by CIO Executive Council

How to Balance IT Onshoring and Offshoring

News Analysis
Sep 28, 20144 mins

Three CIOs share their strategies for striking a balance between onshore and offshore IT resources to meet business needs.

Three CIOs offer advice for how to strike a balance between onshore and offshore IT resources to meet business needs.

Tim Arthur, CIO & Global Director of MIS, Alltech

Look for knowledge, commitment, agility.

Outsourcing can add layers, and layers can add complexity. And we’re all about clarity. We’ve been growing 30 percent a year, both organically and through acquisitions. As a result, we have an agile environment in IT. When we do outsource, it’s based on skills and, more importantly, on knowledge, rather than on adding physical bodies. For example, security and Citrix support–they’re here and fit right in to our tight-knit team.

Three years ago, we tried offshoring our ERP development. We’re in 128 countries and are responsible for deploying systems to all those entities. We gave a portion of that customization work to so-called experts overseas. They had skills, but no knowledge to contribute. If you asked them to put a box on a screen, they’d put it there, but they didn’t offer any expertise beyond that. If you have an agile team working 24/7, by the time the box is put on the screen, they may have eliminated that screen altogether. We ended the relationship abruptly and had to redo it all ourselves.

When there’s a crisis, there’s a difference between someone on your team and a contractor. There is a different perspective of ownership and solution delivery that is hard to replicate outside your organization.

Warren Kudman, former CIO, Sealed Air

Don’t trade efficiency for low prices.

Certain skills that are important strategically or competitively–such as supporting systems for product and service offerings–should not typically be outsourced. For skills that could be outsourced, choosing a domestic or offshore provider comes down to balancing effectiveness and efficiency.

In some cases, like when we’re working with product development or engaging in agile development, I need to have people close–that solution cannot be developed halfway around the world. If we’re moving quickly through incremental versions of software, I’ll want someone in the same city or a similar time zone or, often, in the same room.

Offshoring makes sense with established technologies that provide less differentiation for the company, such as basic enhancement or break-fix work for established ERP platforms. In these cases, it’s not difficult to pass off a specification or requirement to an offshore provider and create a good partnership for ongoing support.

Ultimately, you can lose the cost advantage of offshoring if it takes you more time than it otherwise would to deliver a solution. Business leaders look to IT to find the right balance of cost and benefit and to contribute strong vendor- and project-management skills for handling both domestic and offshore suppliers.

Bill VanCuren, CIO, NCR Corp.

Use captive offshore expertise for quality, cost.

We keep most of our strategic roles–function-area leaders, portfolio management, solution architects, business analysis–in-house. We began outsourcing work to India more than a decade ago, but in 2004, we decided to build our own captive center offshore to increase quality, improve staff retention and instill our core values and processes.

Early phases of a project life cycle take place here, and most of the remaining development cycle is handled at our captive center in Gurgaon, India. Initially, offshoring was a way to cut costs. While that’s still true, recently it’s more about the abundance of skills and the ability to keep our projects running around the clock. We also outsource some of our network monitoring and system administration to an Indian provider to create “follow-the-sun” coverage.

At first, we were hesitant to let the offshore team handle project management, requirements-gathering or high-level design. But the maturity of our captive operations has increased tremendously. They can take a development project from start to finish, and we’ve created centers of excellence for mobility and testing, to name a few. It’s been very important for keeping our costs low and quality high. And we can use greater or fewer offshore resources, depending on the business need.