Outsourcing to transform IT, Gartner says

The average IT department will look radically different by 2010, full of relationship managers and “touchpoints” between the company and its outsourced suppliers.

Speaking at a roundtable in London Wednesday, Gartner Vice President Ian Marriott said that the trend towards outsourcing, including the outsourcing of business processes as well as more standard IT services, will involve a complete change of mindset for the IT manager.

“The IT department will need fewer technical skills and more business skills,” Marriott said. Persuading management of the need for outsourcing is going to be hard if a company plans to do it properly because of the huge investment in staff needed, he said.

“You won’t be able to retrain everyone in the IT department, and so you’ll need board commitment to spend the money up front. You should be spending at least 5% of the value of the outsourcing deal on just managing that deal, or it just won’t be good enough,” he said.

Marriott advises CIOs to think of working towards “IT Lite,” where IT works as the glue between the outsource suppliers and the company departments who need their services.

The IT department still has an important role, said Steve Prentice, Gartner group vice president of hardware and systems. “At the moment, everyone has these backdoor paths, ways that they get things done by IT when they need them,” he said. The company has to make sure it retains that to some extent, with lots of links to the outsource company to make sure the communication is there, he said.

“The overriding message is that failure to invest in relationship management means outsourcing will fail,” Prentice said.

“A lot of companies think they do have the right staff in place, but in fact they just have administrators making sure jobs are done. But what you need is someone able to cope with a very dynamic change environment and the business acumen to align IT delivery with the challenges that a business faces,” Marriott said.

Some companies are already practicing what Gartner preaches.

Deutsche Bank AG outsourced its IT department to IBM last year, finally handing over its data centers in February, and has set up a management team to deal with the relationship, spokesman Klaus Thoma said Thursday.

The team serves as an intermediary between the bank, IBM and the 900 staff who have now moved from Deutsche Bank to IBM, Thoma said. “Their job is to control the process, make sure that the tasks Deutsche Bank wants done are done, and to deal with any extra costs that arise,” he said.

The staff in the management team mainly came from within Deutsche Bank, and had the necessary management skills already, although some new staff have been hired, Thoma said. It also helps that 900 ex-bank employees work within IBM “because they have a knowledge of our IT infrastructure and of the complexity of it,” he said.

There are 30 to 40 people in the team, Thoma said. “We have 900 people at IBM, and a lot of tasks to manage. The more you outsource the more people you need to control the processes,” he said.

Swedish financial services company Nordea AB has taken a different tack, and has set up a joint venture with IBM in order to avoid the potential perils of outsourcing, Chief Communications Officer Erik Evrén said Friday.

“In traditional outsourcing, there’s a possibility that you let the control slip out of your hands. This way, we still have control,” he said.

About 900 staff from Nordea will join the joint venture, which will be operational from Nov. 1, and will be run by management from IBM, Evrén said.

“IBM will provide on-demand service, so that we can draw on resources as we need them and pay for what we need, letting us move away from fixed IT costs,” Evrén said.

The 10-year agreement is worth €2.2 billion ($2.56 billion). As well as managing IT staff, IBM will manage the bank’s servers, networks, PCs, help desk and storage devices.