Low-level to moderate competency plagues offshore initiatives and strategies
By Staff -- Manufacturing Business Technology, 7/1/2006 6:00:00 AM
Your IT department may again find itself at a critical crossroads.
A new survey of 945 IT professionals—conducted by Stamford, Conn.-based Gartner Group—says that while a majority of companies negotiate IT outsourcing contracts primarily to exploit cost savings, they remain dissatisfied with low-cost providers that "don't deliver greater business value."
What's more, the decision to outsource is no longer strictly the provenance of IT.
"For the first time ever, executive officers are at the top of the list as the most influential in outsourcing decisions," says Allie Young, a Gartner VP and author of the report. "But companies assess themselves as having only moderate competency in managing life-cycle sourcing. This creates a situation that will either promote greater discipline of sourcing as a strategic core competency, or—if it remains a tactical issue conducted on a case-by-case basis—be a recipe for disaster."
Survey data indicates 73 percent of organizations make outsourcing decisions on a case-by-case basis, rather than as a matter of enterprise strategy.
"They do this rather than following the discipline of multiple sourcing, whereby the organization has a more holistic and integrated view of its sourcing competitiveness," says Young. "It takes a lot of effort to develop a competency and make the business case that aligns it with enterprise objectives. But companies that don't do this put their enterprises at risk."
Tony Viola of Patni Computer Systems, an IT services company based in India, agrees.
"For the last two or three years, most companies have been doing it to shave dollars from the bottom line," says Viola, "but the real opportunity is to engage outsourcing as a strategic initiative. Generally, companies that view it strategically take a longer view of the partners they choose. This allows driving substantial costs from the bottom line over a period of time by using the outsource vendor as a competitive weapon to affect delivery of products and services."
Taking the long view makes sense, Viola adds, as it typically takes between 90 to 120 days for an outsourced partner to learn the client's business environment and master the necessary knowledge transfer to be of real value.
Knowing what to outsource also is key.
"Companies are [tapping into] different sources in what we term blended sourcing, which involves using both domestic and offshore contract workers," says Kate Kaiser of Milwaukee-based Marquette University. "With internal, entry-level new hires, she adds, "there is a greater need for IT workers to have business domain and project management skills.
"You want to keep project management, risk management, systems analysis, and design skills in-house," Kaiser continues. "Though companies are, in fact, hiring third-party providers to deliver this expertise, it is an indication of how difficult it can be to find such talent as an in-house resource in today's market."
