News Feature

Outsourcing: No Longer a Yes-No Decision

By Gunjan Bagla

September 27, 2005 — CIO —

As outsourcing and offshoring continue to mature and to seep into the very DNA of Western corporations, we need more sophisticated management models to understand this phenomenon and take full advantage of it.

Until recently, the decision to use offshore IT resources was regarded as binary. Will you or won’t you? Red or Blue? This way of thinking is outmoded: Ash Rangan, former CIO of Conexant and a veteran of offshoring thinks that a “collaborative development” model is more appropriate. “It’s no longer simply about out-tasking,” he says. “Whether your offshore team is part of your company, or part of a vendor, it is much smarter to think of a blend. You are developing a project in partnership with the offshore group and a continuum model is much better than a binary one.”

According to Rangan, the decision to outsource is no longer a short-term tactical cost saving move. It’s far more strategic and going into 2006, it’s also based on the sheer availability of talent, particularly for many newer technologies.

What does that mean in real terms? Rangan, who was at AST Research prior to Conexant, says that it is vital for the CIO to have a personal perspective on the offshore location, whether it is India, Russia or elsewhere. Some CIOs may find it odd that employees in India expect corporate transportation, meals at work and other such benefits. If they are setting up their own India office, CIOs and CFOs might question these unusual benefits. “But they are simply table stakes for being considered as a credible employer in that ecosystem”, according to Rangan. Taking it one step further, Sun Microsystems recently decided to give raises to its offshore development staff even at a time when stateside wages were frozen; offshore workers deal with their local ecosystem on a daily basis and policies imposed from afar without that personal perspective can have unintended consequences.

According to Rajiv Jain, CTO of New Products for AmericanGreetings.com, “Managing global teams is like walking on water. It’s quite easy if the requirements (like the water) are frozen. But if specifications are fluid, you can end up getting drenched and messy.” Jain previously managed global software projects at ATT Wireless (now Cingular) and has also worked at IBM, Teligent and Charles Schwab.

To minimize the messiness, Rangan thinks it is very important to create a sympathetic bond between the offshore and stateside teams. “CIOs are generally eager to engage with the offshore team in early stages but it’s important to NOT let the interest taper off. I co-opt my offshore staff in annual planning and in the impact on our global human resource roadmap.” Rangan also found important nuances between offshore centers located in different regions of India. People originally from Hyderabad (where Oracle and Microsoft have significant operations), are often eager to return to their hometown and the staff turnover there is somewhat lower. On the other hand, in the areas around Delhi, the capital city, a large percentage of the employees did not grow up there; loyalty and retention are bigger challenges there.