Are You Ready To Outsource?

It took three years for Girls with Goals founder Erin Hurry to finally realize her vision of extending her business and life coaching practice onto the Web, with a community and e-commerce site aimed at helping women realize their business goals through online coaching, mentoring, and storefront services. It's a classic example of IT outsourcing gone very, very wrong. Girls with Goals.com launched this year, and is off to a good start, with 250 members and 40 live storefronts. But getting there has been a struggle, emotionally and financially, as a series of outsourcers to whom Hurry entrusted development of the Web site failed to live up to their promises. The first Web site design and development company she used, a Las Vegas outfit that has since gone out of business, promised delivery in three months. Eighteen months later it turned over a non-working product. Goodbye $10,000. "I was nave because I'm very trusting," says Hurry. "It took a couple of months to regroup and cut my losses." Hurry, who lives in Spotsylvania, Va., thought she'd have better luck with a local Web design contractor, about whom she had heard good things. Hurry paid $9,000 of the $18,000 estimate up front and six months later got a home page and news that the stalled project now was going to cost $30,000 to complete. Turns out the contractor was outsourcing the coding, and when Hurry tried to help the contractor find other developers that could help her bring the project in on budget, she got stonewalled. "People don't understand that most of these Web design companies outsource the work -- they're just brokers," says Hurry. The last of the three Web development companies she tried, based in New York, ultimately delivered on most of the site design, albeit six and a half months past deadline and using a team in India that wasn't the company Hurry had consented to use. The design had some flaws in the code that could have opened the door to hackers. By the time the product was delivered, Hurry had already signed two IT persons onto her staff to handle application development, including fixing the flawed code. Bad Start Not a Deterrent Despite her bad experiences, Hurry isn't entirely soured on outsourcing. She believes it to be a good choice for desktop support and business processes such as payroll and bookkeeping. But given that the Web site is the backbone of her business, she's concluded that application development is too critical a function to outsource. "It's a big step to hire your own team," Hurry says, "but you can build loyalty within your company and see those folks grow, too. Instead of a service provider, you have a team. They start believing and investing themselves in your product, and they understand your brand." That's probably the most important lesson small and midsize businesses can learn about outsourcing: Don't outsource a core competency of your business. In most companies, that leaves the field pretty wide open for what to outsource. "The way the textbook goes is to identify your core competency and seriously consider outsourcing anything outside of that," says Frank Casale, CEO of The Outsourcing Institute, a professional association dedicated to outsourcing. "If IT is a core competency, then don't outsource it." There's good reason to pursue IT outsourcing, whether it's application development and maintenance, help desk support, infrastructure, or business processes. "I like the word growth-sourcing because outsourcing really is a growth enabler" for smaller companies, says Casale. "There's less of what you see in large companies, where you talk about large bloated bureaucracies they are trying to skinny down and optimize. With many small and medium-sized companies, it's more about [dealing with] limited resources and gaining scalability and just growing within a vertical or horizontal, or growing globally."

That's been the case for MyWeather, which provides timely, personalized weather information to over 200 TV station Web sites, including clients such as NBC Universal, Fox Media, CBS, and 350 online newspapers; it also provides personalized forecasts and severe weather alerts to 2 million registered users. A private company with about 55 employees, MyWeather has a small IT staff consisting of a CTO who focuses on strategic issues related to software architecture and two employees who deal with internal networking, hardware, and software issues. The company also has part-time access to an IT staffer at primary investor and sister company Weather Central. But MyWeather co-locates its servers and network infrastructure to service provider Berbee, which was acquired by CDW last year. MyWeather uses IT services such as monitoring and application load-balancing, and most recently placed its public-facing machines behind Berbee's shared servers to increase reliability and redundancy. With the business growing at 70% year over year, MyWeather needs flexibility in bandwidth to spike up as traffic peaks during big weather events. "Weather information is the single most temporal information on the Web in the digital space. The expectation is it's real time -- it's not just that I can't go down, but I can't be late," says MyWeather president Kevin Baird. MyWeather has been increasing its IT outsourcing with Berbee for a number of reasons. For example, it saves MyWeather the expense of having on-staff IT talent focused on keeping up with changes in the Microsoft technologies it uses. And, as Baird puts it, "Berbee has a lot of mojo with the carriers." Because Berbee has strong relationships with multiple carriers, MyWeather knows that when it needs additional bandwidth on network pipes, it's going to get it. As MyWeather's experience shows, there's no question that smaller companies can outsource effectively. But before they sign on the dotted line, they need to evaluate whether they're really ready to make the commitment. "Outsourcing is a philosophy and a business strategy," says Forrester principal analyst Bill Martorelli. "You have to make sure you are in a position not only to demand good service from the provider, but also to do your part of the bargain in terms of having the internal preparation that's essential to being an effective consumer and helping to manage the relationship on the customer side." Smaller companies must be prepared for change, for challenges, and for outright difficulties in making outsourcing work to its maximum potential, Martorelli says -- or at least to not fail completely. Jennifer Zaino has served in senior and executive editor roles at publications including InformationWeek, Network Computing, HomePC, and PC Magazine. Currently she's a freelancer covering business-technology issues, including IT management and best practice frameworks, IT architectures, and virtualization.