Captives : The Middle Path

The value proposition of an offshore based captive is very compelling for large global corporations. Those that have gone through few cycles of offshore services contract, smelt the value in streaks in their experience but also most often faced the business disconnect as IT moved away from an inhouse function to a service provider. While there are cost efficiences to leverage, most enterprises do not expect and are not prepared for the commoditized service model that service providers unleash. Fact is that part of the cost efficiency and its related lower management overhead is derived from these models but IT teams and business often find this to be the most understated situation in the before and after discussions they had during the sales cycle.

It is like moving from a gourmet (and in-house at that) restaurant with all the bells and whistles of a fine dining  place to a fast moving pizza delivery location which at best may have few chairs thrown in just in case patrons are too hungry to take the pizza home. The delivery model for the pizza place which is running a large scale operations at a competitive price with low real-estate footprint and staff does not have the well dressed manager who greets you at the door of a fine dining place. From there, you see that most stuff in the pizza place is standardized and fixed. They may be able to help you with some of your special request but cannot do a made-to-order dish that you can relish at the gourmet place. You often leave the pizza place unsatisfied on these counts if you are not prepared for this change from your gourmet habits. So, that's coarsely what is at play.

Now, the captives step in like couple of those pizza joints which also have a manager who greets you at the door and while they use the same kitchen and staff, the relationship with the client is more refined and customized and factors in your special request (to the extent the kitchen can accommodate). There would silverware for those who look for it and he could take time to explain how the cheese is made and stuff. 

So, in summary, the captives on paper do have a compelling proposition. The devil lies in the detail of execution. Running an offshore set-up requires more than just running an internal IT department. And if the set-up is in the neighborhood of service providers, resource management and retention is just one of the key challenges. Some companies have found the secret (pizza) sauce and are doing well while others are trying to refine the model and few others have already exited selling their set up to IT service providers ( who else?!) as part of a lock, stock barrel deal.

Cultural Sensitization

Anyone who has been involved in offshore based outsourcing for some time, in any way, will surely have interesting stories of how lack of cultural awareness led to serious and some times just hilarious incidents. Fact of the matter is that while the common denominator that drives work to remote locations is the fact that at least in technology services, these are finally technical stuff which can be delivered by anyone technical, these closely linked to cultural aspects too.

What is not often factored in, is that these technical services are needed and provided through human interface and these provide the cultural tone to services, through the consumer or provider of these services. If there is no adequate sensitization on both or at least one side of the equation, it can often lead to misinterpretation, service deficiency or frustration. Most companies which provide offshore based services have understood this now, many the hard way, but there is still a big gap to cover and most measures are not comprehensive and do not tend to address the root cause.

Now, it is also true that it is not easy to change the cultural affiliations of people so easily and so, ultimately it comes to making people appreciate the cultural gap and having them be aware of the major socio-cultural aspects through learned behavior in an effort to match what comes naturally and effortlessly to the other party as it is part of human social and behavioral manifestation.

Bottom-line : it is very important to ensure that both enterprises and service providers appreciate this aspect and jointly work to address this in a way so that it at least neutralizes the obvious rough edges fairly consistently and is baked into the fabric of service delivery enablement. 

Making IT Work With Offshored Services

Came across this article IT Offshoring Still Works, If You're Careful which talks about what some of the companies have matured to do, in handling the offshored IT services through various service providers. 

While there is no magic potion (!), fact is that enterprises need to be cognizant of the fact that this is different from the way outsourcing worked earlier and need to make some changes in the way they structure the contract and engage with the service providers's teams. There is surely tremendous value still, provided a proactive approach is jointly taken by both sides. 

Quality Concerns with Offshore Outsourcing

Came across this article in CIO.com on the drivers of offshore based outsourcing and also what some of the respondents had to say after their experience. Clearly, service quality is an area which stands out across application services offshoring  (24%) and IT infrastructure offshoring (29%).

What this also means is that aside of the fact that a quarter to a third of the customers not satisfied with the quality of services, they probably did not put in enough measures, governance and enablers to bring this as a area for continuous performance measurement with their service providers. Clearly the service provider would be motivated to address areas that are part of their performance and since this is not being done largely, the gaps in performance are reported by so many.

Now, I am not suggesting that this is easy or that there would not have been issues, but that both sides (customer and service provider) need to acknowledge and accept this as an area of client value and put measures to track, report and action on.

