Outsourcing and the Strong CIO

pril 30, 2007 (Computerworld) -- To all those who think outsourcing will lead to the marginalization or elimination of CIOs, I have two words: You’re wrong.

The truth is that outsourcing makes strong IT leadership even more critical. Outsourcing success can be elusive. Studies have shown that a low percentage of outsourcing relationships are considered successes, and at least 50% of outsourcing relationships are terminated early.

Here are five ways strong leadership can make a difference:

Blending resources. In an IT organization that consists of both in-house and outsourced personnel, everyone has to look as if they are on the same team. No one outside of IT should know or care which IT team members are in-house employees and which are outsourced. Creating this seamless blend is not easy, but it can be done with strong leadership.

Optimizing performance and customer service. Most outsourcers try to live up to the terms of their agreements, but they do that a lot better when they are held accountable by strong IT leaders. Conversely, some outsourcers will take advantage when strong IT leadership is lacking.

Making IT more agile. By its nature, enterprise IT is not very agile — and outsourcing can make it even less so. It takes strong IT leadership to overcome barriers like cumbersome outsourcing agreements and time-consuming processes.

Quickly addressing and resolving problems. In outsourcing, small problems can quickly grow into big ones. IT leaders always need to act decisively to solve problems, but that’s much tougher with outsourcers than it is with the leader’s own employees. IT leaders have to tap into a broad range of skills — communication, diplomacy and negotiation, for example — to effectively address and resolve problems that cross organizational barriers.

Preparing for insourcing. Isaac Newton observed that what goes up must come down. Having fought the enterprise IT management wars for more than 30 years, I have observed that what gets outsourced usually gets insourced again — about five years later. While outsourcers are doing a better job than they did in the past, I still think we will see a new wave of insourcing in the not-too-distant future.

But, more important, even if an organization never insources any of its outsourced functions, it will benefit by being prepared to insource. Outsourcers know that insourcing is not a realistic option for an organization that lacks IT leadership that’s strong enough to drive an insourcing effort. If you maintain at least the perception that insourcing is an option, you will have extra leverage.

The truth is that any company that thinks the outsourcing of IT is an excuse to marginalize or eliminate the CIO is doomed to an outsourcing failure.

Bruce Skaistis is the founder of eGlobal CIO Advisors, which focuses on helping organizations maximize enterprise IT value, optimize enterprise IT agility and performance, and minimize enterprise IT expenses.