SMBs Still Apprehensive To Outsource IT

According to a Granter Survey, an increasing number of organisations are now turning to IT outsourcing to enhance business outcomes, instead of just to control or to reduce costs. To discuss in detail about the benefits of IT outsourcing and other related issues, Biztech2.0 caught up with the CFO of Mahindra Finance, V. Ravi.

How important does Mahindra Finance consider IT outsourcing to be?

IT is not just a key enabler of business but is a critical tool to decide how the business needs to be conducted. At Mahindra Finance all products are in sync with IT. As IT is of strategic importance to the enterprise there needs to be a constant upgrade in the knowledge to keep up with the latest trends. By outsourcing IT to a competitive service provider, we are in a way making ourselves auto-updated with the best in the market, keeping in mind the resource and financial constraints. Thus, in a way outsourcing is helping leverage with the latest IT trends from time to time.

What trends do you see in the IT outsourcing space?

Currently IT outsourcing is taking place only at large enterprises. I would rather say that in the SMB sector, IT outsourcing has not even started. The basic issue with the SMB sector is that they are still not convinced of the cost-benefit analysis of outsourcing. Secondly, they are apprehensive about dealing with large service providers. To help this situation, service providers need to have a service model that would help SMBs clear their doubts. I see IT sourcing picking up in medium businesses but nothing at all in the small-scale industries.

What part of IT is currently being outsourced?

Today it’s typically facilities management that is being outsourced and this has been going on for quite some time in our country. I also see network management picking up in the medium businesses but I don’t see any software outsourcing happening except in the telecom and some segments in the financial sector. In the times to come, software management will be outsourced to a large extend and many SMBs shall outsource IT on a really large scale.

What should organisations keep mind if they wish to outsource?

In my opinion, the CEO of an enterprise should always view the service provider as a partner. Today, we see many enterprises approach service providers as mere vendors but they need to know that this is going to be a long-term relation. Both parties also need to have review meetings periodically and they should also note the points discussed in the meeting carefully. There also needs to be an escalation Matrix, which will prove to be useful during disasters and emergencies. Another very important thing would be not to see it as a cost saving plan but rather as a strategic deliverable exercise. This I feel should be the mindset for a good outsourcing agreement.