When Deloitte LLP turned to IT outsourcing, “the business case was predicated on saving money,” said Larry Quinlan, CIO at the professional services firm.
“But now we stay for the value,” Quinlan continued. “We think we’re getting more out of the deal than we expected.”
Deloitte now has 40,000 employees in the U.S. and 150,000 people in more than 100 countries around the world. Speaking at this week’s Global Sourcing Forum + Expo in New York, Quinlan shared what he’s learned about outsourcing, including what he called nine global outsourcing myths, and accompanying outsourcing facts CIOs should consider:
Myth: IT offshoring is not successful. “That’s absolutely not true,” Quinlan said – if it were, why would so many U.S.-based companies be pursuing it? In its studies, Deloitte is seeing “a significant uptick in global outsourcing activity,” particularly in the Philippines, Mexico, China and Costa Rica.
Myth: Wage inflation negates the sourcing cost advantage. The global nature of this recession has depressed salaries worldwide. “There are very few things a recession is good for, but one of them is it takes away the whole issue of wage inflation,” he said.
Myth: Offshore labor pools have been exhausted. “There are a whole lot of things [U.S. companies] have to do to attract the labor pool we want,” Quinlan acknowledged. Still, as individual countries refine their outsourcing crafts, more and more up-and-coming professionals are seeking the schooling and training to provide needed IT skills.
Myth: There are only a few suitable locations for IT outsourcing. But different countries do offer outsourcing pros and cons, so if you’re starting out or thinking of changing locales, SearchCIO.com has gathered some information on some outsourcing locations in Asia and Latin America. “You do have to figure out, in a methodical way, where you want to be,” Quinlan said.
Myth: My competitor’s successful location will work for me. “It’s important not just to say someone went to Hyderabad or Sao Paulo, and say ‘That’s where I’ll be,’” Quinlan said. “There are more thoughtful approach factors you should consider.” Conduct your due diligence and really consider your needs as far as pricing and skills sought.
Myth: The risks are too high. The cost savings and skill sets make the case for outsourcing, but it’s certainly important to consider personal safety and the risk of a natural disaster or political instability in the country or countries in which you are considering outsourcing, Quinlan said. You can mitigate accordingly by diversifying your outsourcing base.
Myth: Shared services are difficult to manage. OK, this one might be a little bit true, Quinlan admitted. Time zone differentials, the cost of travel and the quality of staff interaction can be challenging to oversee when outsourcing. But nothing worth having comes easily, he said. “To do this well, you’ve got to put a whole lot of effort in and make sure it’s managed.”
Myth: There’s no need for captive centers – you should outsource everything. “You really have to think about what services you’re providing,” said Quinlan, whose company has two captive centers in Hyderabad and Mumbai, India, facilities that house 7,000 employees. If torn, he recommended considering a hybrid model, whereby firms establish a blend of a captive center (a firm’s own facility abroad) and outsourcing.
Myth: Offshoring is bad for the U.S. economy. Quinlan compared this to a religious debate with no definitive answers, and “religious debates cannot be won.” Yes, outsourcing sends jobs overseas, but it also provides for enterprise growth, which can in turn spur domestic job growth.
Is Quinlan on the mark? Are there any IT outsourcing myths you’d like to dispel? Share your thoughts below!
Good morning! We’re enjoying some beautiful Indian summer weather here in the Northeast — if only every Monday could start like this! Last week on SearchCIO.com, we talked to Virginia’s CIO about that state’s IT outsourcing problems, provided links to some free IT outsourcing templates covering SLAs, RFPs and more, and looked at various SOA implementation approaches. Let us know what you think!
How Virginia’s new CIO is fixing the state’s IT outsourcing problems — In a one-on-one interview, Virginia’s CIO explains steps being taken to improve oversight and performance of the state’s $2 billion IT outsourcing deal, which has been beset by delays and other problems.
SOA implementation evolves from open source to Oracle SOA suite — Though SOA is something you do, rather than buy, the CIO at the Screen Actors Guild found the best approach was to go shopping and solve the problem at the database layer.
Free IT outsourcing templates: SLAs, RFPs and more — CIOs pursuing IT outsourcing deals can benefit from templates spelling out SLA and RFP best practices. Here, we’ve provided links to some of the best free IT outsourcing templates on the Web.
I’ve been digging into service-oriented architecture this week again in an effort to understand a bit better the technical requirements of a SOA implementation. Daunting.
What I’ve found is that when doing a SOA implementation, wrapping an existing application exposes an interface in order to increase access. In addition, refacing an application provides a new interface to not only increase access but also to allow reuse. Deconstructing an application into components (“componentizing”), so that it can be reassembled exposes new services. And that feat, it seems, is the province of enterprise artists, tapping into the collective business and digital imagination of the company.
