Outsourcing IT services is common – but too many people make costly mistakes

Sub-optimization refers to activities that focus on improving efficiency in small details, with the result that the entire service suffers because the company does not consider how things affect each other.

Partial optimization is usually done on a quarterly basis, meaning the company aims to optimize investments in the current or next quarter.

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However, the immediate price savings may backfire over time, leading to multiple costs, user dissatisfaction, and even information security risks.

As a result, companies must now move from local optimization to lifecycle thinking and understand the entire value chain.

What you leave behind, you will find before you

In the worst case, service delays for services used by organizations relying on suboptimization can extend to one day if the service is purchased at the cheapest price from a service provider located in another time zone.

This often results in at least not getting answers to questions quickly enough. At the same time, service updates can get stuck, which reduces service quality. In addition, suboptimization increases the time employees spend managing service providers, such as time away from clients.

Businesses must understand that ensuring data security is extremely difficult when services are provided by so many different parties.

On the other hand, modern technologies and their components require specific expertise. How can companies ensure that service providers have sufficient and equally high levels of expertise and that services are provided by truly competent people?

A partially optimized system is like an apartment building that was built and forgotten.

Snow has been made and the hallways have been cleaned, but things that are important for the long-term life cycle have not been done. For example, if you save and extend the repainting too long, you will eventually have to repair the entire facade. A well-maintained apartment building that meets the changing needs of residents, equipped with fast Internet connections and modern water meters, will keep residents satisfied for a long time.

The same way of thinking applies to IT systems: if the system is not maintained, the money saved in one quarter may multiply over a few years, at which point the system’s life cycle is shortened and must be essentially rebuilt from scratch.

Larger one-time investment can extend lifecycle

With technology advancing so rapidly, it is completely understandable that the understanding of the risks of partial optimization is not yet at an optimal level.

For example, the great arrival of AI tools has created problems for companies, specifically how to make the most of them. Especially for generative AI, high-quality and consistent data is key.

Due to partial optimization, it may become extremely difficult to analyze the data that a company collects from different sources, which in turn can have a negative impact on the development of services and user experience.

Service differentiation also weakens the user experience. If an organization buys the cheapest solution for five services from five different places, the user experience will be very poor.

If businesses consider the entire value chain and invest in extending the lifecycle, end-user user experience and employee job satisfaction will more reliably remain at consistently high levels.

Therefore, you must invest in the ongoing maintenance and availability of the service and ensure that it is updated as the market requires, rather than minimally updated. Although the individual, recurring one-off investments are usually larger in this case, by extending the life cycle, major multi-million dollar renovations can be postponed for years.

Jonas Koppela

Vice President of Managed Services, Futurice