On Off, Off On

I have just returned from a fact-finding mission about moving our IT operations offshore. Everyone looks to India or Indonesia as their prime offshore destination due to their low labour costs, good skills and similar spelling. There's no competitive advantage to our company just following the crowd, so I looked to parts of the world that few others have seriously considered, such as China, Africa and Europe.

Everybody's already shifted manufacturing to China and the move of services is following, but China's management of its massive expansion could present a future business risk. Africa may well become the next China, but currently it's the next Middle East with regimes popping up and down like a badly configured intranet. I think the next China will still be China.

To assist other CIOs in planning their fact-finding itineraries, I can advise that the regions I chose to visit — Tuscany, Provence and the Maldives — are not viable offshore alternatives. (Maldives is admittedly offshore, but the powers that be there didn't seem to be promoting that feature as an outsource business option.) I conducted an exhaustive search throughout each region — so exhaustive that I had to have a holiday afterwards, and fortunately there were resorts conveniently located in each destination.

Prior to my trip, I thought that sending some IT functions overseas would be good for both the company and the country. The current account deficit is very high, so I'd be helping restore the balance of payments by exporting some of our skills and talents overseas. The CFO saw it differently, and tried to explain it to me over lunch one day, but I had trouble following his figures, especially after the second glass of red.

I've never been good with numbers. I once worked in a company that shed a third of its workforce during a downturn, issuing a statement that this was a positive move that would save the company $30 million. At the information and propaganda meeting for all employees, I asked why they didn't just get rid of everyone and save $100 million. They then shed one third plus one. That company now has a large number of workers in India, soon to outnumber their US employees.

On the way home on the plane, I had time to think about my mission, since I'd already seen all the movies — twice. I considered the impact on my loyal employees and, more importantly, on my department. If staff numbers decrease, I'd lose power and prestige. While I could argue that I'd be managing an international business with increased staff numbers (since our offshore operation could afford to hire more people), I doubt the CEO would buy it. Nor would my staff. Nor do I. If most of my IT operations does move, then the management previously required for those operations diminishes or also moves offshore. A job reduced is a job in peril — my CIO position could be replaced by the part-time contract positions of a policies officer and an outsourcing manager. I'm willing to resign myself to IT being in India, but I'm not willing to resign myself to be in India. There and then, I made two important decisions. I will fight any attempt to send my IT operations offshore. Secondly I won't use the term offshoring, as I don't like to verbize nouns (but I'm happy to nounize verbs).

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Caned Again?

This offshore notion arose because of recent dire warnings about a looming skills crisis that's going to last decades. A Deloitte report says going offshore is no longer just to cut salary costs, but is now a legitimate means to source otherwise unavailable talent and skills (that would be unavailable in the sense of people with those skills not willing to work for what we want to pay them).

Using overseas resources to solve a local crisis that threatens economic performance sounds like the plan undertaken in the mid 1930s. That crisis was the Cane Beetle, threatening the economics of sugar cane. The overseas resource employed was the Cane Toad, which unfortunately didn't eat Cane Beetles, but does eat everything else, and breeds like rabbits (another glorious overseas solution). Obviously we'd never make that kind of mistake again.

The simple solution is improving local skills. Why don't I skill up my own staff rather than pay someone in another country to skill up their staff? What are the skills they should acquire? According to recruiters, the IT skills needed today are not certifications on every new hardware, software and networking product, which is what my guys like to attain. It's interpersonal and soft skills like emotional intelligence, presentation skills, business communication and business processes. If I take this path it could also help me retain my staff: They won't feel confident applying for other jobs if their resumes aren't peppered with lots of four letter certification acronyms, and they'd rather be unemployed than mention "emotional intelligence" or "writing skills" on their CV. According to a technology salary survey, retaining IT staff requires offering bonuses, incentives and flexible working conditions. I'm guessing they won't regard the opportunity to work in Hyderabad or Shanghai for a quarter of the salary as a positive flexible working condition.

To stave off offshore, I needed the support of my executive team, so I had to present very compelling reasons that matter to them. I theorized that if moving my department's roles and responsibilities overseas enables the company to achieve its missions and values (meaning its bottom line), then this value must surely amplify if I identify additional areas to outsource and send offshore.

If most of my staff are working offshore, their HR requirements would follow them, so the HR department should move to where its human resources are. Marketing is easy to outsource, provided we find someone who can use PowerPoint, create PDFs and send spam e-mails to our valued clients. We wouldn't need to send this function offshore as any high school student with a Friday afternoon free would suffice, and would cost no more then an Indian worker. This would also demonstrate commitment to our youth policy. The finance department should not move offshore to India. It should move to China, because the Chinese invented the abacus so have unrivalled experience with fiscal matters. When I suggested this course to my fellow senior executives, I added that with no local IT presence, there'd be no one to show them how to use their iPhones. I now have their full support for my decision to keep the IT operations onshore.

That left just the CEO to convince. Knowing how she loves independent reports, I sent her one from AT Kearney, highlighting the section that said 60 percent of companies who send operations offshore don't achieve their operation performance expectations and over a third fail to meet their savings targets. Unexpectedly, the CEO read the whole report — who'd have thought she'd have the time? — and asked me why we couldn't be one of the companies who focused on overall performance, saving three times more than those simply trying to cut costs. It got worse, as the study found companies achieved more savings when they sent medium-complexity processes offshore, such as IT functions. Note to self: next time read report before I send to boss.

It does seem clear that the prime benefit of moving work offshore is about meeting business performance objectives and is not just about cost-savings. Certainly not in our case, as the entire annual budget set aside for outsourcing discovery, tendering, pilot and set-up has been fully expended, so the decision has been deferred till next year. Perhaps I could put Africa back on the list — somewhere near the Serengeti and Victoria Falls.

Bruce Kirkham is a veteran IT satirist and professional speaker ­specializing in leading edge technologies and scepticism, who views the IT industry not so much as "dot com" as "dot comedy"