For Successful IT Outsourcing, Providers Must Earn CIOs’ Respect

Quite a few years ago, when I was a full-time news reporter for a weekly IT magazine, our editor-in-chief often talked about the need for technology companies to talk the talk and walk the walk of the CIO. It’s the CIO, after all, who has the most direct access to (and control over) budgets and budgeting within an IT organization. So it’s no surprise to me that IT outsourcing companies are working hard to build their offerings into services worthy of CIOs’ attention.

I spoke recently with Vijay Balasubramanian, who is a VP and global head of consumer goods and ecommerce at HCL Technologies, one of the top Indian IT outsourcing providers, about the evolution of IT outsourcing, and how it has transformed from basic IT services to more comprehensive services and solutions that can be tightly aligned with an organization’s business processes, success and growth.

Balasubramanian says he sees outsourcing in chapters, starting back in the late 1990s into 2000 with a focus on Y2. “That chapter was note exactly focused on core operations, only technical results,” he says. In the next chapter, organizations began seeking offshore models for IT systems support, but again, that basic level of IT service proved insufficient. “Providing just the right technical skill is not sufficient,” Balasubramanian says.

From there, HCL began focusing on business process re-engineering, to meet demand and expectations from customers looking for new services to augment and evolve the existing services that were providing infrastructure and applications support. The requirement for services to bolster business processes and outcomes continues, says Balasubramanian. “And it is a two-way street. Unless we move into the space of helping the CIO focus on business results, we will also not grow, and not be strategic. Increasingly the CIOs are under pressure not just to reduce costs but also to reduce operational expenses, and improve efficiencies. At the same time there are tons of new technologies coming. The whole evolution of mobility and mobile technology in last three years make even company board members look at what else mobile computing can do besides deliver email. They are asking whether the iPad help deliver efficiencies. They are looking for ways to leverage mobile technology to deliver business benefits.”

HCL responded by transforming its own organization, the employees it hires, the services it offers, and the contracts it writes. Operational service level agreements (SLAs) are a given; now HCL works with customers to iron out contracts that focus on how specific technologies can be leveraged to gain business efficiencies. While HCL has yet to begin writing contracts that define SLAs for business processes, it is moving in that direction.

“We’ve invested in business-aligned IT. In every outsourcing engagement there are every three to six months of transition and knowledge transfer, and we’ve made all of that more scientific. In the past we’d go in with a note pad and do whiteboard discussions, and then convert all of that into a Word document of knowledge,” Balasubramanian explains. “Now we are able to layer, or capture the information across four layers. We map the business processes of the organization in a structured, scientific manner, we map the IT landscape in a structured, scientific manner using a specific software tool, and then we map the business processes to the IT map. We link the infrastructure to the application infrastructure and capture all of this in a visual, representation form.”

HCL refers to all this information as the biological knowledge of an organization. With this knowledge, application support personnel, for example, can link any problem in the application landscape with any business process that might be affected. From there, activity monitors can be applied to the business process or sub-processes that may be affected to see where inefficiencies, such as shrinkage or waste common in consumer packaged goods (CPG) industries are occurring. Such investigation can lead to solutions that improve business processes, and ultimately improve them. “Has it now been structured in a contract that HCL will reduce shrinkage by a certain percent? No,” says Balasubramanian. “But this has gotten HCL closer to the CIO, yes. Slowly, what is happening is that the team that is the application support team has started looking at areas in business processes that can be optimized.”

This idea of leveraging IT pros to optimize business processes in a measurable way is the start of the shift toward the fourth chapter of IT outsourcing, according to Balasubramanian. Measurements that illustrate the impact an IT initiative has on business benefits will be benchmarked, and Balasubramanian says ultimately these benchmarks will be leveraged in contracts. “I am sure that in the next few years there will be contracts that will include expected efficiencies and benefits written into the contract.”

HCL’s focus on the CIOs needs has earned it kudos from market research and analyst firm Gartner Inc. In a paper written by the firm earlier this year, Gartner analysts noted that HCL’s strengths are underscored by its “innovative management principles and also by signing outcome-based contracts.”

I think HCL is headed in the right direction. No IT outsourcing provider will succeed without a strategy that directly includes and involves its client’s CIO and business success. After all, IT is no longer a back-room initiative; it is a central function to every business line, every process, every product, every service… to effectively everything that a business does. Therefore, a partner that provides IT services to said business becomes the same: central. That’s a strategic place to be, a place that demands accountability. It’ll be interesting to watch how well HCL, and other providers, deliver.