CIO — Shortly after Dick LeFave arrived at Nextel Communications in February 1999 as the company’s new senior vice president and CIO, he concluded that Nextel could vastly improve its IT operations and its sagging bottom line (it had posted a $1.8 billion loss in 1998) if it outsourced a good portion of its IT. "The need here was to build a company that if [Nextel CEO] Tom Donohue wanted to press a button tomorrow and say, ’Hey, LeFave, we’re going to grow this thing two or three times,’ I didn’t want to be standing in front of him saying, ’We can’t scale.’"
LeFave had negotiated and led outsourcing arrangements for two of his previous employers, Southern New England Telephone and The Boston Co., a subsidiary of American Express. So he knew what he was getting into when, between 2000 and 2002, he signed long-term, big-money contracts with Amdocs to run Nextel’s billing system (nine years, approximately $1 billion), with EDS to take over desktop and help desk support, network management and data center operations (five years, $234 million) and with IBM to manage Nextel’s call center (eight years, $1 billion). He kept project management, application development and testing in-house.
What LeFave knew was that once he signed those contracts, his role would change, his department would change, and the lives of the 700 people working under him would change.
LeFave had no illusions. He knew shrinking the 285 Nextel workers in the IT operations department down to 20 wouldn’t be pleasant. And he knew that he wasn’t suddenly going to be free to spend more time fishing for flounder off the coast of Connecticut where his family vacationed. He knew his beeper would still go off every time a server went down, although it would no longer be his job to bring it back up again.
LeFave knew all this because he’d been through it before.
But maybe you haven’t.
Right now, many CIOs are considering outsourcing significant chunks of their IT to cut costs, improve performance or obtain the scale their companies need to grow. Indeed, organizations around the world spent $180 billion on IT outsourcing in 2003, according to Meta Group, which predicts that this market will grow 10 percent within the next two years.
But despite the accrual of experience these numbers would suggest, the decision to outsource remains a difficult one. It has become a political issue, particularly when American jobs are sent overseas. (For more on the politics of outsourcing, see "Backlash" at www.cio.com/printlinks.) It alters the relationships between managers and employees, and between business and technology executives.