Reading up in preparation for some interviews with companies using service-oriented architecture, I kept coming across variations on the statement that doing a SOA implementation is more an art than a science. Knowing which services to expose for the maximum value requires judgment and taste, sensibilities rarely afforded much value in the world of IT. The notion that judgment and taste can make a huge difference made more sense after talking yesterday to Fred Falten, the chief architect at Amtrak. Here is Falten on designing for future generations with SOA:
“When you’re building a service, you need to plan ahead. Always think about how the service can be reused. Make the extra investment to not just have the project at hand be the mechanism that says, ‘Here is what the interface definition should be,’ but take the extra time to think about what would the entire company, or at least the next reasonable set of potential users, want.
“That pays dividends in so many ways, in terms of future savings. Don’t build services point to point, where you’re really defeating the purpose of SOA.
“The other thing I would say is granularity of the service. It’s extra work, but if you have existing environment it is all too easy of fall into the trap of taking the existing transactional environment and just exposing each transaction as a service. That makes it so fine grained that it is usually meaningless to other applications and other potential service users. It is exposing things at a level that no one knows what to do with, or if they did, it is a lot of extra hassle for them to figure out how to move all the little transactional pieces together. So, what you want to do, if you have a legacy environment that is highly transactional and has relatively small transactions in it, is take the extra time to think about how an external business unit would want this information to be presented, not the way the original team built it, but how it really means something to be business now.”
Check in with us next week to read details on how Falten dealt with the art and science of using SOA to make the Amtrak environment more fleet of foot, er … track.
Happy belated Halloween! I hope everybody who celebrated had a great time — any creative IT-related Halloween costumes you’d like to tell us about?
Last week on SearchCIO.com, we talked about demonstrating the business value of IT, agile development methodologies, a botched IT outsourcing contract and six ways to fail with your SOA implementation. (Come to think of it, the latter two probably provided you with some pre-Halloween shudders, right?) Check out the full stories linked below.
The Real Business of IT: Free chapter download — This book focuses on how CIOs can demonstrate the value of IT as a strategic partner. And who doesn’t like free?
Agile development methodology not easy but worth the effort, users say — The agile methodology is giving development organizations the “speed they need” to respond to changes in the market and bring more value to the business faster. Here’s how you can do the same!
Botched IT outsourcing contract shows need for governance, SLAs — Virginia’s $2 billion IT outsourcing contract has gone awry, with service interruptions and missed deadlines. Find out what lessons were learned on IT governance and clear SLAs. To share your views, read our post on IT outsourcing contracts without penalties.
Six ways to fail with your SOA implementation — A service-oriented architecture is one way to make application development more agile, a growing business requirement. Here are the top risks for SOA failure — avoid them if you want to do it right!
An end to information overload may be in sight. Call me late to the party (or perhaps naïve!), but I think I’m starting to make social media work for me, and not in the way you might think.
This is what I’m talking about:
Now if only I could find a way to get my LinkedIn updates, Gmail and other sundry faves from across the Web together in a similar fashion, I’d be even more efficient, informed and responsive than I am now. Yes, really using Twitter “right” (for networking, relationship building and so on) requires more than I’m giving it, but for now this approach fits my reality and my needs. I highly recommend it.
You hear a lot of analysts, clients and, of course, vendors touting the benefits of IT outsourcing, especially as the U.S. emerges from this economic recession, which the latest government numbers show is over. In larger organizations, outsourcing can help globalize operations, and proponents inevitably point to the bottom line: It usually saves organizations money.
But if you follow the news, you might have also heard about what must be considered an IT outsourcing failure in the state of Virginia, which is currently embroiled in controversy over its $2 billion IT outsourcing contract with security firm Northrop Grumman. Although there have been a number of missed deadlines and service failures, as we reported this week, breaking the current contract could cost the state hundreds of millions of dollars in taxpayer money – that’s no pocket change! It leaves the state with little choice but to get this deal back on track.
So what went wrong? Perhaps most importantly, there was a poor governance framework in place for overseeing this deal. I wasn’t so surprised to hear that – a lot of organizations struggle before successfully implementing a governance framework for IT outsourcing contracts. But I’m still wondering how the state could not include penalties for any missed deadlines and service levels below those specified in SLAs. Isn’t that the entire basis of a contract — to hammer out those details? It’s mind-boggling.
(And, just so you know I’m not new to such failures: As a community journalist, I covered the construction of a new high school with a budget that’s ballooned to nearly $200 million, almost double the initial estimates. So, trust me, I know government incompetence.)
I’m scheduled to speak to Virginia CIO George Coulter Friday about the corrective action plan proposed by Northrop Grumman and how the state intends to straighten this mess out. Do you have questions regarding IT outsourcing contracts or what went wrong here? I’d love your input.
