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May 25, 2007

Save Your Failed Outsourcing Initiative (or make sure it’s not doomed from the start!)

Boris By Boris Pevzner

Over the last few years outsourcing has become a popular answer when the topic of IT cost cutting comes up (as it often does), but in my experience speaking with numerous CIOs in many of the world’s leading organizations, it is rarely ever as effective an answer as it may seem at first glance. In fact, according to a CIO magazine article, the failure rate is anywhere from 40%-70%.

Many outsourcing initiatives are destined to fail because the demand for IT services is not well controlled or accurately forecasted at the organizational level. Most outsourcing is structured so that all new (“out of scope”) services are charged on a “per drink” basis. This means that while the spend for “in scope” services may go down, the total IT costs go up over time because of the uncontrolled “out-of-scope” spend.

Knowing what we know now about why it fails, how do we then approach an outsourcing initiative without having to navigate all of the guesswork that comes along with it? And once an outsourcer is in place, how can you ensure seamless service delivery for your customers, and how do you make sure you’re getting what you paid for?

For many reasons, a comprehensive Service Portfolio, including integrated Financial Management and Demand Planning capabilities and a requestable, customer-facing Service Catalog, is the answer:

  • Financing Transparency and Benchmarking around Services: Makes it clear which service lines should be outsourced and which should be retained
  • Demand management: Publishing choices at different price points in your Service Catalog enables an organization to control business demand for IT services before it gets into the outsourcer’s work stream
  • Customer satisfaction: Provides a single place that communicates what services IT delivers to internal customers, regardless of which vendor is actually doing the work
  • Seamless Fulfillment: Allows coordination among multiple outsourcers participating in service fulfillment, which is particularly important in a multi-vendor outsourced environment
  • Vendor Management: Tracks SLAs associated with outsourcer contracts and reports back on when agreements weren’t met.

Simply put, before you approach any outsourcing initiative you should know what you need now, what you will need in the future, and how much it costs to deliver what you need internally. You are then empowered to either negotiate a contract with an outsourcer that will meet your needs (and make sure they deliver to it), or keep the service in house with the knowledge that you are able to provide the service better, faster, and cheaper.

So, if outsourcing is on the roadmap for your organization, take the guesswork out by getting help from industry experts like my team at Lontra in implementing a strategic Service Portfolio and be sure you’re not jumping in blind.

Posted on May 25, 2007 | Permalink | Comments (0) | TrackBack

May 1, 2007

ITFM’07 Conference Recap: Aligning IT and the Business… with Pixie Dust!

Boris By Boris Pevzner

Last week, I was in Orlando for the 5th Annual IT Financial Management Week 2007. I was the Chairperson for the event, so I got to meet a lot of the attendees and enjoyed many fascinating conversations.

The theme for this year’s event was aligning IT strategy with the demands of the business. This is a very broad topic, and it tops the priority list for many CIOs today. In my introduction, I compared it to that old EDS Superbowl commercial about building an airplane in the sky: we in IT are “servicing” our business customers, and helping them to achieve their business goals, even as the business is constantly changing, moving, and morphing. And that’s what the Business-IT alignment is all about.

One takeaway was that, while the speakers approached this topic from a variety of different angles, a consensus quickly emerged around one important thing: You cannot meaningfully talk about alignment without first having defined the IT Service Portfolio which is the common denominator between IT and its business customers – and thus the very thing in which the alignment is embodied.

Nowhere did this concept come through more clearly than in the CIO panel discussion, which I moderated.

  • Barry Carter, CIO of Alliance Data Systems, gave an insightful keynote on using demand management around a shared Service Catalog to achieve better communication between business and IT. Barry’s thesis was that, by defining service choices at different SLAs at different price points, IT can better communicate the value it is delivering to its business customers, drive them to service choices most appropriate for their business needs, and reduce IT costs in the balance.
  • Russ Finney, CIO of Tokyo Electron, linked the alignment theme to globalization. Over the last eight years, Tokyo Electron grew from a primarily Japanese company to a truly global one. Russ highlighted that this move from regional to global service provisioning would not have been possible without a great deal of service standardization and service-centric financial discipline.
  • Arvind Sabharwal, Technical Information Officer at GMAC Financial Services, focused on how defining IT infrastructure services was critical to the success of GMAC’s recent divestiture from General Motors. Pulling yourself away from one of the world’s largest companies is never an easy task (especially if the chunk being torn off is as massive as GMAC), but having well-defined IT services in the Service Portfolio helped Arvind immensely to achieve a relatively orderly and speedy separation.
  • Jeff Neville, CIO of Eastern Mountain Sports, had yet another kind of story to tell. His was a story of corporate turnaround, with IT-Business alignment being the cornerstone of success. It helps that Jeff’s job description includes not just the typical CIO responsibilities, but also the corporate strategy portfolio. What better way to achieve the alignment of IT strategy and business strategy than to give both jobs to the same guy… right?
  • Jeff Cooper, VP of Client Services & Technical Relationship Management at The Walt Disney Company focused his keynote on outlining how Disney manages service delivery in a multi-vendor outsourced environment. Given that different outsourcing vendors at Disney are responsible for different IT service lines, having a clear definition of IT services is paramount to success. Jeff also talked about the importance of establishing an internal IT brand, and of “marketing” IT services to internal customers through his Technical Relationship Management organization.

While each panelist approached the topic of IT-Business alignment from a different angle (globalization, demand management, outsourcing, corporate restructuring, M&A), they all agreed that a well-defined, actionable Service Portfolio is the cornerstone of any IT organizations that is striving to become aligned with the demands of the business. Service Portfolio is what all the critical interactions between IT and the business revolve around: IT financial management, demand management, service request management, and IT self-service.

Alignment_2

From the audience’s questions I know that they enjoyed interacting with the CIO panel as much as I enjoyed moderating it. The last question really captured the spirit of the conference (especially given that we had a Disney executive on the panel!) – “If you could spray pixie dust and make your business-IT alignment challenges go away, would you do it?” While having business and IT magically and instantaneously aligned seems hard to resist at first blush, the panel CIOs were unanimous that they wouldn’t want to rob their teams of the experience of this journey, with all the learning and professional growth that it brings. Besides, who needs pixie dust when there are experts who can guide you on this journey and make it that much more fulfilling!

Posted on May 1, 2007 | Permalink | Comments (0) | TrackBack