A world of outsourcing possibilities

With the economic downturn increasing pressure on firms to make the most of global opportunities, Mark Samuels explains how IT leaders can best support overseas expansion

Tough times call for tough measures. New economic realities ushered in by the recession mean the board is putting more pressure on chief information officers (CIOs) to ensure IT projects deliver value.

One area of spending that continues to receive increased attention is outsourcing. But such attention is not leading to a re-evaluation of global sourcing initiatives – rather the opposite is true.

For the majority of CIOs (62 per cent), the economic conditions are having little or no impact on their organisation’s use of outsourcing, according to research from IT leadership network CIO Connect. In fact, a third of technology leaders actually believe the economic conditions are causing an increase in outsourcing.

One crucial factor that helps to explain the continued demand for outsourcing is cash. Leading factors driving globalisation efforts, particularly in the case of outsourcing, are to reduce costs and cut spending levels, both of which are clearly more important than ever in today’s stringent economic environment.

The downturn has focused executives’ minds on the potential for fast growth in previously untapped locations. A global strategy requires IT organisations to develop more worldwide service chains, both to remain competitive and to tap into skilled, local talent.

Globalisation and the move into new territories creates a range of business opportunities and challenges that western organisations must address or risk losing competitiveness. For CIOs, quickly grabbing opportunities created by globalisation is the best way to avoid being overwhelmed by an associated range of challenges.

While the increased use of alternative IT service delivery models, such as offshoring and outsourcing, is typically viewed as a manifestation of globalisation, such models are also business tools that organisations can use to exploit opportunities for overseas expansion.

Globalisation is much more complex than most of its proponents or opponents articulate. While there are winners and losers at the macro level, virtually every constituency – at home and abroad – will feel both positive and negative impacts from globalisation.

The CIO Connect study shows that IT leaders must develop a strong strategy to define the optimum but ever-changing mix of service delivery options. Such options can include internal distributed resources, shared services, outsourced operations, and the deployment of the processes, policies and procedures required to manage mutli-sourced approaches.

The good news is that most technology executives already view business process and IT service delivery as critical to the success of globalisation efforts. On a scale from one to five, where one is very unimportant and five is very important, the vast majority of CIOs (81 per cent) consider service delivery to be very important or important to the firms’ overall globalisation strategy.

IT leaders recognise the importance of solid governance, and supply and demand management, in supporting service delivery efforts. Most CIOs are also satisfied with the quality of their organisation’s service delivery efforts across business and IT functions.

But the global game is not yet won. Most IT leaders are still more satisfied with services delivered through internal resources, compared to outsourced services.

To improve the quality of third-party services, executives must concentrate on effective outsourcing management and governance capabilities. And it is important to keep in mind that outsourcing’s real or perceived service quality can erode if lowering costs is the primary goal behind globalisation.

Finding the right strategy for your business is a priority. IT leaders must work to strike a balance between different management models, recognising specific approaches work best for particular situations and circumstances.

The recession might have worked to slow the advance of globalisation but the lull is temporary. CIO Connect’s research shows globalisation continues to receive strong support from leading businesses and IT leaders are keen to shape their operational priorities (see below).

Times might be tough but the challenges will become more significant if your business fails to prepare now for new global opportunities.

What are CIOs’ main global IT leadership priorities?
IT leaders believe that managing service delivery – both internally (62 per cent), as well as from external service providers (65 per cent) – is key.

The main challenge in relation to global operational IT leadership is not only doing “more for less”, but to be agile and innovative, and to be sure that the organisation is able to compete in a cost-efficient manner.

Managing complex service chains, and having an integrated supplier model, is also considered one of the main operational challenges.

Several CIOs suggest the pressure to deliver cost-efficient business initiatives often squeezes out more internally-focused activities.
Mark Samuels is editor at IT leadership network CIO Connect. The survey of CIO Connect members was conducted with advisory service EquaTerra.

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