So you've decided to outsource. You know you need someone else managing your IT systems so you can focus on what's important. But within your IT operations, where exactly will you draw the line? Who will leave and who will stay?
It's a tough question. After you reach the initial decision to outsource, you'll then have to decide how much of your IT organization you can farm out and how much you need to keep internal. How many people should stay? What functions are important enough that they need to stay in-house? And what will those remaining internal positions look like?
Although the answers will probably vary according to each company and situation, Carolyn Byerly decided on a ratio of about one to nine — one internal position for every nine outsourced positions. Although those numbers seem somewhat arbitrary at first glance, Byerly said more than 10 months of study went into the decision.
Byerly is the chief information officer for Stanford Hospital & Clinics in Palo Alto, CA. She joined Stanford in May 2002 and has 30 years of experience in IT management and planning, including 20 years with healthcare organizations. Stanford counts around 613 beds and a total of about 1,800 medical staff.
The hospital last year outsourced its IT operations to Perot Systems Corp. in a deal worth around $380 million. Around $60 million of the Perot IT outsourcing agreement involves Stanford's affiliate Lucile Packard Children's Hospital, which Byerly does not oversee.
Stanford's leadership decided to outsource the hospital's IT functions in 2003, after about six months of internal review. Byerly headed the evaluation, which covered all aspects of the hospital's IT operations including staffing, help desk services, infrastructure and other functions.
"We discovered that we had significant risks in that evaluation," she said.
The internal review uncovered concerns regarding federal regulations, infrastructure security, disaster preparedness, data center functions — and a shortage of staff to deal with it all. The varied, complex nature of the issues convinced Byerly and the rest of the hospital's leadership that outsourcing was the only way to bring everything up to snuff quickly and cost effectively.
Straight away, Byerly sought out the advise of outsourcing consulting firm Everest. The firm offers counsel on outsourcing vendors, contract negotiations and internal restructuring. For 10 months, Byerly worked alongside a five-member team from Everest to cover all of Stanford's bases. The team included a senior account executive, an IT expert, a number cruncher, a former outsourcing vendor executive, and a consultant with experience in the medical field. Together, Byerly and the team figured out that touchy question: who will leave Stanford and who will stay?
First things first: "I knew I wasn't being outsourced," Byerly said.
Starting from that point, Byerly and her Everest team determined five areas that needed to remain in-house within Stanford:
1. Strategic planning.The hospital could not expect an outsourcing vendor, no matter how experienced and trustworthy, to determine its long-term IT roadmap.
2. Technology architecture.Byerly said Stanford needed to retain the ability to define the structure of its systems and technologies, including which development tools it used and the layout and functions of its Web site.
3. Technology standards.The hospital wanted to be able to make the final decisions on things like wireless technologies, desktop computer configurations and database vendors.
4. Evaluation.Byerly said Stanford wanted to be able to keep track of its IT spending to make sure it was scoring a suitable return on its investments.
5. Management.Finally, the hospital knew it couldn't outsource the management of its outsourcing contract.
After figuring out all the areas the hospital needed to cover, the next step was deciding how to cover those functions. Byerly and the Everest team came up with 24 new management positions within Stanford that would oversee the hospital's outsourced IT functions. Stanford's new positions include:
1. A Director of IT Strategic Planning.Byerly said the position oversees five lower-level managers including a director of planning, a director of business and financial systems, a clinical planning director and three directors who cover various departments within the hospital. Byerly said the department directors are an essential part of the equation because they "act as advocates" for the hospital's doctors, nurses and staff.
2. A Director of Technology Architecture.Four people fall under this position, overseeing the nuts and bolts of Stanford's IT systems.
3. A Director of Governance and Administration.This position keeps track of the hospital's IT budget.
4. A Director of Operations.Byerly said this position checks on the hospital's service level agreements with Perot, and makes sure the vendor lives up to its promises.
5. An Information Security Officer.This position makes sure Stanford is aligned with HIPAA and other federal and state regulations.
Support staff comprise the rest of the 24 positions. All of the director positions report to Byerly, who then reports to the hospital's senior leadership. Byerly said Stanford opened up the new internal positions to its existing IT staff, and that it eventually filled 14 positions with existing Stanford IT employees. She said the hospital filled out the remaining positions with new hires. She explained that the positions are new and are therefore not necessarily suited to the hospital's current IT staff.
Byerly said Stanford began negotiations with Perot only after it had figured out what its internal IT structure would look like. That way the hospital knew what it needed to outsource and what it needed to keep in house.
So, if you're in that stage between knowing you need to outsource and not knowing what to keep in house, take stock of what's critical to your organization. You might want to take a poll or conduct an internal survey to see what parts of your IT operation are essential and what should be farmed out.
Stanford Hospital & Clinics