Should You Outsource Your Help Desk?
Many IT managers dream of turning their in-house help desk over to an outsourcing provider. Others fear it's the worst thing that can happen. In the new bring your own device (BYOD) era, it's a more consequential decision.
In the boardroom and executive suite, the notion of unloading a significant portion of IT operations onto a third party spurs fantasies of major cost savings that will boost the bottom line. Many CIOs imagine outsourcing the help desk will let them repurpose their IT teams and resources toward higher-order work more focused on the core competency of the business. They even contemplate handing routine projects, such as desktop upgrades, to the help desk outsourcer, freeing up even more resources.
Other top IT executives have more troubling visions of disappointing service, unhappy end users, revolts in the IT department and intangible costs that undermine the supposed efficiencies help desk outsourcing might bring. Deeper in the IT organization, help desk outsourcing is often viewed as an outright nightmare. The greatest fear is that top management will initiate major layoffs to immediately realize savings, while lesser concerns include having to mop up behind shoddy third-party work.
Each of these dreams is grounded in reality. How an organization handles the decision of whether to use a help desk outsourcer and goes about finding one and then creating and maintaining the relationship all determine which type of dream comes true.
Help Desk Outsourcing Evolution
IT outsourcing is a huge category, and the help desk represents only a small but significant part of it. Other forms of IT outsourcing can include turning over entire datacenters to a third party, or perhaps limited to portions that may cover enterprise applications and networks. Help desk is frequently one of the first services companies will outsource, and sometimes serves as a pilot for follow-on outsourced services. It's also important to note the often blurry difference between outsourcing, which simply means an outside party is providing a service, versus offshoring, which specifically means the service is being provided by an overseas company, presumably with substantially lower labor costs.
"How do organizations effectively serve new markets, and where is the next level of back office savings?"
Cliff Justice, Partner, U.S. Lead, KPMG Shared
Services and Outsourcing Advisory Practice
At the same time, the cloud is interfering with traditional definitions of outsourcing. Desktop as a Service (DaaS) and other types of cloud-based virtual desktops represent new avenues for non-traditional players to offer services that overlap with the traditional help desk. Gartner Inc. has acknowledged as much in its most recent "Magic Quadrant" report on the topic. Gartner's influential "Magic Quadrants" place vendors along x and y axes to show the relative strength and breadth of various players.
In its 2013 report, Gartner consolidated the Desktop and Help Desk Magic Quadrants to reflect the changes in support services. In the text of the report for the quadrant that Gartner is now calling the "Magic Quadrant for End-User Outsourcing Services, North America," Gartner analyst David Ackerman and two colleagues pointed to the biggest sources of evolution in the category.
"A changing workforce model, which is more mobile and more virtual than ever before, will continue to challenge tradi–tional working models and IT services delivery approaches," noted Ackerman and co-authors William Maurer and Bryan Britz. "The net impact will be greater demands on service desk functions and continued growth in mobile device support. These factors will also drive growth in cloud printing services and cloud storage. We see BYOD accelerating... rapidly in North America during the next three years."
Outsourcing the help desk, or other IT functions, isn't necessarily a juggernaut of a trend that every organization must adopt to be competitive. Gartner sees mid-single-digit increases over the next few years for the overall IT outsourcing industry worldwide. From an approximate revenue base of $287 billion worldwide in 2013, Gartner forecasts a 6.5 percent compound annual growth rate through 2017.
Use of outsourced help desk also tends to wax and wane. The Computer Economics Outsourcing Statistics 2014 report, published this summer, included a chart that tracked the use of desktop support by organizations with more than $50 million in revenues that already use some form of IT outsourcing. The percentage using desktop support waffled from 30 percent in 2010 to 24 percent in 2011 back up to 39 percent in 2012 and down again to 32 percent this year.
John Longwell, vice president, research, Computer Economics Inc., calls the trend cloudy. "I think it shows that some IT organizations that had been augmenting internal capabilities with outsourcing desktop support due to hiring freezes are beginning to fill those positions, resulting in a decline in the number of companies outsourcing desktop support," says Longwell. "That does not necessarily mean the market is shrinking because it does not tell you how much work is being outsourced. The companies that were on the fringe and just augmenting internal resources were never doing that much outsourcing to begin with. Organizations that made a strategic decision to outsource most of their desktop support will continue to do so."
