Outsourcing IT, without losing your job

In an ongoing drive to reduce capital expenditures, corporate executives continue to consider outsourcing as a way to pare IT costs and focus on projects that are most directly linked to business goals.

Experienced executives agree that outsourcing almost always sows uncertainty in internal personnel. It can result in layoffs and budget reductions among IT middle managers. The silver lining for IT managers is that there are opportunities for those who are prepared to embrace change and help their companies face the challenges of dealing with outsourcers - whether those external providers are in Bangalore or Boston.

"Take charge of decision making, and take the fear out of the process of using external service providers," says Reynaldo Gil, CEO and founder of Commendo Software Inc. in Fremont, Calif.

Capitalize on the fact that outsourcing is notoriously hard to do, Gil says. In a career that includes stints at Bank of America Corp., The Charles Schwab Corp. and IBM Corp., Gil has pulled the plug on what he calls "nightmare scenarios." He once advised a CEO to walk away from an intellectual property dispute with an external provider, at a loss of close to US$1 million dollars.

Other technology and business leaders agree that when it comes to outsourcing, companies need all the talent they can muster to do it right.

"The management of outsourcing partners does create certain positions to ensure that the deliverables expected from your partners are actually done," says Cecilia Claudio, CIO and vice president of engineering for Align Technology Inc., a Santa Clara maker of orthodontic products, and a board member of RampRate LLC, an IT outsourcing advisor in Santa Monica, Calif.

"You need a team to manage the outsourcers, a program management office or an offshore development management center," says Claudio, who has worked at Zurich Financial Services, Farmers Insurance Group and Xerox Corp. over her 30-year career. In the 1990s, Claudio helped engineer Xerox's bellwether $3.2 billion outsourcing deal with Electronic Data Systems Corp.

Claudio says outsourcing program management involves a variety of tasks and skills, which include the writing of service-level agreements; analysis of contracts; documentation for how processes should be managed; and creation of liaison roles to ensure effective communication among IT, the business side of the company and outsourcers.

At Align, Claudio started to bring in program managers from offshore providers skilled in these areas. She assigned some of her IT staff to work with the managers on different cross-functional projects."People willing to move out of a fire-fighting role can work at a higher level, on projects that can transform the way a company does business," Claudio says.

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