Recently I wanted to alter the regular premiums of a pension policy I have with a very well known company; a simple transaction you might think. After 4 months of delay and much correspondence, I received a letter from the said company saying “their systems were not working because of their offshore partner, and they were unable to do even the most simple transactions.” They apologized profusely and promised to fix as soon as they could. Three months later they have now solved the problem as far as I am personally concerned, however my guess is that as a company they are still completely screwed up. Certainly to admit internal problems in this manner suggests at the very least a failure of policy and management.
It just so happened that by sheer coincidence I consulted to this very same company a couple of years ago. At that time the engagement, to assist in establishing SOA reference architecture and process, was curtailed because the organization was in complete chaos. They were offshoring huge chunks of their core business in what looked like a mad panic in order to radically reduce costs. My observation was that uninformed business managers, over promoted because of their aggressive management style were riding roughshod over highly experienced professionals and managers and demanding results in impossible timescales; handing their problems over to naïve overseas companies who were happy “to bite off more than they could chew” because they didn’t understand the awesome complexity of the core business systems.
In this process the company destroyed years of organizational intelligence and knowledge.
Is this situation unusual? Not in my experience. Over the past couple of years I have observed numerous companies taking extraordinary decisions of this nature. Perhaps the most incredible was the one that eliminated an entire EA function because it delivered no short term ROI and the offshore partner would be able to undertake project architecture as required!
Yet outsourcing has become for perhaps a majority of larger enterprises, the de facto business operating model. A couple of years ago I wrote up the insightful experience presented by Denis Hageman[i], in which he described how his then company ABN AMRO grew their outsourcing capability over many years. In that process they discovered that outsourcing is a complex management task and required dedicated attention to deliver on what often looks like easy cost savings. He described a journey, not a quick fix.
For all these reasons I was interested to discover that Carnegie Mellon and its spin-off company ITSqc have created a capability model for what they refer to as eSourcing. CBDI members will know we have long been advocates of capability management as a means to managing complex change and the eSCM[ii] (eSourcing Capability Model) is a valuable contribution to this discipline.
This month I have published an article on eSCM. In the report I draw the conclusion that the eSCM is a useful model, but that it is probably too generic and too broad for most organizations because it attempts to provide a generalized model that can cover all forms of IT enabled outsourcing. I wonder how the challenges of call center outsourcing can be similar to IT program and service delivery? They can be at a very superficial level of abstraction, but a useful model needs more granularity, and therefore tighter domain focus.
In my report I explore how eSCM might be extended and detailed by integration with core aspects of SAE and ITIL which I believe can create useful practice guidance. This is an exploratory work and I will be pleased to hear members’ views and particularly any experience with eSCM for IT services delivery.Outsourcing is not an inherently flawed strategy. Quite the reverse. But used as a tactical strategy, in the wrong hands; without due care and attention, outsourcing may be a highly dangerous strategy. We badly need better practices to make it work reliably and to provide a benchmark for providers to certify themselves and client organizations to make assessments and manage the relationship.
[i] How to Stay in Control of Outsourcing, Denis Hageman, ABN AMRO