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 5, 2010
In the book “Outsourcing America: The True Cost of Shipping Jobs Overseas and What Can Be Done About It” (Published in 2008 by AMACOM, a division of American Management Association). The authors Hira brothers argue that outsourcing jobs overseas is deleterious to the health of the American Economy. To add salt to injury, a University of California study concludes that 14 million white-collar jobs are vulnerable to being outsourced offshore. Given the high rate of unemployment, outsourcing jobs is getting bad press. Lou Dobbs of CNN made a career just on this topic.
Enough gloom, let me narrate a real story about a real company based in California that manufactures a Green Technology product, one that converts radioactive waste to harmless reusable materials. This company has a patented product and builds its machine in California. Guess where the big markets are for this product? No prizes awarded for guessing China and India. The more China and India buy these products, the more jobs in California. Admittedly this is one example, and you cannot extrapolate on a single datum. However, the message is loud and clear. The way for America to forge ahead is innovation.