Extreme Outsourcing

Extreme Outsourcing

The days of lump-sum outsourcing deals and blunt offshore labour arbitrage are gone. The future is about disaggregating IT processes — and then figuring who is best equipped to handle them and where they are located. Here’s how to do it right

Questions to Ask

The next step is to figure out whether a process or a task can or should be outsourced. The way to do this is by running each one through a set of questions. While the exact questions will vary depending on the company, department or process, here are some guidelines suggested by CIOs who have done it.

1. Does this have to be done inside our office?

Almost anything can be done from anywhere, including tasks that would have seemed impossible to do from afar just a few years ago — network monitoring for example. CIOs need to establish whether the person performing a task has to be physically present in order to get it done. It could still be outsourced, of course — the old model of hiring consultants to work in your office hasn't gone away completely.

This is the first question that Sanzone, the Credit Suisse CIO, asks when he is evaluating a task or process. He's looking for a solid business reason behind the answer. For example, he recently developed a new trading application for his company's brokers. The first task in the process — requirements gathering — is the sort of thing that needs a lot of back and forth between IT and the brokers. It could be done over the telephone or through collaboration software, but realistically the best results always come from face-to-face meetings. And being co-located makes it easy to ask quick, stupid questions that someone offsite might not feel safe in asking. So despite the fact that New York, where the traders work, is the most expensive market in the US, it made the most sense to do the requirements gathering there.

And of course if the answer is no, then the process or task is a candidate for outsourcing.

2. Are there other geographic limitations?

Sometimes a process or task doesn't require face-to-face interactions but frequent contact is still important. It is possible to outsource these projects, but the outsourcer better be located nearby. Boehme was involved with a project during a previous job that involved a lot of data scrubbing. His department wasn't staffed for the project, and it was low-level work anyway. "But at the end of the day you have to call people and verify their addresses," he says. He found a partner in Mexico that had the computer skills, the language skills and, best of all, a voice over IP network, making the phone calls even cheaper. He decided on Mexico because he wanted to have people in the same time zone so they could call US customers when they had to. It worked great. (He tried to source a DBA project in Mexico more recently, but after 90 days of interviewing, he couldn't find the skills he needed. He ended up moving the project to India and having a team there work the night shift.)

When Sanzone was sourcing the trading application, he realized that the design team needed to be in occasional, but not frequent, contact with the requirements group and the traders — just enough to get a few questions here or there answered. So he decided to source that task out of Credit Suisse's Raleigh, North Carolina office. The project was still done by his employees and in the same time zone, but it was a less expensive rate than New York.

3. Does having your employees do it provide you with a competitive advantage?

This is the number-one reason not to outsource something. And it is a determination that every company will have to make for itself. There are some things that hardly any CIO would outsource — architecture, for example. And then there are situations where the answer may be counterintuitive. Homa, the Hannaford Bros CIO, doesn't outsource his help desk, even though that 2has become the low-hanging fruit for many first-time outsourcers. "I support about 300 internal applications and it would be very difficult to train an outsider how to answer those questions," he says. But it would be possible. And if the cost savings were large enough, he might try to do it.

But there's an important argument against it that isn't readily apparent until you look — and think — more deeply. Hannaford Bros is based in Maine, where IT talent doesn't exactly grow on trees. So Homa views the help desk as an important training ground for his future stars. "My help desk is my farm team," he explains. "It is a great way to get into IT without having an IT background. Maybe a third of the people who came into IT came in through the help desk."

If Homa outsourced the help desk, he would be limiting his ability to grow the rest of his IT department. It's not an obvious reason, and it illustrates why deciding to outsource something requires more than just a cursory level of scrutiny.

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