5. Look Outside of IT The business case for outsourcing may be great for IT cost-cutting, but will it break the CFO's budget elsewhere? Outsourcing--especially offshore--is great at cutting the CIO's expense line, while increasing it for other areas of the organization, such as audit, travel, security, communications," says Adam J. Strichman, founder of outsourcing consultancy Sanda Partners. "CIOs would be wise to effectively communicate how their cost-cutting measures may increase cost to other groups."
6. Apply Portfolio Management Principles The CFO thinks about everything in terms of the financial portfolio. To finance, IT outsourcing is just another investment in the mix. "CFOs want IT to use portfolio management thinking," says Peterson. "They want you to periodically reevaluate [outsourcing] and rebalance it and consider diversification.
" While outsourcing to a single provider or location may be attractive from an IT management perspective, reliance on a single provider or offshoring everything to Bangalore won't sit well with finance.
7. Get CFO Signoff on Financial Terms The average IT outsourcing deal has hundreds of moving parts, but a handful of core financial performance aspects including pricing schedules, minimum spend or volume commitments and the implications of not meeting them, asset sale and buyback provisions, business downturn or divestiture terms, and termination considerations. Get finance to sign off on those before a contract is signed, advises Martin. "CFOs don't like to be surprised with a multi-million dollar fee on the eve of a major transaction."
8. Don't Forget the Case for Not Outsourcing It's just as important to make the case for what you don't want to outsource. "Justify why you haven't outsourced everything to India--even if nobody asked," advises Strichman. "
Every CIO should have an offshoring analysis at the ready especially those CIOs utilizing minimal offshoring. Somebody--especially the CFO and board members--is always wondering about this."
9. Measure and Report on Success--and Failure "At some point the CIOs organization loses credibility with finance because they make all these claims [about IT outsourcing], but after the fact there's no accountability or evidence that the promised value has been realized," says Masur.
CIOs need to establish metrics relevant to the success of the initiative that can be measured later if they want to be taken seriously by finance. "Provide real post project performance impacts--even if not requested--showing projects that exceeded expectations as well as those which fell short on their potential impacts and costs to the entire company, not just IT," says Strichman.