RayooTech – IT Outsourcing

By Stephanie Overby

part 5

Clean House Before Outsourcing

If the success rates and benefits of transaction relationships have you wondering why you don’t just outsource everything that you can characterize as extractable, beware. There is a potential trip-up. Emphasizing transaction relationships can make a company less innovative with its IT architecture. In the short term, transaction outsourcing can help a company clean up isolated processes, but in the long term these deals may actually reinforce application silos in a company, according to the CISR-CIO research.

This potential problem makes the need for enterprise architecture planning even more important for companies engaging in transaction relationships, Ross says. "We think of a transaction as a smallish piece of IT that the vendor ought to be able to provide value on," she says. "But that can be dangerous. Until companies have cleaned up internal processes, outsourcing transactions is going to reinforce silos. And that can make your internal architecture messier and messier." Over time, a weak enterprise architecture could inhibit a company’s ability to respond to changing market conditions.

Cinergy could have fallen into that trap. Before CIO Gaines’s arrival in 2002, the company had commenced a transaction relationship with DBA Direct to do database administration for its commercial energy business unit only. At the time, Cinergy IT was decentralized, with each of the company’s four business units operating autonomously. The DBA Direct deal "worked reasonably well and served its purpose," Gaines says. "But there was not a lot of visibility into it. It was filling a rather specific need in that business unit, and it wasn’t scalable."

When Gaines took the reins, he was charged with centralizing IT for the $4.7 billion company. One of his first acts was a review of Cinergy’s entire IT service delivery model. He also looked ahead to future needs. "We had an opportunity to get into some new emerging technologies, but that would require incorporating an enterprisewide data warehouse," he says. Gaines knew he did not have enough internal expertise to tackle that job.

Gaines began to look at outsourcers. He liked that DBA Direct had experience with his company. "The database work they would be handling was complex, and they were already managing a highly reliable database for us," he says. So he hired the vendor for database administration enterprisewide. DBA Direct started with the company’s Oracle databases. And as Gaines continued to centralize IT, the outsourcer took responsibility for most of Cinergy’s databases.

By reexamining the outsourcing relationship with DBA Direct and expanding it as part of a larger enterprise architecture strategy, Gaines avoided the silos that transaction outsourcing sometimes produces. The vendor has also proved valuable working directly with Cinergy’s other outsourcers, with whom Cinergy cosources much development and maintenance of applications that in turn rely on database functioning and availability.