Offshore CTO?

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:

  1. The business drivers must be articulated on-shore by a CIO or equivalent;
  2. The off-shore CTO must be co-located with the implementation team;
  3. The off-shore CTO must provide PMO functions to ensure successful outcomes;
  4. The CTO must be fluent in the enterprise architecture; and;
  5. 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.

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Reducing the Fixed Costs in Project Management

January 3, 2010

Sudoku puzzles teach an important lesson in project management, that we almost forget- there are fixed costs associated with every project.  In Sudoku, there are different levels of complexity – from the very easy to the excruciatingly difficult ones.  While the time taken is correlated with difficulty, it is not linear.  No matter how easy the puzzle, it takes a finite amount of time to simply fill the puzzle.  This is also true for any project.  Initial project reviews, user-buy in, planning, resource allocation, project briefing, and de-briefing after the project is completed all have a “fixed cost” component to it. While it is impossible or even desirable to eliminate the fixed costs, it will be helpful to streamline the project management process to develop efficiencies. 

These guidelines help in reducing the fixed costs associated with projects:

1. Develop a simplified project management methodology (PM-Lite).

2.  Use simple workflows (automated workflows add more benefits) using a portal approach to oversee these “small projects”.

3.  If you outsource these projects, use a set of pre-screened and pre-credentialed vendors who are specifically suited for delivering small projects.  This is discussed in more detail in this blog.

4. Set limits on the number of deliverables (such as 5 to 7).

5.  Keep the distance between each deliverable small (time and technical relationship).

6.  Set simple success criteria such as 10% within each deliverable’s costs and schedule as green, between 10% and 25% as yellow, and more than 25% variance as red.

This simple guideline should not be construed as one shoe fits all.  For example, risk management, compatibility with enterprise architecture, adherence to standards, and other project management principles also apply, but they should not become onerous and increase the fixed costs of a project. 

A note on the Fixed Costs associated with Outsourcing

Following the ignominious collapse of several major outsourcing deals, IT services providers and customers alike have had to revise their approach to the entire outsourcing business.   The trend towards more small projects is gaining momentum, and it further reinforces the need for organizations to develop an IT governance methodology for small projects. SMB CIOs have an alternative solution in extending their resource capability using project-based sourcing.  Project-based sourcing is a convenient way to balance the need for reducing costs and maintaining core competence in-house.

While outsourcing makes good sense, organizations, particularly SMBs (Small to Mid-Sized Businesses), simply maintain status quo. Either they cite lack of expertise in managing off-shore engagements or perceived quality issues to not engage in off-shoring. To a large extent, their fears are justified. Tier-1 outsourcers seek outsourcing of entire functions – not the ideal method for SMBs which seek help for specific projects.

When outsourcing the projects, the overhead gets accented as procurement and sourcing decisions have their own components of fixed costs.   The lack of a well established Service Provider network who deliver project-based off-shore solutions adds to procurement costs, often negating the benefits of outsourcing. Fortunately, web-based brokerage solutions are emerging. These solutions are built on a solid pre-credentialed Service Provider network to ensure that lower cost is not negated by poor quality.  These web-based solutions benefit both the SMB as well as the Service Provider.  SMBs benefit from low administrative costs and accelerated contracting.  They also benefit from selecting a vendor from a pre-credentialed network.  Many Tier-2 and Tier-3 off-shore Service Providers have the ability to provide niche IT solutions that match SMB project needs.


Is a CIO or CTO required? Does On-Demand services make sense?

July 26, 2009

The question may sound almost blasphemous, particularly in light of numerous CIOs and CTOs I know who are all looking for a job – nevertheless it is a topic of great interest.  Just to ensure we all have the same understanding, let us define a CIO to be the “architect” who aligns IT to the business ensuring “best value” for the business.  CTO can be defined as the individual who delivers the IT in the most efficient manner possible.  To address the issue of whether a CIO or CTO is required, let us first classify companies based on size.

Ignoring the Fortune 1000, there are 17000+ companies who have between 500 and 10,000 employees.  Let us call these companies Tier-2 companies.  There are probably 200,000+ companies who have more than 100 employees but less than 500.  Let us call these Tier-3 companies.  There are millions of companies smaller, and for the sake of this discussion, let us ignore them (even though they may have IT needs).

The role of both a CIO and CTO is critical in Tier-2 companies, and I am going to assert that these roles should not report to a CFO, but should report directly to the CEO or COO.  It is possible, and likely, that the CTO reports to the CIO and may not even be called a CTO, but that is less important for this discussion.

Tier-3 companies who tend to emulate a Tier-2, generally have a CIO.  I take the position that in such firms, the role of a CIO is greatly exaggerated.  After all, once the IT vision is articulated, the role becomes more of a lower level delivery manager.  My view is that for such firms, an on-demand CIO service is valuable.  Organizations like Office of the CIO, USourceIT all foster on-demand services.  The advantages of the on-demand service are:

  • There are no excessive fixed costs (a small retainer plus on-demand service provides continuity).
  • Different skills are brought to the table based on demand – for example, if the focus is applications, then an applications architect may be better suited for the business.
  • Experience in different verticals and horizontals can help “reuse” the knowledge base – for example, if a firm needed CPG and manufacturing experience, then a CIO who has worked in such environments can offer rapid solutions to align the IT to the business needs.

The key to success for a CIO on-demand service is to provide a trusted value driven turn-key IT capability to Tier-3 companies that enables them to compete, grow and operate effectively.