Bring the Business In

Twenty years ago at the dawn of the outsourcing age, decisions about handing tech functions over to a third party were made solely by the IT department, with no input from the business. During the mega deal days of the 1990s, the pendulum swung in the opposite direction, with the business foisting outsourcing deals on IT. Today, we're somewhere in the middle. "The ideal situation would be to make the sourcing decision process a collaborative one involving relevant stakeholders," says Gartner's Anderson.

At Henry Schein, Harding engages the business in the process to protect himself from sending more work offshore than he's comfortable with. For instance, when it's time for auditing internal IT costs and working with external consultants on benchmarking, Harding involves the finance department. "I bring them in and have them look at it and add their own analysis as to whether it's a fair benchmark," he says. "It provides a good check and balance for IT, and it lends some credibility to the numbers."

He also publicizes internal costs and service levels monthly, explaining what the results mean in business terms, both in one-on-one meetings with the C-level suite and in IT steering committee conferences. "As long as your costs are competitive and you're delivering well, there's no pressure," says Harding. "If those start to fail, they'll start to say: 'Why don't we bring in some outside experts?'"

If there's a problem with internally delivered IT services, Harding is quick to communicate. "It can be as insignificant as an issue with e-mail or as bad as an AS/400 core processor going down. We issue a code red and report on it at the end of the month," says Harding. "If it's something really critical, I'll call the chairman myself."

Harding believes the best defence is a good offence. He learned this at Mobil Oil in 1985 during the first outsourcing gold rush. "We made all the classic mistakes," he says. "The business was making the decision, IT didn't understand our own costs, and we outsourced every single thing that was not 'core'." The result? "We ended up taking it all back in-house."

The lesson for Harding was to involve the business early and often not only in sourcing decisions but in monitoring how well IT is delivering so the business leaders don't have the impetus to seek other sourcing options on their own. When Steve Brown was CIO of Carlson Companies, the $US8.4 billion travel, hospitality and marketing conglomerate, he was selective about outsourcing. Hired in 2000, he knew that Carlson's margins were slim, and anything he could do to ease the margin pressures would help.

After close examination, Brown decided the best way to provide low-cost and high-availability IT services to the business was to keep most of IT in-house as he transformed the decentralized IT function into a shared services organization. But he made certain the businesses within Carlson understood not only why he did not outsource more but also how that decision benefited them. He created a catalogue of 85 services IT provided, each benchmarked against "best in class" providers.

"That allowed me to make sure I was provisioning services that were best in class from a quality and cost point of view," says Brown, who left Carlson in 2005. The one area where he couldn't compete was printing and document management, which he handed off to Xerox.

Brown knew how important every dollar was to each of the company's businesses. So he took his services catalogue and benchmarking and drilled down. He compared the IT for the hotel businesses to best in class hotels. He compared the marketing business's IT costs to best in class marketers. "It's important not just to benchmark but to be able to talk to the business in the terms that are meaningful to them," Brown says.

He also tailored presentations to the CEO, CFO and COO, making it a habit to point out where service or costs were less than stellar and explaining how that might be solved either internally or through a third-party provider. "You have to own all the facts and that allowed me to have a very meaningful conversation with the business about IT and enabled them to be an informed part of the decision-making process," says Brown. "It transformed it from the typical conversation you have, which is: 'We need to cut some costs. Let's cut it out of IT.'"

When executives asked about the possibility of sourcing some application development offshore, he could tell them: "'I'm already looking more deeply into that and here's what I've found so far.' They knew I was looking at every aspect of IT all the time. That created trust."