The much-hypedcredit crunchand general economic
uncertainty of recent times has had an impact at every level of
every type of business, and IT is no exception. Even at the best of
times IT is cost sensitive, and when the bottom-line of the
business is under direct threat it is often to the IT department
that the board look for "quick hit" savings.
When margins are under pressure it is often the support services
in a business that suffer, and so the forward-looking IT
professional needs to be thinking now about their response before
the call comes.
The response to this call for efficiency is bound, in many
cases, to lead to a further push towards
offshoring. Long a popular option in industries such as
financial services, the current economic uncertainty is going to
mean that firms of all types will continue to develop
global IT service delivery models incorporating a significant
offshored component to drive down unit costs and maintain
competitiveness.
Improved offshore quality
Offshoring as a practice has been around for some time now, but
it is only in recent years that it has really reached a stage of
development where it has become relevant for the broader market.
Concerns in the early days of offshoring centred around quality.
Although offshoring should be about accessing low-cost,
high-quality resources overseas, in the past reducing costs was
frequently the primary or sole driver. These days, however, the
story has changed - established providers in locations such as
India and
Eastern Europe can increasingly match or even beat domestic
competition on quality and delivery. Indeed, a client of mine was
recently forced to quietly request that their offshore arm slow
things down a bit so as not to make the in-house team look bad.
Another brake on the take up of offshoring has been a general
unwillingness among IT decision-makers to take the leap. Whether
through fear for their own positions or through confusion about the
negative perception of offshore call centres, many firms have
tended to stay away from offshoring on principle. This, however, is
set to change. As well as the moves towards improved quality of
offshore service provision detailed above, the global spread of
offshoring increasingly means that any firm that is serious about
its competitiveness needs to at least consider the option.
Global IT delivery
At princeOMC, it is our belief that the current economic
situation is going to lead to a far greater openness in global IT
service delivery models than has been the case previously. This is
going to be particularly true in Europe, long an offshoring
laggard, where so-called "near-shore" locations in Eastern Europe
are offering a new and compelling offshoring argument for IT
decision-makers. In the US, where offshoring is already very much a
reality, multinational firms are going to be further leveraging
their existing offshore arrangements as a protection against dollar
depreciation.
Also, it is not just the geographical spread of offshoring that
is going to increase as a result of these turbulent financial
times. For firms with a toehold in the offshoring space, any margin
pressure is going to push towards a deeper offshoring engagement in
an effort to further optimise IT spend. Whereas in the past some
basic
helpdesk or maintenance tasks might have been passed to an
offshore provider, firms can now look offshore for full service
remote IT infrastructure management and other seemingly
mission-critical tasks. The capabilities of some of the more
advanced providers are hugely impressive and, given the right
agreement and relationship, there are few aspects of an IT
department that could not be considered for offshoring.
A positive future
So what does this mean for the UK-based IT worker? If offshore
providers can increasingly service what were once core IT tasks, is
there a role for a domestic IT industry? From our position as
dedicated sourcing consultants we can safely answer that question
with an emphatic yes.
Although offshoring does remove some of the day-to-day tasks
once dealt with by an IT director, it opens up a whole new array of
challenges and opportunities for the forward-looking technology
professional. As well as the strategic thinking required for the
establishment and building of an offshoring arrangement, there is
also an important role to be played in the day-to-day management of
any such relationship.
An offshoring engagement is not like a software purchase which
can be bought, installed, then forgotten about. It needs to be
actively managed as a partnership to ensure your business is
gaining full value. Indeed, many offshoring veterans now see the
removal of mundane, day-to-day IT tasks as a real benefit allowing
senior IT staff to focus on the higher level, more engaging aspects
of modern technology management.
The opening up of the world's economies, the ubiquity of
high-speed international data connectivity, and the increasing
spread of high-quality IT training in low-cost markets means that
offshoring can only become ever more prevalent. For the IT director
faced with a harsher than usual demand for cost cutting, offshoring
represents a unique opportunity to optimise their department while
maintaining or improving service levels - a promise that its hard
to ignore when the sound of crunching credit is nearing.
Prior to founding princeOMC, Ian Prince was IT director at
Deutsche Bank and JP Morgan.