A pair of influential outsourcing advisors even suggests that one of the major epochs of outsourcing, especially as it relates to offshoring, is ending.
In a widely cited 2012 whitepaper, "The Death of Outsourcing," KPMG Partner Cliff Justice argued that a new IT business model is arising as some of the cost efficiencies are falling out of the system.
"The traditional low-cost arbitrage markets have been India, China and other parts of Asia. However, the success of outsourcing and global manufacturing has spawned a rapidly growing middle class in these regions, which is both increasing the cost of labor and broadening the potential customer base for many companies. As this success causes the benefits of labor arbitrage to disappear, how do organizations effectively serve new markets, and where is the next level of back-office savings?" asked Justice, the U.S. Lead for KPMG's Shared Services and Outsourcing Advisory practice.
Justice's take on the market isn't as encouraging to opponents of the practice as the paper's "Death of Outsourcing" title might suggest. Instead, Justice believes outsourcing is evolving into a more mature relationship among services providers and IT departments.
KPMG calls for an "Extended Global Enterprise," an iteration that involves organizations that "are centrally managed, and usually have an integrated portfolio of capabilities -- typically a combination of external service providers, internal specialists and internal shared services."
Another outsourcing advisory firm, Florida-based The Hackett Group, contends that the majority of easily offshorable jobs from North America and Europe have already moved. The Hackett Group numbers are staggering. In a report last year, The Hackett Group estimated that from a 2002 baseline of 8 million business service jobs (a superset that includes IT), about 4.3 million will remain by 2017 -- a 46 percent reduction. In a conclusion similar to KPMG's, The Hackett Group finds that the movement of most of the jobs doesn't signal an end to offshore outsourcing.
"While the projected completion of the transition of discrete business services jobs offshore marks the end of offshoring as we know it, it also marks the beginning of a more mature stage of globalization and global economic integration. Once this stage is reached, business services labor capacity will have been redistributed globally on the basis of regional competitive advantages in labor costs, capacity and skills levels; any net-new capacity will be created on the basis on this same competitive advantage," The Hackett Group report states. "This macro trend applies to individual enterprises, as well. Companies must complete the transition of offshorable work in order to reach the next stage of globalization of the operating model of their business."
Upsides: Cost, Efficiency
While KPMG and The Hackett Group generally serve global enterprise clients who already have major outsourcing operations underway, the pressures to outsource, and benefits from the practice, may not be as great for national, regional or local companies.
Nonetheless, both small and large organizations can realize many benefits from the outsourcing services from major vendors, such as Atos, CompuCom Systems Inc., CSC, Dell Inc., HCL Technologies, Hewlett-Packard Co., IBM Corp., Tata Consultancy Services Ltd., Unisys Corp. and Wipro Ltd., among others.
The most obvious traditional reason for outsourcing the IT help desk is cost savings, although almost all observers warn organizations against basing decisions among offerings on price alone. Other traditional reasons to consider help desk outsourcing include the ability to supplement existing, internal help desk staff in situations such as mergers and acquisitions without needing to make additional hires.
More recently, IT pros are seeing themselves as members of the business leadership team in their companies. As such, leveraging potential productivity advantages available from outsourcers for a relatively low-skill function like working on a help desk, theoretically leaves existing staff with more latitude to work on projects that directly impact the business. Similarly, IT outsourcers often leverage the help desk relationship to offer other bundles of related desktop services, such as desktop upgrades. Again, handing off that type of routine project to an outsource provider can allow on-staff IT pros to focus on more demanding and creative projects. Finally, an outsourcer with an entire business practice dedicated to help desk services should, in theory, be able to do the job faster and more professionally.
More recently, help desk outsourcers have been expanding to cover some emerging technologies -- mobility, BYOD and virtual desktops. The capabilities of outsourcing providers are extremely uneven in these areas, with some already delivering solutions and others at the evaluation stage. The emerging bundles of capabilities can give enterprise IT a way to add mobile management or virtual desktop capabilities through the outsourcing arrangement, rather than as a dedicated internal project.
