Outsourcing IT, without losing your job

In an ongoing drive to reduce capital expenditures, corporate executives continue to consider outsourcing as a way to pare IT costs and focus on projects that are most directly linked to business goals.

Experienced executives agree that outsourcing almost always sows uncertainty in internal personnel. It can result in layoffs and budget reductions among IT middle managers. The silver lining for IT managers is that there are opportunities for those who are prepared to embrace change and help their companies face the challenges of dealing with outsourcers — whether those external providers are in Bangalore or Boston.

“Take charge of decision making, and take the fear out of the process of using external service providers,” says Reynaldo Gil, CEO and founder of Commendo Software Inc. in Fremont, Calif.

Capitalize on the fact that outsourcing is notoriously hard to do, Gil says. In a career that includes stints at Bank of America Corp., The Charles Schwab Corp. and IBM Corp., Gil has pulled the plug on what he calls “nightmare scenarios.” He once advised a CEO to walk away from an intellectual property dispute with an external provider, at a loss of close to US$1 million dollars.

Other technology and business leaders agree that when it comes to outsourcing, companies need all the talent they can muster to do it right.

“The management of outsourcing partners does create certain positions to ensure that the deliverables expected from your partners are actually done,” says Cecilia Claudio, CIO and vice president of engineering for Align Technology Inc., a Santa Clara maker of orthodontic products, and a board member of RampRate LLC, an IT outsourcing advisor in Santa Monica, Calif.

“You need a team to manage the outsourcers, a program management office or an offshore development management center,” says Claudio, who has worked at Zurich Financial Services, Farmers Insurance Group and Xerox Corp. over her 30-year career. In the 1990s, Claudio helped engineer Xerox’s bellwether US$3.2 billion outsourcing deal with Electronic Data Systems Corp.

Claudio says outsourcing program management involves a variety of tasks and skills, which include the writing of service-level agreements; analysis of contracts; documentation for how processes should be managed; and creation of liaison roles to ensure effective communication among IT, the business side of the company and outsourcers.

At Align, Claudio started to bring in program managers from offshore providers skilled in these areas. She assigned some of her IT staff to work with the managers on different cross-functional projects.”People willing to move out of a fire-fighting role can work at a higher level, on projects that can transform the way a company does business,” Claudio says.

Of course, not all IT managers have access to mentoring programs such as Claudio’s. However, IT middle managers in any company can develop their project management chops, according to experienced executives.

“Be process-oriented, focusing on managing resources,” Commendo’s Gil says. “Analyze what you do, apply metrics to what you do, break out costs and inventory skills. See how you can do things faster, better.”

Process management is regarded as a crucial factor in coordinating work and communications among dispersed offices and personnel. “Errors get compounded and magnified in a distributed environment, which is the world of outsourcing,” says Marc Hebert, a vice president at Sierra Atlantic Inc., a provider of ERP implementation services in Fremont.

Process management is essentially a way of breaking down work into tasks that can be benchmarked and replicated. By formalizing and measuring what they do, IT managers can more readily show their business counterparts what they accomplish.

Hebert, Gil, Claudio and others make a key point: Cost-containment is not the only, or even the best, reason to use outside providers. Benchmarking IT processes can help managers lead to where a company can best use outsourcers, and where internal staff should be focused.

“There are many reasons to outsource: to get 24-hour support, to take on specialized skills that you might need for only a short time, to bring in more mature partners,” Gil says.

Take initiative by suggesting small pilot projects to be outsourced, starting with lower-level jobs like infrastructure maintenance. Claudio took this approach at Farmers and forged solid working relationships with business leaders throughout the company.

Creating benchmarks for what your staff does and proposing outsourcing pilot programs to accomplish goals more efficiently gives you a shot to expand the total budget you control or your overall responsibility. Middle managers in IT who learn to measure and communicate what they do to business managers will be seen as a valuable resource, says Tony Greenberg, CEO of RampRate.

IT managers who have strong soft skills are sought after as companies transition using outsourcers, Claudio stresses. “I look for people who are good communicators, good negotiators, people who really know how to get the most out of any particular situation, who can put themselves on the other side and have great empathy for the other side,” she says.

“People involved with help desks and network management are in a good position to hone their communications and negotiating skills since they need to contract, for example, for services for bandwidth and deal with a complex network of relationships to have systems installed,” Gil says.

Ultimately, outsourcing consultants and top executives advise IT managers to prepare to embrace change, and take the initiative to develop the skills required to deal with outsourcing.

As Gil put it: “You don’t want to get run over by the train — you want to learn to drive it.”

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Jim Love, Chief Content Officer, IT World Canada

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