This is also one of the key areas which industry needs to get into as more and more work moves outside the country from where work is being outsourced. What worked (in terms of governance and measurement) with in-shore outsourcing couple of decades back will not necessarily work with offshored outsourcing. A strong understanding of these would help enterprises engage with their service providers to ensure that the latter are driven on these areas of concerns that many have.

Trends : Hands-off Outsourcing to Hands-on Outsourcing

Few years back companies in their earlier efforts to outsource with all its benefits of being able to focus on their core business most often outsourced services (IT services in general and specifically IT infrastructure services too) to a single vendor so that there was almost no IT staff required in their enterprise. The service providers brought in expertise --- operational and otherwise to work with business.

Over time several enterprises have evolved to realize that it may not just be a great idea to leave everything to a service provider (or even couple of them) and not gett their hands dirty. There are several challenges, many which come to fore over time due to need for continuity or improvements over a period which can best be championed and driven from within the enterprise to provide the best and most relevant content.

Many mid to large enterprises are now kind of going back to having IT staff, much leaner and with core responsibilities of making things happen working with service provider(s). This is bringing in a fresh change to business where IT department is able to step up and have more skin in the game and take responsibility not just for getting things done but also for doing the things that need to be get done.

This is possibly a natural evolution and comes as the proverbial middle path which offers best of both worlds --- there would increased IT staff wage bills but it comes with greater benefits of an improved business aligned IT services plan. Of course the thing many are struggling with is to get businesses to accept the improvement and provide inputs to put a tangible $$ value which can be used to further justify the change in approach by the CIO.

Knowing The Business Technology Services Supports

One of the common themes that most managers leading IT service teams struggle with (once they figure out that it is important) is the best way to get the technical teams to understand the business that is supported by the technology that they support.

In the depths of technical operations the technical folks get too technical to be the better and best. They are into commands and scripts and cross technology domain, but what takes a toll is the understanding of the business that they support. In several situations, this appreciation will add tremendous relevance to their actions or even create new ones if they can understand the business they support.

One of the  basic ways is to take them through the business environment -- like taking them to a retail store or a bank branch so that they can see the customers of that business enterprise, and how technology helps (and can struggle) when business faces it's customers. There are several other ways too but whichever way one chooses, there is no denying that this has tremendous impact on the way the teams then see their work.

The other struggle is to keep such awareness current and not to have it take a back seat in the technical and operational trenches. Successful managers have been able to do this through various means successfully (else, guess what, they would probably not be successful managers!).

The IT Services Cloud : Emerging Trends

NetworkWorld recently carried Gartner's Prediction for 2012. The summary has predictions, many of which revolve around the buzz that we have been hearing around cloud services, social networking (here in the enterprise context), IT security, smart devices, energy crisis etc. 

One that caught my eye, and is against the current known trend at large, is around movement of Asia produced finished goods and assemblies (consumed in US) to Americas (not US per this prediction). While this is not widely discussed, movement of manufacturing and even services bases around the world is not unknown. What has worked well is not necessarily set to work well in future too. In fact if we extend this to IT services : it is not very unlikely that center of gravity of where these services will be delivered, will also move in the coming years. In fact it may move to not have a center of gravity at all and be more diffused than previously known. Several new contenders from Europe (more of East Europe) and those from Far East are already creating shifts in the currently emerged models which moved out of US in the previous decade. These are challenging the current sweet spots in India and other regions for IT services.

What will countries, currently making hay while the Sun shines, do in that scenario? There are naysayers galore which is evident with continued investment in building greater and bigger delivery infrastructure. Like any bubble, these will continue till the trend reversal seems imminent. That will unleash (if this theory which I personally feel is not too far fetched) a string of manifestations which would not be new. Looking at what happened when a disruptive model moved many of these outside US will provide some insights on those impacts.

For now, the view from the trenches does not show this trend at all, probably because the view from trenches is never good to know where things are heading overall. In India, companies continue to grow and many are rightly in a constant effort to find those differentiators and build exit barriers. 

In the longer run, companies should focus on building capabilities and resource models which are not geo-specific and should be easily adaptable across cultures and geographies. What then  will emerge are leaders in IT services who can front-end with enterprises and get the work done. Where the work happens may not be really relevant. It would then commoditize the services model and turn it into a "IT services cloud", invisible and transparent to the enterprise. The core focus would then be around understanding business imperatives, domain focus and orchestration of service delivery which the clients would value. Where work gets done would then be irrelevant, who gets it done and the process maturity would be key then.