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Building a sourcing strategy

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Why should an IT organization ship work offshore?

Certainly not because the work is “not core,” — the answer offered up by the popular but not-very-useful “core/context” theory that’s too-often used to make this decision.

The core/context theory’s deficiencies have been explored in this space often enough that wary readers might be wondering if yours truly has anything to offer beyond criticism. Yes, I do … while criticizing others is more enjoyable and less risky than offering an alternative, it just doesn’t pay the bills.

So if the core/context theory provides the wrong criteria, what are the right criteria? Here’s the starting point: “What should I send offshore,” asks the wrong question. And when you ask the wrong question, even the best answer is misleading.

What you need, that is, isn’t an offshoring strategy. You need a sourcing strategy — one that takes into account the full range of choices available to you to staff the different kinds of situations you face running an IT organization.

And you have a wide variety of staffing resources to choose from: Employees; consultants (defined here as outside experts brought in because of their special knowledge); contractors (non-employee staff brought in to perform day-to-day tasks); on-shore, off-shore, and multi-shore integrators who provide multidisciplinary teams to execute projects on your behalf; and outsourcers of various stripes to take over ongoing functional responsibilities. Each has its own characteristics, which suits it well to some staffing situations and poorly for others.

So here’s the plan: Make each of these staffing sources a column in a matrix. The rows are the characteristics used to match sources to situations. Score each cell using a ranking ranging from strongly disadvantageous to strongly advantageous. At IT Catalysts we use a –2 to +2 scale for this purpose; others prefer 0 to 5 or High/Medium/Low. Whatever works for you.

  • Immediate economies of scale — sufficient size and scope to spread fixed costs and variations in staffing needs across multiple sources of demand.
  • In-depth understanding of business/IT linkages — knowledge of how your company conducts business and the information technology available to it, so as to be immediately competent in addressing new business situations.
  • Immediate access to scarce expertise — sufficient size and scope to keep experts with scarce skills and expertise busy, and to ensure their availability when they are needed.
  • Ongoing availability of scarce expertise — the ability to staff an enduring need for a particular set of scarce skills and expertise consistently and affordably.
  • Personal investment in the company’s mission and success — “skin in the game,” loyalty to your organization, and a commitment to its success.
  • Need for a role to provide leadership — for others to recognize and respond to the direction and goals established by the individual in a particular role.
  • Low cost, risk, and impact of switching sources — so if you change your mind, either about a specific source or class of source, you can change the source itself.
  • Urgency — how quickly you need to respond to a new opportunity or situation.
  • Riskiness — not of the source, but of the venture your organization is undertaking, and the implications for how certain it is the company will need the staff deployed to it.
  • Criticality — how important the function to be provisioned or the new venture being attempted is to the company’s success.
  • Raw cost of labor — oh, yeah, let’s not forget the need to save a few pennies here and there per hour of effort expended.

    • Different companies will fill out this matrix differently. The cost of internal employees is lower in Altoona, Wisconsin, for example, than it is in downtown Manhattan; if you’re a giant multinational corporation you have economies of scale internally that you don’t have if you operate a half-dozen retail locations. What’s important is that you understand how well each available source scores in each of these characteristics for your organization (and whatever others apply to you that aren’t listed here).

    Then, when the time comes to match sources to the requirements of a specific business situation, you can choose the source that best fits your characteristics and specific situation.

    When you choose a piece of software, you assess its fit with your requirements — it’s a complex, in-depth process that requires serious effort and analysis.

    Why would choosing a source of staffing call for anything less?