Why it pays CIOs to map their plays before a dictate to outsource comes down from on high
One of the most frustrating aspects of working for somebody else is the dreaded "dictate from above". Dictates aren't requests, they are demands. Most workers, when faced with an order to do something they don't understand or support, disconnect emotionally from the task and follow through in lacklustre fashion. This leads to disappointing results that reinforce the perception that those above are disconnected from reality. And the demanding executive gives up on either the idea or the people. In the end, the organization loses.
For the CIO, some of these dictates are related to outsourcing, a strategy that is usually defined at the top and sometimes disdained in the middle. I was in a planning meeting recently where a midlevel executive conveyed an outsourcing dictate to his group. The discussion that followed was high on perspiration but not on inspiration: "It doesn't save money", "Our complex work can't be outsourced", and so on. Minds were closed to the positive experiences of other organizations and the opportunities that could be created. The outcome? A set of modest goals that did little to address industry cost pressures and global support requirements.
Outsourcing's value depends on the actions of those who are tasked with making it real. Done well, it saves money and allows an organization to reinvest in high-value activities such as interacting with customers, managing innovation, defining strategic direction and formulating plans. Done poorly, outsourcing can increase costs around the management of sourcing relationships and syncing up processes and can strip an organization of creativity by focusing internal resources on work that lacks innovation.
For these reasons, the CIO should be on the offensive when it comes to outsourcing. After all, it's better to initiate your own program rather than have one handed down from on high (see "Just Say 'Know'", page 40). But don't concede the game if you find yourself on the receiving end of an outsourcing mandate. You can still shift to an offensive position by taking a leadership role in the initiative and redefining it so that it works for you and your organization while protecting the long-term interests of the enterprise. In other words, love it to death.
Outsourcing is a competitive necessity in a global economy. When (not if) the call comes, try the following tactics.
Focus on the opportunity. Let go of concerns and fears until you define the opportunities - beyond cost savings - that outsourcing enables. What should your organization do better and how could outsourcing help fund or catalyze the change? The participants in the planning meeting I attended had difficulty focusing on the opportunities rather than on the risks and challenges. It took effort for them to identify how outsourcing could improve leadership on activities that had degraded over time due to a lack of funding for incremental maintenance. Avoid their mistake.
Demonstrate that you are serious. Reach for empirical research and get "lessons learned" from organizations that use and supply outsource services. Develop a plan that shows a committed and disciplined approach. It should incorporate tenets such as an aggressive, integrated pilot program, strategic selection of offshoring locations, multiple suppliers to ensure competition and lower risks, the creation of metrics and a plan to share the benefits with the business to motivate adoption. Remember that unless you commit over time to increasing the work that is outsourced, the payoff will never be realized because the costs of establishing and managing an effective sourcing program are high.
Avoid the path of least resistance. Although it is easier and less risky to outsource "keep the lights on" tasks rather than IT development activities, many organizations first outsource development because of its variable nature. But placing project management, business and architectural knowledge solely in the hands of the outsourcers can lead to a withering of the internal capability to innovate. Outsource innovation-based work to accommodate peak demands and to access specialist expertise. And ensure knowledge transfer and retain control over tasks such as program management.
Take care of your people. By keeping the most exciting work inside and refocusing your workforce, you increase your odds at retaining the best and brightest. Demonstrate integrity by communicating openly and providing training, retention bonuses and severance for those who need them.
You can't really love outsourcing to death but you can play offence to ensure that you get the best out of outsourcing and it doesn't get the best of you.
Susan Cramm is founder and president of executive coaching firm Valuedance
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.