ChannelWorld

Business Needs Drive Outsourcing

By Alaganandan Balaraman Thu, Jan 01, 2009

Alaganandan Balaraman is Vice President- HR & Process Architect at Britannia Industries Limited.

Outsourcing can offer CIOs and their enterprises immunity from the challenges of increasing complexity and the speed with which the environment is changing. I believe that IT departments must and will increasingly outsource the work they do. I would go so far as to say that 90 percent of IT work should be outsourced and as completely unscientific as that number is, it demonstrates the extent I believe in outsourcing.

That said, it’s the 10 percent that CIOs retain in-house that is critical. Why is this scale of outsourcing important? And why is it urgent?

Those who have been in IT for more than 15 years will agree that the world has changed dramatically. The relative simplicity of user expectations and technology platforms are things of the past. Today, enterprises want IT to be accessible over the Internet or mobile phones; we want alerts wired in; we want applications and data to be secure and auditable, we want data to be served from across applications that were never designed with each other in mind and we want everything to be available at a month’s notice. To address the needs of the enterprise, our vendors have thrown up increasingly complex technologies that make even storage an arcane subject and makes you long for the simplicity of DAS.

If we accept that this is the world IT works in, then we must accept that the simplicity of delivering solutions is a thing of the past. There are teams needed to handle aspects of hardware technology — though nothing is pure ‘hardware’ anymore. We need teams to ensure data integrity, teams who can work with more agility, who can deploy across multiple locations and ensure good administration well. And, if we accept that we should be doing all of this, we must know that it is simply not possible to do everything in-house. The demand for skills and the subsequent low levels of manpower utilization make the concept unfeasible.

The problem of complexity is compounded by the speed of change in our technology environment. The principles of faster, better, and cheaper that have been the bedrock of the IT industry have ensured this. While these principles have served customers well, today, that speed worsens complexity. We’ve tried to tame it with interoperability standards and layering our technologies, but competitive pressures force vendors to create unique, ‘margin-building’ solutions that are very seductive. This forces IT organizations to retrain people in new areas that have half-lives, an investment that is hard to justify.

Complexity and speed exacerbate each other. As an example from the consumer goods industry, we worked on an application to track the retail placement and sale of a new product on a daily basis. The need was for a simple system that the field force could use when not connected to the Internet, but could upload and integrate with a central database for analysis and graphing. We were given three weeks of lead time. Security, data consistency, and ease of use were assumed. When users did upload, it had to be done on simple dial-up speeds.

The solution required a surge of skills to access central databases, to create pre-formatted spreadsheets for download, to put in place logic that prevents data duplication and trap errors, that could provide access over a secure portal — and yet be easy enough to use so that training would not be needed. The skills needed for this (database technology, usability, web service calls, spreadsheet integration) were completely different from another project we were running in parallel, which required an ESB connection from a central application to remote applications on a real-time basis. And, these were but two of about twenty different projects, large and small, that were going on simultaneously. Most medium-to-large companies won’t find this figure surprising.

In-house staffing to meet demand across all these projects would have meant excessive cost and a risk of benching people later. Staffing more conservatively would have delayed projects. The obvious answer was aggressive outsourcing. Like any other piece of management, outsourcing needs to be designed well. It helps to avoid buzzwords like ‘strategic outsourcing’, which tend to confuse more than clarify. What is needed is a sourcing plan that looks at various required capabilities and the capacity needed to be built in each. Make-buy decisions need to be based on that profile and the length for which it will be needed.