June 2008 Quick Hits – News, Trends & Analysis

Finding the Right Skill-Sets for Outsourcing
In 2008 more outsourcing agreements are structured around managed services and complicated business processes, rather than simple per-hour labour rates. CIOs need to ensure that their staff have the right project management skills to be able to build a strong culture with the new 3rd party team. This includes having solid project management skills in addition to having the leadership capability to retain talent and reduce churn. Furthermore, the business must have well established governance processes in place to deal with frequent changes, and IT must be able to manage expectations of the business community. It’s a partnership between the business and the outsourcer, often clients think they can just throw the ball over the fence and due to miracles the business processes will be improved. It is recommended that a company looking to outsource must first fix their process (which can often be a painful 12 month journey), build a business case, ensure the retained teams have the correct tools and training to work effectively with new supplier. These are some of the pre-requisites for a successful engagement. Everyone knows it takes two to tango, and in some cases it’s a sweaty dance before it looks well rehearsed and smooth.

Strong Supplier Management Skills a “Must” for Today’s IT Project Manager
At Outsourceworld in London, Lloyds Register IT director Stephen Hand spoke about the need for strong supplier management skills to make multi-sourcing work. Lloyds Register has moved away from a large single contract with 1 provider to using multiple suppliers and driving efficiencies through competition & collaboration. GOX also firmly supports this idea that if you truly want better performance from your suppliers make them feel the competition for any work assignment. The GOX team spent much of 2007 implementing an online governance framework for multi-sourcing. As a result, we can offer companies access to a proven network of suppliers with an audit trail for documentation and communication.

Green IT – Is it a differentiator Among Suppliers?
You can’t turn on the radio, watch television, open a trade journal, listen to a politician, or speak to someone you love without some reference to “going green.” Thanks to oil prices, congestion charges and ever increasing environmental taxes, our cars and food bills are now heavily involved in the debate – ultimately leaving our wallets to pay the price. So how can this green movement become a real opportunity for outsourcing?
Datacenters have spread like wild locusts as part of the IT revolution in the early 1990’s, and they now account for 4-12% of all carbon emissions for corporations. At a recent BLP Outsourcing Breakfast, Robert Morgan mentioned that by 2010, IT will contribute 4% of global CO2 emissions – which is twice that of the global aviation industry. So with that in mind, outsourcers managing large datacenters will become targets for higher taxation and activists. As a client, if you had a choice between a supplier with a datacentre powered by wind in Germany and having a center deriving its energy from a large coal burning plant near a primary school, the choice is obvious. Outsourcers that adopt green policies early on to help reduce CO2 emissions will be better positioned to deal with EU legislation. Furthermore, don’t be surprised if vendors who take the lead in “going green” start winning more business in the coming 5 years.

The FSA Sharpens its Knives and Slices an Outsourcer
An outsourcer was fined nearly a million GBP for failures in its systems and controls for producing/issuing documents to life and pension policy holders (quoted in the FT in April). As mentioned by the BBC News, on multiple occasions between Jan 2005 & Jan 2007 their systems flagged issues that documents had not been produced but the company decided to act “reckless” and didn’t resolve the errors in its document management system. This put customers at risk because they did not receive statements and were therefore treated “unfairly”.
I think this is just the beginning of a series of fines being handed out to outsourcers with broken business processes. Outsourcers must ensure that their quality methodologies and processes have been thoroughly reviewed & checked. There are many quality initiatives an outsourcer can adopt to help improve their processes with CMMI, ITIL, & Six Sigma available, so it is unacceptable for an organisation to let a broken process persist for 2 years. These metrics should be picked up on a dashboard, and issues should be rectified immediately.