October 30, 2011
Consultants have created a plethora of adjectives to differentiate themselves from outsourcers: smart sourcing, right sourcing, strategic sourcing and the like. Now rogue sourcing? Before the reader frowns, I will freely confess that I created it. Please view me as a career CIO who coined this term and not as a consultant.
To provide a bit of a background, IT is facing the daunting task of delivering more for less. The result is that users (like marketing, finance, operations) are seldom getting their projects done by the internal IT department. Naturally they resort to outsourcers. A very harsh phrase to use, but rogue sourcing refers to IT sourcing by non-IT departments. Of the many challenges with rogue sourcing, the three that kindle their way to the top are: management overhead, higher costs, and lack of a review and credentialing process potentially leading to poor delivery quality.
The way to eliminate rougue sourcing is not to outlaw it, but accept it as a weakness in the IT department in how it is managing user requests. IT governance helps facilitate decision making across all users. This prevents IT from independently making and later being held solely responsible for poor decisions. The guiding principle is to deliver value to the business without injecting onerous controls that stifle productivity. To achieve it, the IT Governance framework should provide complete transparency on IT activities and make it simple for users to make, monitor and prioritize IT requests. In order to achieve transparency, IT management will need to establish controls and processes to deliver quality technology solutions on time and within allocated budgets.
Outsourcing can actually enable effective IT Governance as it provides a scalable resource base to work in conjunction with internal IT resources. IT can transform itself as a nimble service based organization taking advantage of outsourcing. This will signficantly reduce rogue sourcing.
October 24, 2011
With all the offshoring taking place, one concern is that US is losing its competitive edge. A recent analysis in Information Week seems to suggest otherwise. US is actually ranked number 1, and two big offshore providers India is ranked 34 and China 38.
If this study is to be believed, then off-shoring has no impact on competitiveness. One can even argue the opposite. US is focussed on innovation and taking advantage of global resources to produce what makes US competitive.
October 7, 2011
A “body shop”, analogous to a garage where the bodies of automotive vehicles are repaired, in IT refers to a company that recruits resources to work for other firms building their technology. A very popular Indian writer Chetan Bhagat’s tweeted calling Infosys a “body shopping company”. His tweet “it is ironic when someone who runs a body shopping company and calls it hi-tech, makes sweeping comments on the quality of IIT students,” created a turbulent discussion with a majority agreeing with Chetan.
I disagree with Chetan. In the Indian outsourcing industry, Tata’s established that Indians can program at customer premises by bringing technically trained resources to work under the clients direction. Infosys proved that the same work can be done off-shore using a very structured process with a combination of client and Infosys management. Before Infosys, offshore programming work was not deemed to meet the quality requirements that satisfied client requirements. Infosys, in particular Narayan Murthy, must be congratulated on helping not only establish credibility for Infosys, but every Indian IT services company who gained from the success Infosys achieved. To brand Infosys as a body-shop is harsh. The acceleration of outsourcing to India over the past two decades can be attributed in a large measure to Infosys.
October 4, 2011
My good friend Frank Scavo does us all a great service by showing us facts and trends in the field in IT. His report on IT Outsourcing is available. It answers questions like: a) How many IT organizations are outsourcing particular functions and how much work are they actually outsourcing?, b) Is the trend up or down?, c) What percentage of the typical IT budget goes to outside service providers, and, d) How do costs and service levels for outside service providers compare to doing the same work in-house?
Invaluable questions, and more important, evidence based guidelines. It covers:
- Application development
- Application hosting
- Application maintenance
- Data center operations
- Database administration
- Desktop support
- Disaster recovery services
- Help desk services
- IT security
- Network operations
- Web/e-commerce systems
For a full report, visit http://www.computereconomics.com/page.cfm?name=Outsourcing
The cost of this report: $595 a true bargain.
September 9, 2011
Voluntary Outsourcing refers to events where outsourcing is managed as a discretionary activity. Most outsourcing in the past was voluntary. Enterprises addressed both technical and social aspects of outsourcing, and outsourcing was typically undertaken to 1) to drive costs lower, and/or 2) to focus on “core” activities, and/or 3) to gain resource flexibility.
Of late, outsourcing has become a necessity, almost involuntary. Lack of technical resources or expertise is forcing organizations to outsource. The gains by outsourcers (even in this stagnant economy), indicates the growth of involuntary outsourcing. The critical research question is whether the effects of involuntary sourcing is no different than voluntary sourcing, or there is a significant difference. If there is a significant difference, it is important to identify them. My hunch is that involuntary sourcing may lead to less than optimal decisions which will adversely impact the value IT can bring to the business.
August 19, 2011
USourceIT has helped many IT companies get access to customers at extremely nominal costs of 10% per transaction. Now we are going to completely eliminate all fees. This means our customers will gain full access to our provider database and seek out service providers directly! Naturally, some of the customers may want us to be an intermediary handling contracting, payment, and escrow services for a nominal fee of 5%, however, we are leaving that option to the buyers. Effective October 1, 2011 all new transactions will use this no-fees model. The new model eliminates transaction costs.
An important aspect of this change is to open the service provider network. Only general capabilities will be shared: Financial and other confidential information will not be shared. Using a open and friction free B2B model (no transaction costs), customers and service providers will save money and time. Tools will be provided at no cost for service providers to assess their chances of success, and customers will be provided tools, again at no cost, to evaluate bids.
I am excited to make these changes to help foster your growth. Your feedback and suggestions are most welcome.
May 1, 2011
At first the idea of off-shoring the CTO function looked a bit difficult to comprehend. To put it in context, IT Organizations hire a Chief Information Officer (CIO) for ensuring that the organizations information technology investments are aligned with its strategic business objectives. For most Fortune 2000 companies, the CIO has become the the architect of building and managing technology assets that meet the business requirements. Many CIOs come from a business background and lack the hands-on-skills in architecting solutions. To help alleviate this gap, often a Chief Technology Officer (CTO) was hired to support the CIO. While the CIO was the big boss in most organizations, technology-centric firms gave more credence to the CTO. Large firms can afford the luxury of having both the CIO and CTO. Small to Mid-Sized Businesses (SMBs) rarely have the luxury of affording two executives. Many CIOs lack the technical skills to build contemporary IT efficiently. Conversely, many CTOs lack the business skills to build a technology portfolio that best matches the organization’s needs.
The idea of of an off-shore CTO working under the direction of a CIO to help architect and deliver a technology platform does appear to make sense, particularly in light of the fact that many technology solutions are in fact developed off-shore. A few guidelines for successfully off-shoring the CTO services:
- The business drivers must be articulated on-shore by a CIO or equivalent;
- The off-shore CTO must be co-located with the implementation team;
- The off-shore CTO must provide PMO functions to ensure successful outcomes;
- The CTO must be fluent in the enterprise architecture; and;
- If the development team is outsourced, the CTO function must not be from the same outsourced entity. This will help ensure that the CTO’s loyalty is to the enterprise and not to the outsourced entity.
Off-shoring a CTO is not necessarily undertaken to reduce costs, rather it is to help minimize the gaps between the desired outcome and the delivered technology platform. The capability of the CTO determines the success of the engagement. Fortunately, with the large number of engagements that have involved on-shore and off-shore projects, it will not be difficult to locate competent CTOs. Many qualified CTOs in Europe/US may themselves avail of off-shore engagements further boosting the pool of available CTO resources.