Enterprises of all sizes must consider outsourcing in their business decisions, and midsize businesses (MSBs) are no exception. In fact, a growing legion of MSBs are beginning to view outsourcing as an important tool to help them maintain their competitive focus, enhance their IT skill sets and cut costs. However, by nature, MSBs continue to be more conservative and more cautious about outsourcing IT management services than their large enterprise counterparts.

At the recent Midsize Enterprise Summit (MES), we spoke with a number of senior IT executives across industries regarding their use of outsourcing services.

Said Scott Howitt, Chief Information Officer at BenefitMall.com, “It’s so important to outsource as there is no way to keep up with the flux and growth of a midsize business. I wish business was a steady diagonal line but it’s a real up and down thing, so I’d rather bring contract help in as needed. I’ve had good experiences with it.”

Although BenefitMall.com utilizes outsourcing services it tends to be for very discreet tasks. “For example,” said Howitt, “if the network’s not tuned quite right, I’ll bring someone out for a week, he tunes it and it’ll be fine for two years.”

The most recent Gartner IT Outsourcing User Wants and Needs survey reveals that MSBs have experience and are well-informed about outsourcing, but their basic need for outsourcing is indeed to keep their current IT environment available. As a result, selective outsourcing models have become popular among MSBs where the objective is to find a specialist service provider to manage a small singular piece of their IT systems, or to simply augment staff and “out-task” vs. a traditional multiyear contractual model.

“In the pure sense of outsourcing, I do occasionally bring in a consultant, normally someone who knows something that we don’t know,” said George Evans, CIO at Lexington Medical Center. “But we try hard to have a full knowledge of every system even before we buy it - that’s our approach. If something goes down, I don’t have four hours to wait for someone who is trained on it to get to the site. It used to be that you could handle some downtime processes, but in the hospital, we’re getting more and more systems that are such that you can’t do anything if they’re down.”

Gartner research concurs that overall MSBs do have a strong propensity to control their internal operations, and once the formal IS department is established, they are reticent to allow functions to leave, often developing the internal IT department to support the growing business. However, this doesn’t mean that MSBs aren’t interested in outsourcing for reasons such as focus, speed and cost reductions.

In the Gartner IT Outsourcing survey, midsize companies across industries indicated the highest propensity to outsource the following:

The Selection Process
Once Michael J. Lehman, VP Information Technology at Batteries Plus, determines the need to outsource, he has a process in place to evaluate a number of different firms, create the short list, do reference checks, then talk to past customers.

“We always go to previous customers with the all important question of, ‘can they deliver?’,” said Lehman.

Whether you have a long track record, or are just getting started in outsourcing, selecting a service provider that is the best fit for your needs is no simple task. “We’ll evaluate a provider’s experience, flexibility, and of course, cost,” said Dan Stuart, Director, Information Services Americas, Manitowoc Crane Group, “but when we do use outsourcing, it’s also to be able to transfer and capture that knowledge for our staff so they can grow and learn from it.”

Gartner recommends that MSBs screen potential outsourcing providers by evaluating responses to the following questions:

Does your midsize business outsource? We’d like to hear how – email The Midmarket Report at midmarket@gartner.com.

You can meet with your industry peers to discuss a range of IT issues such as this one at Midsize Enterprise Summit 2004. Click here to qualify for a complimentary package to attend.

References
Research Note
Selecting an Outsourcer: Relationships are Key to SMBs
Published: May 6, 2003
Author: Robert H. Brown

User Wants and Needs
SMBs Show Appetite for IT Outsourcing: How Will Outsourcers Respond?
Published: February 13, 2003
Authors: Allie Young and Robert H. Brown