CIOs Outsourcing More But Face New Management Paradigms

In recently conducted research by Vanson Bourne, an independent global market research firm, 48% of testing and development projects are outsourced by CIOs. Yet the study revealed that the change in dynamics involved when your IT becomes more of an outsourced management environment rather than a fixed internal team causes some projects to fail.

Many times these failures appear to be the fault of the outsourcing provider. Yet when more closely and objectively examined even the CIOs themselves soon learn that they need to change their management methodology not change their outsourcing partner.

For example the report found that 81% of those polled suggested that they were “not totally confident” in telling an outsourcing company exactly what they wanted, yet the biggest reason (55%) projects overran or failed to deliver was ‘too many changes occurring to the requirements during the project’.

Other key reasons for projects hitting the skids included a lack of skills to interpret requirements (47%) and insufficient testing (40%). 85% of organizations use a “variety of stakeholders” in sorting out requirements resulting in increased complexity, whilst only 37% said they could manage variability and change during these contracts.

In an unrelated survey of IT decision makers in the UK, France, Germany and South Africa 52% of the respondents indicated that their ability to innovate was being compromised by a lack of budget dollars. Similar U.S. statistics on budget constraints also indicate that budgets continue to be tight despite organizational needs for new and innovative uses of technology.

So what’s a CIO to do when they don’t have big budgets but they do have big challenges? The answer is still outsourcing.

It may not mean outsourcing everything but in companies that are fundamentally changing how they meet these challenges there is one model that is critical to consider so that your projects have a better chance at success.

Lois Coatney, in a comprehensive piece for CIO Insight, has some excellent suggestions for creating an “outsourced operations” environment for CIOs and their staffs. She points out that “The CIO’s team also changes dramatically after a transition to outsourcing. What had been a single staff now comprises a number of service providers within the supply chain. As a result, the manager’s responsibility shifts from assessing individual performance to assessing overall service compliance to agreed service levels in the contract. Similarly, incentives to change behavior must be focused on service-level improvements rather than individual staff improvements.”

It is also helpful to select outsourcing partners who have a well established and documented method for engaging and satisfying the requirements of client projects. There are a number of these outsourcing partners that have deep roots in both new technologies and legacy systems. Add in the fact that the best of them maintain both low cost offshore development assets, as well as, in country based personnel to build and maintain an effective outsourcing relationship, companies with tight budgets can still meet their organizational needs.

CIOs and other IT management will eventually need to provide innovation at a low cost. One way is to in-source the management of outsourced assets by utilizing your more specialized in-house staff to effectively to manage projects to success while keeping overall development costs down.

Many a CIO’s job is on the line now to move their organizations into a tech driven future. Doing a better job with outsourcing may well be the key to keeping those jobs.

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