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CIO Insights: IT offshoring/outsourcing — how much is too much?

Rebecca Merrett | Sept. 19, 2013
Three Australian IT leaders share their advice

Not all companies offshore or outsource purely to cut costs — freeing up staff, getting access to skills and getting a foot in a new markets are also important reasons. But cost is still a key factor, as business heads demand more bang for their buck while still wanting to be able to innovate. But is there even such a thing as getting the best while driving down costs?

In the second instalment of CIO Insights, we talk to three leading Australian technologists on how much is too much when it comes to IT offshoring and outsourcing, and when to put your foot down and keep the IT functions in-house that will allow you to do your job well.

Scenario: The CEO or another business head is looking to offshore/outsource some back-end IT functions that are costly and time consuming to run. The CIO likes the idea of having time freed up to focus on more strategic business-focused projects that could make the company more competitive.

However, it doesn't stop there — with a tight budget, the CEO also wants to offshore/outsource important roles in project management, software development and IT architecture. The CIO fears that this could lead to issues such as lack of agility and innovation, loss of control over quality and performance, difficulty to replace staff in future, vendor lock-in, etc.

What would you do in this situation?

Simarjit Chhabra, CIO at Xtralis
In any offshoring or outsourcing environment, what you have to do is make sure that everything is structured. Any deviation from the structure creates additional costs. That is one thing many people forget.

For example, a software developer could be working on things outside his or her usual work, or on broader business projects known to the CEO or the relevant stakeholders. So if you take that role away you are not only taking some projects out of the organisation, but it could also impact on other areas of the business. While these may seem like soft changes at first, you could run into issues down the line which may not be immediately reversible.

One issue is related to the flexibility and agility of an organisation. Today we are talking about agile project management and developing things on the fly. We no longer have five-year budget plans. Yes they may still exist, but they are guidelines. We are now budgeting quarter-to-quarter and we are meant to be flexible, to be able to do things on the fly in terms of decision making and reacting to the competition.

If you look at successful leaders in business, they always look at how they can grow innovatively — they don't always look at costs. We need to get value for our dollar, but not keep looking at the cost as a primary driver for being successful in a business.


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