By Andy Soanes, CTO, Bell Integration

Technology change has helped move financial IT away from the traditional, monolithic approach to outsourcing. Instead, advances such as the cloud have made smartsourcing a reality: using small, flexible contracts for discreet services to cover specific IT needs quickly and effectively, rather than providing a mass alternative to in-house IT for the banking and finance world. We’re already seeing enthusiastic adoption: for example, the Government’s G-Cloud digital services allow public sector bodies to pick and choose the services they need at any particular time.

However, smartsourcing is not a magic pill that will fix all of an enterprise’s outsourcing issues. On its own smartsourcing is simply a method of working, with all the potential to be as ineffective and inefficient as any other method an organisation might choose. Without effective management it will offer no benefit over a traditional, large-scale outsourcing project, and may even represent a step back. For instance, if outsourcing becomes a number of smaller, temporary contracts then it can be very easy to set up contracts and, worse still, forget about them. This can leave the business spending money on services it no longer needs and that the IT department has no visibility or control over.

Getting smart part one: planning

Smartsourcing is like any other IT strategy: its success will be decided long before any technology is involved. Effective smartsourcing means effective planning and preparation. To begin with, an IT department needs to know both its business’ strategic needs and the IT capabilities required to support them. This will identify any immediate black spots in an organisation’s IT set-up where smartsourcing might help. The next step for the IT department is to determine what the business’ needs will be in the future. For instance, if growth is a core part of the business strategy, it will need the IT infrastructure and services that can support it. Similarly, a short-term project might put extra demands on the department for a number of weeks or months.

Once the IT department has identified the business’ current and future needs, and how equipped it is to meet those, it can make the next crucial decision – whether IT growth will happen in-house or come from external providers. This will depend on the precise needs involved. If IT needs to support ongoing growth, then keeping expanded IT services in-house makes sense. If a short-term project will increase demands for a few weeks or months, sourcing the expertise and resources needed externally will make more sense than hiring permanent or contract workers at great expense who will be surplus to requirements when the project is finished. And if there is an immediate hole in IT capability, external services can provide an immediate fix, while the department works to expand its internal IT capabilities as a more long-term solution.

Getting smart part two: action

Assuming you have gone through the process above, and have decided that smartsourcing is the best route to take, you can then determine exactly what it is that the business needs. This might be extra skills to support an IT project or fill an existing gap; new services to support a wider business project; or infrastructure that can adapt to meet expanding and contracting demand, e.g. from seasonal changes. This gives you a detailed specification of the smartsourcing service you desire which can be used to pick the best service provider.

There is a whole other article that could be written about identifying the best possible choice and negotiating for the best deal when choosing service providers, but the three key considerations that should always be addressed are:

• Ensuring the provider can definitely offer what they claim at the agreed price. This will involve due diligence; speaking to other customers and performing thorough background research to ensure that, once the contract is signed, there won’t be any unpleasant surprises.
• Being aware of what control you will have over the services, skills or infrastructure that the provider adds to the business. Ultimately the buck will always stop with the IT department, so the department must ensure it has full visibility and final say over everything that is done in its name.
• Having an exit strategy. As we know from “traditional” outsourcing, the greatest costs come when a business wants to remove itself from a failed or unprofitable deal. The IT department should always know how it can end a contract, ideally ensuring that any break can be done on its own terms and at short notice.

Smartsourcing might not automatically solve all of a business’ outsourcing woes. But if IT departments know their needs, understand what’s on offer, and choose wisely, they can become smartsourcing success stories rather than a cautionary tale for the business pages.