Business continuity risks

It might be argued that sending some services offshore can offer benefits in terms of capability such as access to offshore expertise. However, this needs to be seen against the risk of failure in a foreign operation causing service delivery failures in New Zealand.

The Reserve Bank has considered the risks of offshoring banking services and has established policyaimed at ensuring the continuity of banking services in the event of a service failure in a foreign jurisdiction:

A large bank that outsources its business activities must also be able to continue to function in the event that its service provider fails or becomes dysfunctional, or in the case where the provider is a parent bank, becomes subject to the administration of a foreign supervisor. For both of these purposes, it is essential that the bank in New Zealand has access to the customer records, people and systems it needs to continue operating.

To a great extent, that same philosophy should be adopted by government agencies when offshoring ICT services. A government agency must be able to access the records, systems and services it needs to continue operating in the event of a service provider failure, infrastructure failure, government intervention, etc., in that foreign jurisdiction. Government agencies may want to review the Reserve Bank policyand develop their own strategy for dealing with similar service or systemic failures.

Business continuity risks

  • Loss of domestic capability including loss of organisational knowledge and strategic capability
  • Loss of intellectual property - explicitly and embedded in system design or business processes
  • Effect of loss of skilled jobs to a particular part of the New Zealand economy
  • Limitations on future options due to loss of capability to develop alternatives
  • New Zealand Government's capability to deliver service is reduced because:
    • There is a service level reduction compared to New Zealand providers
    • Service providers may not have the understanding required of the New Zealand market, operating environment and local needs and preferences to deliver the best possible services.
    • Staff morale and productivity issues may arise because of impending changes.
    • There are difficulties in communicating performance expectations

Example mitigations

  • Undertake regular offshore training of key staff to maintain fluency in the solution. If possible, maintain an overseas presence.
  • Establish a local capability and backup for services, perhaps by insisting on a local provider of support services.
  • Ensure effective change management so that documentation and training material is kept current and accessible.
  • Undertake best practice governance, contract and service delivery management.
  • Investigate and contract for appropriate levels of technology redundancy, resilience and business continuity capability.
  • Consider the long term strategic value to New Zealand of the skills being outsourced (consult the Department of Labour).
  • Don't move strategic intellectual property offshore.
  • Quality and level of service is specified and managed by a service level agreement.
  • Change management strategy implemented.
  • Structures and processes established to monitor and manage communications and performance expectations.