Who wins when one company acquires another?

The shareholders do, of course. The point isn’t to impoverish the owners.

The acquiring company ought to win too, as measured by profitability and marketplace success. That, in fact, ought to be the reason for any acquisition. Whether the goal is increased economies of scale, elimination of a competitor, acquisition of customers, acquisition of skills or technology, or product line extension, the acquiring company ought to be stronger following an acquisition than it was before.

Guess who doesn’t normally win. The acquired company is one answer. It might benefit, but there’s no a priori reason to expect it to. Individual employees aren’t usually beneficiaries either, whichever company they started with.

Corporate acquisitions and large IT outsourcing deals are similar in many respects, with the outsourcer playing the role of acquiring company. That means it’s the only entity certain to benefit from the transaction.

How about the company that decides to outsource its IT? That’s a more complicated and uncertain question. The proponents of IT outsourcing rarely promote direct financial benefit anymore. As explained in last week’s column, an outsourcer can only reduce its client’s IT costs by reducing the amount of service provided, unless the IT organization being outsourced just wasn’t very good at the job.

So instead outsourcers talk about letting a company “focus on its core competencies.” This logic is something short of compelling. After all, from the CEO’s perspective the only differences between managing a CIO and managing an outsourcing contract are (1) unlike internal IT, outsourcers need to make a profit; (2) outsourcing contracts are likely to have loopholes beneficial to the outsourcer, and the outsourcer has much more experience negotiating outsourcing contracts than the CEO does; and (3) it’s a lot easier to replace a CIO than an outsourcing company.

So why do CEOs sign major outsourcing deals? The most likely answer is far simpler than the textbook ones: They’ve given up on internal IT. They buy outsourcing because in their eyes in-house IT botched the job and can’t be fixed. Their eyes are the only ones that matter.

Since an outsourcing decision on the part of your company is unlikely to advance your career, what steps can you take to prevent it?

Here’s one: Don’t botch the job. Let’s start with IT operations, since in most companies this absorbs more than half the total IT budget, making it the biggest outsourcing target.

Do you adhere to or improve upon industry best-practices? (Of course, if you don’t know what they are, the chance of improving on them is slim.) For an excellent source of information on this subject, check out the Information Technology Infrastructure Library (ITIL — http://www.itil.co.uk/). It’s the industry standard reference point, and friends who are experts in the field tell me it’s the right starting point for IT operations processes.

IT operations is where formal measurements work best, because it’s where you do the same things repeatedly. If you haven’t established formal service level measures, do that immediately. Implement a continuous improvement program for the most important of them, usually the stability and performance of specific, critical applications. You might be tempted to measure only platform performance and stability “because that’s all we have control over” but that would be a huge mistake. If a major application is down, nobody cares except your troubleshooters that the servers are up and running, after all.

Track service levels, but don’t negotiate them. The process of negotiating service levels provides no benefit and carries plenty of risk. There’s no benefit because no service level worth your time to negotiate will truly satisfy anyone. Regardless of what you negotiate, anything short of the telephone, where you always get dial-tone and always get it right away, will fall short of what’s wanted.

Here’s the downside: Negotiating service levels means you’re negotiating with the rest of the business. That separates you from everyone else, makes you look and sound like a service provider, and establishes precisely the gap between what you provide and what they want. It’s another way to make them customers and yourself into just another outside supplier. As mentioned last week, that eases the transition to an outsourcer.

So remember: Tracking service levels makes you professional. Negotiating them simply makes you vulnerable.