Also, for those who view Virginia’s mess as a cautionary tale, remember to check out SearchCIO.com, where we have information on IT outsourcing governance, outsourcing trends going into next year, and more.
Good morning! Last week on SearchCIO.com, we focused on how to build innovation and flexibility into IT outsourcing deals, discussed how to select the right BPM tools for success, and shared Gartner’s top 10 strategic technologies for 2010. Check out the stories and podcast linked below and let us know if you have any comments to add.
How to build IT innovation, flexibility into your IT outsourcing deals — Learn how to draw IT innovation from your IT outsourcing vendors and structure your contracts to cover new technology models like cloud and SaaS.
BPM tool selection: Strategies for success — Get the most out of your BPM tools. Learn how to assess your business and technical needs and choose the best vendor and tool to meet your BPM needs.
Gartner’s top 10 strategic technologies for 2010 — Gartner’s list of technologies that bear examination during the next three years show an agile, mobile, secure enterprise that can spot early warning signs and predict trends.
We’ve written a lot lately about what leads to IT project failures and what causes CIOs to get fired. Today I heard about business failure — and its flip side, how companies go from good to great. Yes, this was a talk by Jim Collins, author of the book by that name. And though he’s probably given this talk hundreds of times, his speech during the CIO lunch at Gartner’s Symposium ITxpo was a rousing testimonial to leadership — from what makes a great leader to what distinguishes him or her from a mediocre one, and the causes (almost all self-inflicted) of business failure.
The talk was full of useful insights, especially for all of us looking ahead to 2010 and trying to figure out what to do and what’s going to happen (beyond Gartner’s prediction of 3.3% IT spending growth).
Some of it was even CIO-specific. But more on that in a moment.
First, some things he said about who leaders of “great” organizations are:
And here are some of the things they do:
As for CIOs, Collins talked to a dozen or so of them before his speech, and reported having a lively conversation on what makes a “great” CIO. (His use of great generally refers to consistency of strong results.) The outcome: “They agreed that the truly great CIOs have the leadership capacity that they could be CEOs.” In order words, all of the characteristics above apply.
Are you a “great” CIO or “great” IT leader? Do you want to be? Try Collins’ free diagnostic tool for going from good to great.
p.s. For those interested in the business failure side of his talk, another attendee blogged on Collins’ stages of decline.
Good morning! We had a snowy weekend here in the Boston area, as anybody who watched the Patriots game knows. What better way to warm up than by enjoying a piping-hot cup of coffee or tea and reviewing our latest SearchCIO.com content?
Review these trends in IT disaster recovery planning and outsourcing — IT disaster recovery outsourcing can help enterprises protect data centers more effectively than doing it themselves if catastrophe strikes. Want to show us how much you know about outsourcing DR, or looking to learn more? Review our latest stories and take our quiz?
Multi-sourcing requires IT governance strategy with multiple tiers — An IT governance strategy for multi-sourcing activities requires a multi-tier approach with participation throughout the enterprise. Read how NASA (yes, the NASA that recently bombed the moon to learn more about its surface) learned to govern multi-sourcing.
FAQ: IT and organizational change management — The CIO’s role in organizational and IT change management is to ensure service availability and business support. In our latest FAQ guide, learn more about IT’s role in change management.
Lean thinking in IT: Case studies and advice from practitioners — Lean thinking in IT can improve customer satisfaction and business alignment and cut waste, as TransUnion, Harley-Davidson and Flextronics have found. Read each company’s story here.
Is there a difference between recession-era thinking and recovery-era thinking for IT? That was the question posed last night to members of the Boston chapter of SIM (where the percentage of the 100 people in attendance introducing themselves as “in transition” probably exceeded the unemployment rate). But the biggest challenge that people saw ahead? IT staff retention.
The good news is that budget cutbacks have taught many IT teams how to prioritize, work smarter and find creative solutions to problems they don’t have money to fix. The bad news is that companies that aren’t thinking ahead may see these teams splinter apart through attrition. Those that cut training budgets and don’t restore them in time to invest in their people, for example, won’t be in a good position to retain staff once the economy stabilizes and jumping ship doesn’t seem like such a huge risk.
It wasn’t clear how many organizations could find themselves in that position. Some members mentioned preventative measures under way, such as one company that was hiring at pre-recession salary rates in the hope that new staff would stay beyond a short stint. But for all those still coping with tight resources and few extra benefits, there is probably still time to figure out some IT staff retention measures — by most accounts, the economic recovery will be slow and cautious, and the IT jobs turnaround has just barely begun. (Foote Partners notes that U.S. labor statistics show IT-related job growth of 1,400 jobs since July, with 32,600 IT jobs lost in the first seven months of the year.)