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BUSINESS FOCUS - IT & TELECOM - SLOVAKS ARE CAUTIOUS ABOUT IT OUTSOURCING BUT THEY WILL NOT ESCAPE THE PROCESS

There is no going back

IT HAS only been in the last few years that Slovak companies have started to outsource their activities related to information technologies in significant volume.
Despite a relatively short history of outsourcing IT processes, which means more than a 10-year delay compared to the developed world, insiders predict its success in Slovakia just as in international markets.
"Slovakia, like the other countries of central and eastern Europe, began to see this service appear about two years ago.


OUTSOURCING helps companies follow trends in information technology.
photo: File photo

IT HAS only been in the last few years that Slovak companies have started to outsource their activities related to information technologies in significant volume.

Despite a relatively short history of outsourcing IT processes, which means more than a 10-year delay compared to the developed world, insiders predict its success in Slovakia just as in international markets.

"Slovakia, like the other countries of central and eastern Europe, began to see this service appear about two years ago. Since this time, outsourcing has penetrated many segments of the Slovak market, and we are confident that it will grow, considering many economic, political, and social factors," said Ivo Križko, solution support director of NESS CEE.

According to Tomáš Lencz, business development executive - strategic outsourcing from IBM, the company has seen an attempt to have IT services outsourced in Slovakia for about five years, but it only started to bring actual results three years ago. From the global point of view, Slovakia is still only at the beginning of the outsourcing track.

The first case of IT outsourcing appeared in the United States in 1989 when Kodak transferred its entire IT department to IBM. As Križko said, there had certainly been outsourcing before that, but those cases mostly concerned hardware. As for Europe, outsourcing came over from the US in the late 1990s.

Companies worldwide outsource all the areas of implementation and operation of information technologies. Data centres and servers, network infrastructure, terminal stations, e-business solutions, data storage administration, and applications represent the basic fields involved.

The transformation of business processes like financial management and accounting, human resources, supplier-customer relations, and public relations have also had an important place in outsourcing.

IT outsourcing penetrates almost all market fields. "Of course, in segments such as banking or telecommunication, where IT functionality is a condition for the quality of services, the outsourcing model is more integrated into the company," Križko said.

According to the latest studies, top management ranks outsourcing among the most important factors in the decision-making process, said Križko.

"Management often decides to focus on core business, because the growth of the competitive environment and ambition to penetrate international markets drive management to see technical and tactical issues like IT as a waste of time. Additionally, it is difficult to follow modern trends in IT development and improve IT equipment," explained Križko.

The number of companies that outsource more than simple activities where it is easy to change providers - like cleaning, food, and transportation - has increased in the last 15 years. These companies have begun outsourcing activities closely related to their performance and results.

Initially, companies decided to outsource some of their core activities mainly for tactical reasons like cost reduction. Today, important reasons for outsourcing are using the positive impact of the skills of external experts to increase the quality of products and services and the transparency of cash flow, to reduce operation risks, and to introduce innovations.

"Transforming the IT field from just another cost item into a means for supporting business goals is one of the biggest current challenges in IT," said Lencz.

Firms are thus trying to prepare IT solutions on demand. These are integrated solutions for business processes related to employees, customers, and business partners that are able to follow new market opportunities, demands, and threats.

However, some companies still choose a cautious approach towards IT outsourcing. Their reasons are usually fears of a leak of information or losing control of core activities, IT skills, and business leadership.

"This is not the case in companies [in Slovakia] with foreign owners. On the contrary, they approach us and they are interested in cooperation. However, we sense a little distrust at the level of middle management and from impacted employees," said Lencz.

"But in most cases we successfully explain the benefits for IT users as well as opportunities for the professional development of IT workers in the company," he added.

IBM suggests that Slovak and Czech management tend not to make decisions concerning outsourcing based on general promises; they prefer to see concrete measures with quantified benefits and needed steps. They tend to stress preventing situations from getting out of control and not meeting expectations.

As insiders say, the further development of outsourcing in Slovakia is only a matter of time. Companies will not be able to ignore the necessity of increasing competitiveness, and IT outsourcing is one of the tools in such a process.

IBM does not think the Slovak market will be unusual in its shift to IT outsourcing. "It is a part of the global environment and this suggests a development similar to European and international markets," said Lencz.

Experts agree that IT outsourcing is, in fact, a business model. Besides already mentioned advantages, it also has positive side effects like risk management and the control of IT budgets and service quality.

"If an IT contract is specified according to SLA [service level agreement] standards, the benefits of services are measurable. This way you know what you get, you can identify areas and processes that are not effective, and quickly make improvements," said Križko.

This attitude enables management to measure and score IT functionality in many processes and, at the same time, to identify points that are not effective or even have a negative impact on any business departments.

"We see an important fact: That there has not been an organisation so far that has gone back to internal services. This means that every company that has decided on such a solution agrees that outsourcing is an effective tool for improving business," added Križko.

"Of course, there are cases when a customer is not satisfied with the supplier and changes services, but they will not change the model," he summarised.

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