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Our outsourcing discussion continues in April as we investigate what the future holds for this business practice.

Jim Longwood at Gartner and Scott Ferguson at Check Point Software also provide information for Voice&Data readers who may be considering using an outsourcer for a part of their business for the first time.

To catch up on the first part of this feature, take a look at the March Voice&Data Newsletter.

What advice do you have for a company considering outsourcing part of its business?

SF: They need to look at multiple outsourcing companies, both local and global. Before they do that as a company, they need to be very clear in their own mind why they want to do this, what they expect to gain from it and have some idea of what they expect to pay for it.

Saying we'll outsource our desktop management is a very simple thing to say. In reality, desktop management means lots of things to lots of different companies and encompasses a whole raft of different kinds of equipment.

Let's take Vista for example. A typical company would have servers, some desktop machines, laptops, PDAs and possibly smart mobile phones.

So for a company making the decision on whether or not to move to Vista, the implications of that firstly are: is it available for all the devices we have and do we want it on all those devices?

You might have to consider upgrading some of the desktops because they're not powerful enough and what will that mean for the applications running on those desktops? And what issues will people have with applications and version levels when travelling remotely?

There are a lot of issues there that from a technology perspective you just chuck money at and fix, but from a company perspective it can have serious implications on the ability of that company to manage the day-to-day business.

So if they depend on salespeople going out to supermarkets and taking orders and entering them online in real time into a PDA that then that gets cascaded, if they lose that access, it has a devastating effect on that organisation.

So it's really important for companies considering outsourcing that they think very carefully about what it is they want to outsource. If you haven't got that sorted in your own head, there's no way to take a sensible proposal to market and be satisfied with the result.

Once they've got a shortlist of two or three potential outsourcers, it's important to speak to some of their customers. But speak to them seriously, not just a phone call, go along and visit them and understand their business and how the outsourcer is working with them.

JL: In Gartner we talk about strategic sourcing. How should you source, internally or externally?

The key thing is how you come to decide how your portfolio is split up. For example, if you decide to insource, we recommend companies adopt an internal service model. You need to implement a sourcing strategy to say: I need all these services, where's the best place to do it? Where does a company want to focus all its efforts?

Most large banks will outsource their data centres. What's the primary focus of their business? Running data centres or banking?

American Express is well known to outsource its data centre and card processing to IBM - a huge deal. They do it on a transaction basis. But Visa, for example, in Asia has kept its data centre in house, as the efficiency of the data is a differentiator to competitors.

A company should weigh up a number of basic questions:

• Why do I want to outsource?
• What do I want to get out of this?
• What's the candidate for outsourcing: security, policies, procedure?
• What kinds of areas are most commonly outsourced?

What do you see in the future for outsourcing?

SF: I think there are two things: one is the trend in outsourcing; then there is the trend of what will be retained in Australia.

So, in the same way we've seen big chunks of stuff originally being outsourced and then being pulled back into companies, we've also seen a whole lot of stuff being outsourced to India. Some has been successful and some hasn't been. So we'll see some of that come back in house - typically where you need a high degree of technology expertise and experience in the use and application of the technology.

So I see some of that coming back into Australia and I see more and more of the repetitive outsourcing execution moving offshore, whether that's to India, China, the Philippines or Thailand. I think we'll even see that in Vietnam in the near future.

In Australia, we will see the function of outsourcing get much tighter and more closely specified with companies working closely in partnership.

The end-user company has to retain management control, and then it outsources the execution. So what you're really doing is outsourcing employees. Rather than having the overheads and training cost of an employee, you outsource that part. The outsource company can offer that at a reduced cost (because it's doing that for multiple companies) and get a better scale.

JL: Selective outsourcing will be the next trend - forcing it to have more discipline -and multisourcing. How do you manage multiple service providers and have them working together?

We still see a lot of contract renewals, as the cost of switching to a new provider is high. Also, you build up a working relationship between yourself and the provider.

There is some re-insourcing (about 3-5% of the deals made). For example, one of the areas being re-insourced is the help desk. But overall, the use of outsourcing is growing.

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