High-Touch Companies and IT Outsourcing: Compatible or not?

Businesses looking to reduce costs and improve service levels can do so through IT outsourcing. However, many companies are reluctant to outsource critical business components because they fear that relationships built over time will erode or disappear altogether. 

A significant part of the reluctance to outsource is that these companies are concerned about maintaining high service levels without their dedicated IT staff.

In order to control this, companies need to consider having a phased outsourcing plan that allows them to test the waters before diving in completely. For example, start with just one outsourced managed IT service component and attach a success metric. If it shows assurance, then invest more heavily and move more critical functions over to the outsourced company.

High-touch means highly complex

High-touch means highly complex, interactive, and lengthy processes handled face-to-face. This is the opposite of high-tech, which means large-scale, standardized, and fast transactions. High-touch companies are those in which personal networks are built through strategic alliances or long-term business relationships with customers.

It's probably not surprising to learn that there is often a high degree of trust between the customer and supplier in these high-touch companies. But, as you can imagine, this is hard for your IT partner to achieve with a digital transformation of an IT outsourcing.

Complexity can be managed

It can be managed in various ways, but it is always proportional to speed. So the faster you want something done, the less complex it can be; if in doubt, remember that time is business money. Trust cannot increase while complexity is falling (or when it falls more quickly than trust), no matter how hard companies try with relationship-building initiatives like customer loyalty programs. If you want to create trust in an IT outsourcing relationship, the process needs to be long enough for it to occur naturally.

The usual logic is that buying anything off-the-shelf scales better than building things in the house. The higher investment into R&D means less focus on cost control and scalability, so this is logical in a way.

Culture is not concrete

For this reason, any outsourcing relationship should be an investment and not a cost. It would be wrong to assume that cultural incompatibility is just one factor. Some of these companies know their core competencies and limit what they offer as IT consulting services, but some go all-in and try to provide everything, then ask for forgiveness when they fail.

It's not just the company culture that is an issue with IT outsourcing; there are very different approaches to work and collaboration, all of which must align for a successful relationship. Flexibility in the workforce can lead to unstable working conditions and inconsistent quality, leading to trust. As long as the business model requires managed IT service providers to sacrifice their private lives in exchange for stability, it is incompatible with IT outsourcing.

It is quite sad that these companies focus on offshoring when the issue is more profound than just hiring cheap labor. The culture gap creates distrust and reduces quality, which leads to loss of business. 

Key Takeaways

• R&D is not scalable and needs to be treated as such (an offshoring cost)
• To build trust in relationships, they need to be long enough to reach mutual understanding and commitment.
• Offshoring must go hand-in-hand with cultural transformation and training.
• Flexible teams will be less productive and of lower quality than stable ones.
• Long-term relationships require time and patience, not just the 'low cost' label IT outsourcing companies usually place on themselves.

Conclusion 

Many of the most successful companies continue to use high-touch. They do this because it is a key ingredient in their business model and customer satisfaction, not just because it is fashionable. So the next time you are looking at IT outsourcing to managed IT services, consider that creating an effective relationship is more than just finding a new supplier or vendor. It requires cultural compatibility and shared values for both parties to succeed together.