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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

Consider this analogy: You can get a $5 or $6 Domino's pizza, for example, or you can get a $30 or $40 pizza in an Italian restaurant. The latter is more expensive, but you are going for a better experience and better service. If most restaurants delivered crappy service, customers would just end up going to the cheapest place they could find. You only get what you pay for.

The customer experience model developed by Steve Jobs has never failed its loyal fans. Apple devices are deemed to be more expensive than an average handset in the market, but the company's loyal customers still stand in queue for hours and hours. It is how one connects with the customers that's important. The customers don't mind waiting but as long as you give them that 'special' attention or experience they can't easily get elsewhere, they will pledge loyalty to you.

As long as the CIO can articulate these metrics in price versus value, he or she will be more successful in making others think. It's always easy to look at cost line on a budget sheet and say, 'IT is expensive because of all the infrastructure or whatever that's needed'. But you need to talk about the metrics that bring value to the business and its customers so they can understand.

It comes down to trust between executives, so that's important. The CEO or other business executive and the CIO need to realise they are both working for the same business. Their goals are common, so it's not that IT is a separate business from the rest of the organisation. IT is working with the business, but they just need to articulate that better and market themselves more.

David Hoysted, IT consultant and former IT director at Mars Information Services, Asia Pacific
When having this conversation with the CEO or other business head, remember not to come across like you are trying to resist offshoring or outsourcing completely, because there is value in it if handled properly. The internal IT team can't do everything and it's not possible to have all the expertise you would like to have. There's a reason why this consolidation of capability and virtualization of services happens and that's because it becomes too unaffordable for everybody to do everything inside their business.

I would try to highlight to the CEO or other business executive that there can be hidden costs and challenges in IT offshoring and even outsourcing to a third party. If the intention is purely to save money, then they should have at least created a very detailed business case, because there can be unexpected costs, particularly if establishing a new offshore capability.

 

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