The More Overlap The Better the Transition • What Happens to Existing Vendor Staff after Notice is Given? • This is Critical to Success – Build it into the Initial Contract C. R. Williams

19. The Loss of Institutional Memory • An Abnormal Staff Transition • Some Information Will Be Lost in Transition • Routine Tasks Are Especially Critical C. R. Williams

20. The Cost of the Transition • Will Be Larger than You Planned • Salary Issues • New Employee Training & Inefficiencies • Need to Continue to Outsource Part of the Staff • Consequences to Relationship Building of the Intense Hiring Process C. R. Williams

21. The Problems the Vendor Will Have with Its Staff • Loss of Staff Who Wish to Stay in the Area • Transfer of Staff • Need to Capture Institutional Memory before They Leave C. R. Williams

22. Lessons Learned • Plan for Success & Plan for Failure • Get Institutional Buy-In • Plan for a Long Transition Period • Leadership is Critical to Success • Use Other Resources During the Transition • Maintain Control over the Outsourced Department C. R. Williams

23. Plan for Success & Plan for Failure • When You Outsource, Plan for Both. • Success • Leads to Adding Services • Plan to Eliminate No Longer Needed Services C. R. Williams

24. Plan for Success & Plan for Failure • Success • Sean Barker • Maintain Control • Measure, Measure, Measure • Marry the Partner • Take Responsibility for Requirements • Review Regularly C. R. Williams

25. Plan for Success & Plan for Failure • Failure • The Vendor May Move out of Your Market • The Vendor May Go out of Business • Your Management May Change • You May Not Meet the Vendor’s Requirements • The Vendor May Not Meet Your Requirements C. R. Williams

26. Plan for Success & Plan for Failure • Consequences • Negotiate Service Increases • Negotiate Exit Strategy • Make your outsourcing decision rationally with the full understanding of the process, the consequences, and the issues of bringing the department back in house. C. R. Williams

27. Get Institutional Buy-In • From the Most Junior Positions • To the Governing Board • In-sourcing is Complex • The New Staff Needs Institutional Support • Anyone Can Cause the Process to Fail • Our Success is Attributable to Institutional Leadership C. R. Williams

28. Plan for a Long Transition Period • This will take longer than you expect. • Short Transition Period Leads to Lack of Understanding of Vendor Decisions • For Example, No Planning Context • At Least Six Months • Shorter & You Pay in Lost Opportunities while New Staff Learns C. R. Williams

29. Leadership is Critical to Success • Institutional Leadership & Support Are Critical • Departmental Leadership Is Key • The New Staff Must Trust & Respect Its Leader • Performance Is Critical C. R. Williams

30. Use Other Resources During the Transition • They can help with the transition process. • We used an IT auditor from our auditing firm to help with positions, organizational structure, and managing the process • We used our area peer institutions in defining positions and establishing competitive salaries. C. R. Williams

31. Maintain Control over the Outsourced Department • From the Beginning • Outsource the Work not the Control and Responsibility • If You Do, You Lose • Bringing It Back Will Be Difficult C. R. Williams

32. Maintain Control over the Outsourced Department • “An outsourcing decision should never be made with the idea of removing all risk or responsibility for something – recruiting or otherwise. The work may move; responsibility stays.” --Overby C. R. Williams

33. OPEN DISCUSSION! C. R. Williams

34. Contact Information Charles R. (Randy) Williams Benedictine University 5700 College Road Lisle, IL 60532 630-829-6025 cwilliams@ben.edu C. R. Williams