Alfredo Saad

IT Sourcing Consultant at Saad Consulting

Bad News on IT Outsourcing Risks: If Not Treated, Their Effects are Cumulative

Apr 23, 2015

Two conflicting, although inseparable, characteristics occur in any project: the materialization of an improvement

opportunity and the unavoidable risks inherent to its attainment.

Also in an IT outsourcing project, the achievement of benefits strongly depends on the way their risks are managed.

Moreover, the capability to proactively identify and treat them is vital to minimize the risk exposure of the

organization.

The greater or smaller degree of urgency adopted to identify and treat them along all phases of the project determines

its success or failure.

Let us consider the phases of an IT outsourcing project in an organization:

Decision taking

Provider selection

Contract negotiation

Services transition

Contract governance

Contract closure

Each of these phases has risks inherent to its own nature. The bad news is that unidentified or non-adequately treated

risks during any phase may be materialized in a later phase with aggravated effects as a consequence of the

accumulated effect observed jointly with the materialization of another risk inherent to this later phase. Such

aggravation may occur as an increase of its probability of occurrence and/or an increase of the resulting impact of its

materialization on costs or schedule of the project.

Conceptually, the resulting cumulative effect over the project risk exposure may be seen on the figure below. It

shows both cases:

An unacceptably high project risk exposure, as a consequence of the cumulative negative effects observed when an inadequate risk management discipline is implemented

A practically negligible project risk exposure which is achieved in the opposite scenario

Both paths, radically opposed, distinguish the routes to project failure or to project success.

.In future posts we will identify and discuss the risks inherent to each phase of an IT outsourcing project, in both

cases:

A “traditional” outsourcing project

An outsourcing project based on the adoption of a cloud computing alternative

Distinct and complementary approaches of this theme were already discussed on previous posts:

“Cloud: Old Risks Vanish, New Ones Arise"

“Cloud x Traditional Outsourcing: (Dis)similarities in Risk Management”

“IT Outsourcing Contracts: Heaven or Hell? You Choose”

Do you agree with the concepts issued on the post ? Enrich the discussion with your comments.