Outsourcing to Gain Control

November 4, 2008

A reluctance to undertake capital expenditure and a ‘necessary evil’ attitude to technology remain endemic among UK partnerships. The resultant poor skills and a lack of senior level understanding of and commitment to IT is leaving solicitors’ practices vulnerable to system failure and data compromise.

With part time IT directors and an in house IT department that has neither the skills nor the authority to deliver relevant, cost effective systems, the result is an expensive technology mish-mash that fundamentally undermines operational effectiveness.  Not only that, but there is a very limited career path for an IT professional in a practice.

Despite this lack of interest and proficiency in technology, partnerships have traditionally avoided outsourcing the IT function for fear of losing control. In reality, getting an experienced, highly skilled third party to proactively address the technology infrastructure will not only pave a way for targeted investment that doesn’t impact the bottom line but also establish for the first time the control they have sought.

Capital Barrier

Strong operational control has become an ever more critical tenet of business practice as organisations look to drive down costs in the current financial climate. Yet for the vast majority of UK business, especially partnerships, IT remains an area of perceived questionable value with costs out of control and benefits hard to quantify.

However, while IT costs are undoubtedly high, it is the partnership’s attitude and approach to IT investment and deployment that also play an important role. Partners have long been loath to make major capital expenditure for fear of diminishing the retirement pot.

In recent years, this clear constraint to operational expansion has theoretically been addressed by the shift to LLPs. Yet the culture remains unchanged: capital expenditure, especially on IT, is anathema to too many organisations. And the result is poor IT processes, a lack of coherent strategy, limited in-house expertise and, critically, an IT infrastructure that is neither robust nor secure enough to support current business demands nor flexible enough to adapt to changing organisational direction.

Part-time Role

One of the key problems for partnerships is a lack of commitment to IT. Often the role of IT Director is assigned to a partner – often the finance partner – and it is a part-time role. Not only do these individuals lack the experience and expertise in IT required to oversee this business critical environment but, more often than not, technology issues will be sidelined in preference for revenue-generating business.

Partnerships typically survive on a shoe-string IT department and, as a result, must regularly buy in expertise – currently the highest IT cost in a world where hardware is virtually free.

This lack of expertise and experience has also led many practices to fall foul of the growing trend for fashion IT. From the ubiquitous Blackberry demanded by partners and managers alike to the adoption of MPLS networking and the VM operating system, too many organisations are making knee-jerk IT investment decisions without adequately assessing the real impact on the business.

Wasted Investment

One accounting firm, for example, recently implemented an MPLS network. The investment was apparently successful, with the practice experiencing no major problems or bottlenecks. Looking closer, however, the firm is not running any significant data over the network and is now committed to paying £100,000 per year for a network it patently does not need.

Such pointless investments are, at least, less likely today as organisations now look to retrench further as the economic situation worsens. But blindly slashing money from the IT budget can, and will, leave the business less secure and lacking robust business continuity processes. How many firms of solicitors can survive a loss of sensitive customer data? And in these highly time-sensitive businesses, significant operational downtime can have a catastrophic impact on client relationships.

Indeed, many clients rely on direct access to case files and payment facilities via the corporate extranet – failure or compromise to these IT systems could undermine confidence and drive clients straight to a competitor.

Outsourcing Control

Yet what is the alternative? Many partnerships are reluctant to, as they perceive it, relinquish control of IT to a third party. In fact, these organisations currently have minimal control over IT; data is insecure, even if it is located within the organisation; operational performance is jeopardised by limited IT skills; and business change or expansion is compromised by the lack of IT expertise required to assess the merits of new technology opportunities.

In reality, opting to outsource the IT function to a third party not only delivers far more control but can significantly drive down costs by leveraging economies of scale and providing low cost access to a broad, experienced skills set.

Outsourcing IT allows a partnership to enjoy far greater control over its business processes. Working to a clearly defined service level agreement and contract, the outsourced organisations will ensure networks and software are maintained to deliver continual high levels of performance.

Facing financial penalties for poor performance, the outsourced organisation is far more committed to service continuity than a complacent in-house department. The expert IT outsourced service provider will also be adept at managing a crisis and be fully equipped to successfully deliver a disaster recovery operation.

Business Focus

Critically, the adoption of a third-party provider paves the way for a business-focused technology debate that ensures any new investment is focused exclusively on achieving business benefits and return on investment. Critically, the outsourcer will address capital expenditure concerns by placing the investment on its own balance sheet.

This provides an organisation with a flexible, responsive IT infrastructure that enables the business to respond to the changing business climate and strategic objectives without demanding an unpopular capital expenditure.

By combining this business-led approach with up-to-date processes and policies that deliver far tighter IT management, a partnership can achieve good operational performance and a reduction in downtime that delivers quantifiable bottom line benefits whilst reducing overall IT costs.

Couple this increase in productivity and efficiency with a highly visible service and a responsive, motivated supplier and partnerships can achieve unprecedented levels of control.

Richard Barker is managing director of  Sovereign Business Integration: www.sovereign-plc.com