Management Wants Benchmarking, Strategy from CIO, Says Alsbridge CEO
DALLAS, November 6, 2008—IT organizations should prepare now to answer strategic questions about outsourcing and its critical role, long before top management asks.
Ben Trowbridge, CEO of Alsbridge the parent company to ProBenchmark, says chief information officers have a three-part responsibility to: - Manage expectations around outsourcing by conducting regular benchmarking exercises. “Make it a part of the annual business planning and budgeting process,” Trowbridge said.
- Arm themselves with credible, detailed information about infrastructure and service components compared to the marketplace or industry best practices. “This better positions the CIO to deflect unwarranted criticism and do what is right for the business,” said Trowbridge.
- Use proven processes, purpose-built benchmarking tools and an experienced advisory services firm for direction and guidance through a complicated process.
When senior management asks about outsourcing, proactive CIOs have already conducted a detailed evaluation and can answer questions about the merits of different options. “These CIOs don’t have to defend themselves against claims of significant cost reductions when the outsourcing mandate comes down from above,” Mr. Trowbridge said.
Top executives and CIOs should look at outsourcing alternatives regularly, using a suite of specific evaluation tools. These tool-kits are key in preparing a detailed baseline of current IT expenditures; a benchmark of cost of services from third party providers; and a critical evaluation of third-party services with the highest value. “These evaluations routinely identify gaps in an organization’s cost and service competitiveness,” said Mr. Trowbridge.
Top management can give too much credibility to unsubstantiated vendor claims of substantial savings or too little credibility to their IT organization’s analysis. “A CIO can be forced into proving unsubstantiated claims wrong or yield to the pressure to outsource because lacked the right information to support their position,” Mr. Trowbridge said.
A market price benchmarking exercise, coupled with a detailed financial baseline evaluation, can quickly answer vendor claims of savings. “A timely, credible answer can improve the standing of the CIO and the entire IT organization,” Mr. Trowbridge said.
Trowbridge also recommends:
Consider the economics of outsourcing. Any benchmarking exercise or evaluation should include the costs of procuring and negotiating an agreement (2 to 8 percent of the total contract value) and the costs of contract governance and administration (3 to 5 percent of the annual contract value) and costs for work from a third party.
Use benchmarks with detailed market pricing to ensure an apples-to-apples comparison of infrastructure assets, application inventories, and current service levels.
Fully evaluate the risks. Contracting with a third party for core IT or business process services introduces new risks -- flexibility, responsiveness and adaptability of the selected provider. Identify services with the highest/lowest risk s part of the benchmarking exercise.
Rely on an expert third party. Most organizations aren’t equipped to conduct internal benchmarking and financial assessments of IT infrastructure and service delivery towers. An experienced third party brings objectivity to what can be a highly politicized and emotionally charged decision-making process.
“CIOs and other C-level executives should look for advisory services firms that routinely conduct strategic sourcing analysis, are intimately familiar with benchmarking processes and toolsets, and have deep experience in the delivery and current market landscape for outsourcing pricing and packaging,” Mr. Trowbridge said..
ProBenchmark provides the industry’s only patent-pending, highly automated and repeatable toolset for benchmarking. To learn more about ProBenchmark’s Online Market Assessment, Snapshot BenchMARK, and third-party benchmarking services, visit www.probenchmark.com or contact inquiry@probenchmark.com
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About Alsbridge:
Alsbridge is a Dallas-based independent advisory firm that helps organizations conduct thorough evaluations of outsourcing options for operating their information technology, finance and accounting, and human resources organizations. For more information, visit
www.alsbridge.com
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