Outsourcing Is The Key To Riding The Freedom Train

<B>Outsourcing Is The Key To Riding The Freedom Train</B>

Is your information technology reducing your workload or increasing it? Is it reducing or increasing the workload of your internal customers? For many years, as enterprise resource providers began the long process of integrating a host of applications into information systems, the clear answer has been the latter. One could debate whether or not this is the way it had to be to get to where we are now. Even though this has been a wrenching process for most companies, overall there have been enormous efficiencies realized and we are all benefiting from its part in fueling the American economy.

Yet in spite of the gains, it is clear that we have not fully realized the promise of information technology to free individuals and organizations to do what they do best: concentrate on their core competencies and revenue generating activities.

Part of the problem is the mentality that we must own and control the technology, that it is safer and more reliable on our servers than being handled by others. Why? We don't think that it makes sense to build infrastructure to generate our own electricity or dial tone, we simply plug in to these networks and pay as we go. It is much cheaper and much more efficient to operate this way.

This has been the mantra of Sun Microsystems and its CEO Scott McNealy for years and they have been right on the mark.

But companies slowly are starting to come to their senses and are beginning to want to make the IT process itself more efficient.

Corporations are beginning to look at moving technology assets and services off the books, treating IT expenses as a utility. They are realizing that they should concentrate on their core business and let outside experts deliver applications, maintain and upgrade their own systems and manage their own technical teams.

Even passionate outsourcing advocates don't believe that companies should outsource wholesale the foundations of their IT infrastructure immediately, but rather do so with specialized niche applications within an ERP environment.

Travel expense management is a perfect example of a niche application that really takes advantage of Internet-based outsourcing. Who would benefit more from the ubiquity of the Internet than a traveler?

The Internet also has gone a long way to change people's thinking. Not only does it offer an efficient medium over which computer services/applications can be delivered, it is in and of itself the perfect model of outsourcing.

With the Internet, the traditional burdens of outsourcing will vanish. Up until recently, companies that chose to outsource usually needed costly, high-capacity communication gear to pipe the data back and forth. This often meant investing in expensive T-1 lines leased from a telephone company. A combination of Internet and Web-enabled applications eliminates the customer's need for such facilities.

The Internet also is hastening the white hot rise of application service providers or ASPs, most of which will deliver products over the Internet through various outsourcing arrangements, such as leasing or subscriptions.

ASPs can be a wide variety of company types, but fundamentally these organizations provide a packaged application, customize it and operate the application remotely. ASPs relieve their customers from the burdens of buying, installing, configuring, operating and maintaining hardware and software.

One crucial point is that under this model, the buying decision can be presented as buying a service rather than meddling with the IT infrastructure. This can speed the procurement process dramatically to give users the applications they want and need now.

It is a freight train gaining speed, the wave of the future. Consider these figures that were just published by the IT market research company Input: The U.S. outsourcing market will experience an annual growth rate of 22 percent through 2003, when it will reach $110 billion. That is roughly six times the annual revenue of Microsoft. This portends a major shift in the way business will be transacted in travel expense management.

Once travel managers and their colleagues get on board with outsourcing, they will need to consider the following points that will make their outsourcing successful:

1. Is the ASP financially stable?

2. Do they have a good, solid customer base?

3. Do they have the ability to grow without service interruptions?

Competency also will be important. As ASPs come out of the woodwork, it will be vital to assess just how much they know about business applications in general and travel expense management in particular, to determine that they are not just a technology company in search of a business application.

Once these considerations are satisfied, service agreements are critical. At the outset, you and your partner must align your expectations about service capabilities and levels. It must be made explicit and one must use his or her judgment to assess whether or not the agreements are realistic. This will pave the way for a good working relationship, which is they key to successful outsourcing arrangements.

The train is pulling into the station, but feel free to leave your baggage behind.

<I>Vincent J. Kroening is president and CEO of VIN.net International in Barrington, Ill.