Why internal IT and outsourcing cultures clash

Everybody loves a hero, particularly in IT-that talented professional willing to twist himself in knots to please his users and work overtime to get the job done. Most corporate IT organizations actively recruit, reward, and retain those willing to repeatedly save the technological day.

But internal IT organizations wind up paying a high price for that hero culture particularly when they decide to outsource to a third party, says consultants at outsourcing consultancies TPI and Compass Management Consulting (recently acquired by TPI’s parent company). The internal culture inevitably clashes with that of the service provider, which values process discipline, predictability, and consistency. Higher costs and lower productivity often result.

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Even those IT organizations that never outsource suffer under a superman regime, say Todd Dreger, partner in TPI’s operational strategy practice and Bob Mathers, principal consultant with Compass.

CIO.com talked to Dreger and Mathers about the origins of the hero IT culture, the value of the rare provider that resists it, and what happens when cultures collide.

CIO.com: You say that most corporate IT organizations built around a “hero” culture-one that values responsiveness, commitment to quality service, and individual initiative to solve user problems? Does that culture serve internal IT well?

Todd Dreger, Partner, TPI’s Operational Strategy Practice: Hero cultures usually develop unintentionally. IT organizations of many Fortune 500 companies seek to recruit the top talent. They look for people with ambition, drive and passion for customer service. These individuals tend to serve a very demanding business. This usually requires reacting quickly to issues or requests, staying up all night or working all weekend. Business and IT management often applaud this behavior and reward it with gifts or promotions.

When this approach is successful, the IT people become part of the business team. A negative consequence is that visibility into incidents and problems is often lost as the business contacts staff in IT directly to resolve issues or concerns, rather than working through a process. And guess who they call? The hero. Success and reward are the motivation. Others in IT pattern the behavior. The result is a culture based on heroics.

Managing business user expectations, adhering to process, and proactively managing problems is contradictory to this culture. While the relationships with business may be good from an IT perspective, we often find little alignment to the business. Projects routinely over-run their budgets and schedule, and the business often cites a lack of innovation provided by IT and inflated cost structure or chargebacks.

CIO.com: How does that hero culture clash with an IT outsourcer culture? How and when do those clashes tend to play out?

Dreger: The outsourcer culture is built around process discipline, consistency, and repeatability. It has to be that way in order for the outsourcer’s business model to be profitable. Specifically, outsourcing works when you can bring in relatively inexperienced people to run things.

The way it usually plays out is that the client culture prevails, because you’ve got the dynamic, talented leaders in the client organization competing for cultural dominance with the relatively inexperienced staff of the outsourcer. This is especially true with some of the offshore providers, who have undergone significant growth in the last five years. They have a lot of young and inexperienced staff who often aren’t equipped to push back on the client and say, ‘We need to follow the process here.’ Instead, they adapt to the reactive, hero approach.

Bob Mathers, Principal Consultant, Compass Management Consulting: This culture clash is fairly well-recognized, at least among companies that have been through outsourcing a few times. It’s not so much the vendor’s fault as it is a clash of organizational styles that should have been reconciled before switching services over to the vendor. What is still surprising is that even organizations that recognize the dangers ahead of time don’t appear to be willing or able to do anything about it until it becomes a big issue well into the contract.

This clash is one of the biggest drivers of client dissatisfaction with outsourcing in general, because the vendor appears to be rigid and difficult to deal with and changes from that structure cost more money. Clients cite this structure and discipline as one of the reasons they wanted to outsource in the first place, they just don’t always appreciate what that means for the organization.

CIO.com: Why shouldn’t the service provider adapt to the internal IT culture? Don’t IT outsourcing customers want a responsive, flexible provider?

Mathers: It’s tempting to do that, especially in the early days of a new agreement where the vast majority of vendor resources supporting the client are the same ones that have been supporting that client for years. They worked for the client, and now they work for the vendor. But now they’re trying to cope with how to keep everyone as happy as they’ve always been while adhering to a new process-driven delivery model that appears to be standing in the way.

But being reactive and supporting a client on an ad hoc basis flies in the face of what the outsourcing value proposition is all about; they are entirely incompatible. If a vendor continues to support each client the way they always have [been internally], they sacrifice their ability to achieve any sort of economies of scale and efficiencies across their client base that, in turn, allows them to deliver the value and lower prices that the client outsourced for. In the last one to two years, we’ve seen the market move towards greater standardization of services and process in large part because clients and vendors recognize that this is a problem that has got to be fixed.

CIO.com: You note that hero environments, while inefficient, often produce positive, collaborative working relationships between the client and vendor teams. Why is that?

Dreger: The camaraderie that defines the hero culture-client/vendor teams pulling all-nighters to solve a problem, senior staff stepping in to do the work of junior staff-creates a sense of teamwork and collaboration. But that positive team spirit prevents opportunities to improve.

Rather than pulling all-nighters, they should be finding ways to prevent problems that require people to work all night. And when you have senior people doing the work of junior people, you allow knowledge and skill gaps to grow, rather than closing them.

CIO.com: How costly is this to the outsourcing customer?

Mathers: The example of senior staff doing work of junior staff is perhaps the most basic. That results in lower productivity and higher costs. A related problem is duplicated effort. If everyone is pitching in to help one another, then it’s not clear who has what roles and responsibilities, so utilization and productivity suffer.

Quantifying the cost impact of the hero culture specifically is difficult, but the cost impact of the related issues that culture drives – process inefficiency, duplicated effort, ambiguous roles and responsibilities-can add up to 10 to 20 percent of total costs.

CIO.com: How can IT outsourcing customers avoid this culture clash in the first place?

Mathers: Outsourcing works best when the internal organization has already been working with a process-driven model before the outsourcing happens. IT personnel and the business have already gone through the pains of moving from relying on heroes to relying on processes. The outsourcer may have even more rigorous processes, but at least the client has some appreciation for what it means to work within a standardized environment and what some of the benefits can be. If organizations don’t do this, the move to an outsourced model will be painful, and the outsourcer will be seen as inflexible and difficult. Those perceptions can be corrosive to the relationship and take a long time to fix.

CIO.com: What can IT service providers do to remedy this on their end?

Dreger: It has to be a collaborative effort on the part of both parties, and it has to include executive-level support. What we’ve often seen is that, after a transition, there’s some maturation and some implementation of process discipline. But then it stalls. At that point you need to come in and do a baseline, see where you’re at, and get both parties to reassess and re-commit to the need for process discipline. Being able to quantify the benefit of that change is essential.

It’s also important to create incentives and rewards-both individual and group-based-to give the heroes a stake in the implementation of process discipline. They can feel threatened by an initiative to instill consistency and repeatability, because it can make them less visible.

CIO.com: Why is it so hard for corporate IT groups to embrace standardization? Is that changing?

Mathers: Standardization can be seen by clients as constraining unless the benefits are clearly laid out. They need not only to understand how they will need to work differently, but what the benefits of that change are.

We’re seeing clients take the time up front to map out what a standardized service model can look like, including leveraging utility-based services, demand management and appropriate tensioned pricing mechanisms to quantify the size of the prize. The benefits can be significant; some have reduced costs 30 or 40 percent. The level of savings the organization should target depends on their appetite to make some of the changes. For some more conservative organizations, savings may be 15 to 20 percent. The largest savings will be reserved for those that are truly willing and able to transform how they deliver services to users, and how users consume those services.

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Jim Love, Chief Content Officer, IT World Canada

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