"The outsourcer has such a razor-thin margin when they accept the contract, you're kind of automatically setting yourself up for a very limited service level or a contract-controlled service level."
Greg Shields, Author/Evangelist, Pluralsight.com
Downsides: Intangibles, Brain Drain
Greg Shields, a veteran of several outsourcing projects, both as an IT department employee and later as a consultant/observer of the process, sees three main reasons companies outsource their help desk.
"I've seen situations with clients that have a pendulum effect that can bounce back and forth with either changes in management, or with enough time having passed that the lessons were forgotten, or with the ebb and the flow of the business cycle," says Shields, who is an author/evangelist at Pluralsight.com, an online training provider in Salt Lake City, and a Redmond magazine columnist. "People tend to focus on outsourcing when they're not profitable."
Shields says the intangibles tend to be the real defining parts of the outsourcing decision. "At first blush the justification for outsourcing is very obvious. But when you look at it from the outsourcers' perspective, the outsourcer has such a razor-thin margin when they accept the contract you're kind of automatically setting yourself up for a very limited service level or a contract-controlled service level."
As a frequent technology conference speaker, Shields comes into contact with a lot of industry insiders, including one outsourcer, who explained the bidding process. "This person was talking to me about how when they go and bid these things, they have to bid every decision that they have to make over the length of the contract. If they end up making any decisions that were wrong, like they didn't budget for Microsoft to change their upgrade cadence, you're stuck," he said.
To Shields, the most important intangible of outsourcing the help desk is similar to something the KPMG and The Hackett Group reports allude to. Building out their outsourcing practices has given the offshore outsourcing companies a deep bench of increasingly experienced technical professionals. The inverse is occurring within IT organizations in the United States and Europe.
"This is more to do with outsourcing IT in general, but you can draw a corollary to the help desk itself. There's a bit of a loss of corporate collective knowledge. There's a brain drain when you move into an outsourcer model," Shields says.
Not only are organizations losing experienced IT professionals when they lay off internal workers to make room for outsourced services, the help desk also traditionally served as a source of entry-level IT jobs for domestic IT workers, who could prove themselves and move up into higher responsibility roles off the support line.
The temptation is strong for non-IT businesses to not worry about that loss of expertise if the outsourcers can handle it. But Shields believes it's "a much more insidious way of inhibiting the everyday actions of business. When IT is executed poorly, whether that be from miscommunications, whether that be from just extra hands in the pot, the ways in which that impacts your agility can be incredibly painful, but not as easily noticeable as if the power went out or if the toilets weren't flushing."
There is also a potential for very noticeable forms of backlash. Outsourcing can be highly emotionally charged, especially if offshoring or layoffs are involved. To cite one recent example, Gardena, Calif.-based En Pointe Technologies Inc. faced a lawsuit in California Superior Court in 2012 when a whistleblower alleged that the company's help desk outsourcing service the company sold to the City of San Diego was using offshore subcontractors against the requirements of the RFP.
Eyes Wide Open
The decision to outsource IT is often top-down, driven more from the executive suite than the IT department. But to the extent that IT is involved in the decision making, bringing up a full picture of potential hidden costs and other pitfalls is crucial if the company is going to get the most value from the arrangement.
Once a decision is made to go with help desk outsourcing, it's critical for IT to be involved in evaluating options. The most important element is to make sure corporate management isn't choosing a vendor solely on price. Instead, there are dozens of other factors that should come into the equation, and they are things that only IT is qualified to judge (see "15 Questions for Help Desk Outsourcers"). And if an offshore provider ends up being selected, it's also key to set expectations with end users around potential language difficulties and a realistic grace period for the outsourcer to "get the hang of" the unique requirements of the business.
Executives, IT pros and employees enter IT outsourcing with a lot of preset expectations, some overly positive, some overly negative. Determining if help desk outsourcing is right for any organization requires that everyone go into the decision with their eyes wide open to the pluses and minuses.
Scott Bekker is editor in chief of Redmond Channel Partner magazine.