More Cost Cutting for Tech Managers
Offshoring and outsourcing have risks, but CIOs and other tech managers should consider them as ways to cut costs.
Thu, November 20, 2008
CIO UK — I'm still reeling from the meltdown in the banking sector, and there are certain to be implications for other sectors although the full effect has yet to be determined. One thing is for sure: the CIO will be told by the CFO – or perhaps the COO, who most CIOs report to – to reduce costs wherever possible.
That mandate will certainly mean that CIOs will take a careful look at outsourcing and offshoring – and they will have to be very careful about what they outsource and offshore. Outsourcing does not make problems go away and a creaking infrastructure will not be helped by outsourcing it. With offshoring you have to be careful about key applications and certainly web applications. If you’re looking at a £20m-£50m revenue stream from a website it’s OK to outsource, but if it’s £200m-£300m you need to build your own team and keep your intellectual property close to your chest.
Offshoring only works if you put in the controls and the structures to make it work. India is fantastic and my company has staff there as well as in eastern Europe, but if you ask the programmers there to build something and your plan is wrong then they will do a brilliant job of fulfilling your plans but it will still be wrong. People say ‘Hey, I can get developers in India for £100 a day’ but if you save 30 to 40 per cent net you will have done a very good job. If it’s a complex application and you don’t take all the steps necessary to manage the project and mitigate risk, you can very easily end up with egg on your face.
The problems caused by the state of the economy will be exacerbated by the fact that in the UK there are a lot of companies warming up for large infrastructure upgrades. The cost of running Lotus Notes is killing a lot of companies. Companies like Virgin Atlantic are still going ahead with Notes-to-Exchange migrations because it’s seen as worthwhile. Also, there are still a lot of doubts over Windows Vista. Corporates are still very wary because of the desktop footprint, retraining and so on and I can’t see large Vista deployments coming in this climate.
On the other hand, I still think virtualization will be very big because it allows you to spin up new systems very quickly and provide other kinds of flexibility that also enable better utilization, consolidation and therefore cost savings. Also, projects in unified communications, once it is better understood by the business, will press ahead. IP communications generally will be a huge investment too because where a few years ago everybody thought about voice-over-IP as a separate investment, now IP is the protocol and the transport for everything.
