Live within your means
- 20 January, 2010 07:26
At the 2009 CIO Summit I was asked the question, "what strategies did you employ to manage the recession"? I candidly replied: "outsourcing'.Just as quickly I was asked what strategies I would employ post-recession. Again, I responded rather blank faced: "outsourcing".While all the economic indicators point to a steady improvement in economic conditions, it's worthwhile for IT teams to reflect on the lessons learned and keep applying them as we look ahead to the new paradigm we are left to operate in after the economic recession.It reminds me of one of my first trips to America. I arrived in the country with about US$250 to my name and the promise of big things to come in my new found employment.While I knew my new job would soon lend itself to financial prosperity of sorts, in the meantime I had very little to survive on and had to learn to live within my means. That meant having to budget very tightly -- eat and live in a measured way - until I was in a better position.That life lesson has stayed with me throughout my professional career, and it's a philosophy I've carried into my working life as well, and it became pertinent during this current economic recession.Without the experience of that life lesson at an early age, it might not have been as easy to navigate the recession. Because it taught me that if you manage what you have during the hard times, you can be successful when the good times arrive. But most importantly: whatever the economic conditions, live within your means.This brings me back to outsourcing. The research firm Forrester estimates worldwide IT-related outsourcing is now about a $120 billion per year business and that it will continue to grow. Domestically, IDC research says the outsourcing sector increased by nearly 7 percent year-on-year in 2008 and was higher than overall growth with IT services. Furthermore, it predicts outsourcing to grow by a compound rate of 4.5 percent over the next five years, as an industry will be worth NZ $1.5 billion by 2013, and comprise more than 47 percent of the entire tech services market at the same time.While I suspect the growth in outsourcing is not strictly IT-related; in other words services such as contact centres and mechanical maintenance and engineering have also been thrown into the outsourcing mix, what we can see is that outsourcing offers opportunities for businesses to explore cost savings.As IT managers, as well as with the IT strategists, we need to come to terms with the advantages outsourcing offers, rather than frown upon it as some kind of a scourge.Here at the Employers and Manufacturers Association (Northern), we have successfully managed to integrate aspects of outsourcing by moving all our main infrastructure hardware along with critical application systems to virtualised data centres. The benefits are operational cost savings in terms of connectivity costs, greater redundancy, stability and reduced downtime.Outsourcing gives me a number of options on how best to run my department. I retain a core staff with the skill set to manage the day-to-day operation, along with the flexibility to engage further assistance either on a contracted or casual basis.I liken it to a pendulum that swings high during the life of a major project and swings back once the project is over. The benefits being the business is not left trying to find work or make up work for employees to do at the conclusion of a project. On the other hand, the contracted help can plan their next move in advance.Outsourcing is a cautious move tinged with excitement, as we strive not only to make the advantage line, but also to come to terms with what it means to live within our means.According to outsourcing advisory firm TPI, information technology and business services save on average 15 percent a year, substantially lower than over inflated estimates as high as 60 percent.However, TPI also suggests outsourcing will continue to grow as corporate takes an axe to operational costs. In its "Outlook for the Global Outsourcing Industry for 2009" report TPI stated: "Coming out of the recessionary markets in late 2009, we will find a strong global outsourcing industry with four to six large, dominant providers that will provide resiliency to the ecosystem that services the needs of major corporations. Ultimately, that ecosystem will service the needs of middle-market buyers as well." So what the figures are saying is like it or not, outsourcing has staked out some legitimacy in the local marketplace and has produced quantifiable bottom line results that have gained resonance within our industry.That brings me back to my original point about why I have adopted outsourcing in my IT strategy: it's about living within our means and outsourcing offers the opportunity to do that.We haven't signed a blank cheque and handed over all the organisation's key functions, but we've selectively sourced the expertise we require to operate an efficient service to our business; while at the same time providing comfort to our key stakeholder -- our colleagues -- that we have the capability onsite to manage the core functions of the business.The spectacular failure of outsourcing arrangements was highlighted in October this year when an IT outage crashed Air New Zealand airport check-in systems, as well as online bookings and call centre systems, affecting more than 10,000 passengers and throwing airports into chaos.The airline was quick to turn its guns on supplier IBM saying it had fallen "well short of expectations" in this instance.While the Air New Zealand incident should sound warning bells to those who have invested significantly in outsourcing arrangements -- and there is an endless web of literature that forewarns about cosying up to outsourcing as a panacea -- outsourcing certainly provides some alternatives and solutions.While my organisation has adopted outsourcing options, first of all we ensured the areas we needed help with were properly functional before handing it over to a third party. It seemed more prudent, than handing over something that was broken.As IT leaders we must continue to lead. We've endured the hard times, matured significantly as a result and, in some cases, shown restraint.We've continued to demonstrate efficiency and now we must cast off the temptation to splash out as the economy picks up, but instead live within our means.The author is the chief information officer of Employers' and Manufacturers' Association (Northern). He spoke at the panel discussion on the impact of the recession on ICT at last year's CIO Summit in Auckland. He can be reached at Aubrey.Christmas@EMA.CO.NZ.