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|In: Industry Commentary|Last Updated:

Some words inspire terror. Their mere mention causes blood pressure to rise, mouths to dry, and beads of sweat to burst out, cold. Words like “vampire”. “Final exam.” “Orthodontist.”

Orthodontist isn’t the most terrifying word to start with “O” either. Far worse is the dreaded IT O-word — the one that’s spoken only in whispers, when the fluorescent lighting is bright enough to drive away the shadows so they cannot hear.

Outsourcing.

Its mere mention is enough to strike terror in the hearts of IT staff, conjuring images of layoffs for many and sweatshops for those who remain.

The reality, of course, isn’t usually that bad. Most employees don’t even change desks after their employers outsource IT. They may get a bit more money and a bit less vacation. More unsettling is the change in their relationship with their formerly fellow employees, who often treat their just-outsourced brethren with the same mixture of pity and disgust usually reserved for those with a particularly urgent need to consult a dermatologist — pity because they’ve been victimized, disgust because they are, after all, outside contractors.

Outsourcing is badly misunderstood at all levels. Executives outsource IT for the wrong reasons, IT employees dread it for the wrong reasons, and most significantly for you, IT management takes exactly the wrong steps to prevent it.

The usual reasons given for outsourcing a corporate function are that it’s either (a) not strategic and consequently not a “core competency”; or (b) less expensive to contract out than to handle in-house. Neither of these stands up to scrutiny.

The old saw about handling strategic functions internally and outsourcing the rest is easily debunked through a quick look at what should be the most strategic functions in any company — those that directly affect customer relationships. We’re talking here about sales, marketing, and customer service, the functions that have direct customer contact. Companies routinely outsource any or all of these — independent distributors frequently handle sales, more companies use ad agencies than handle all marketing functions internally, and there are plenty of call centers for hire that handle everything from outbound telemarketing to software technical support.

On the other hand, very few companies of any size outsource accounting, which rarely has any strategic importance (unlike finance, which does). Clearly, strategic-ness and outsourcing have no correlation, either positive or negative.

As for saving money, that’s also questionable. In favor of outsourcing is the reality than a large outsourcer enjoys economies of scale not available to relatively smaller clients, and can move employees with expensive skills that aren’t needed on a daily basis among multiple clients. But outsourcers need to turn a profit. They need to cover both corporate overhead and taxes and still have 15% or so left over besides. That’s a big hill to climb.

Further complicating the picture is that compared to the formal standards of operation adhered to by most outsourcers, many of the companies that find it attractive under-invest in IT quite badly. It’s hard to save money when you aren’t spending enough now, and even harder to explain the value of outsourcing when the first thing you need to do is to increase IT spending to make it work.

So unless corporate IT is managed quite badly, there’s only one way to save money by outsourcing, and that’s to reduce service.

No, not the overt services that are easy to identify and keep track of. They can’t be reduced because they’ll be spelled out in the formal contract. What’s lost are the minor services and untracked favors that lubricate the relationship between internal IT and the rest of the business. So where an end-user might have called a buddy in internal IT for advice or help with some troubleshooting, that same end-user will just have to do without once IT is outsourced, as all requests for service are funneled through the formal prioritization process specified in the outsourcing agreement.

Here’s an irony: Many CIOs, having read about the importance of well-defined processes and formal metrics, work hard to prevent exactly these kinds of favors. Here’s another: By implementing charge-backs and adopting the notion of “internal customers,” many CIOs work hard to make their organizations look just like an outside service provider, making outsourcing a very easy transition.

Why would they want to do that?

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|In: Business Ethics|Last Updated:

Confrontation doesn’t come easily to most of us.

When making the transition from staff to management, learning how and when to confront others is one of the most important skills to master. Nowhere is it more important than when you take over an existing department. Why? Hold on a moment and we’ll get there.

You have three rules to follow when you take on management of an ongoing operation. Assuming your memory extends to last December, you’ll recall two previous columns on the subject. The first explained why taking over a desk o’ death is preferable to inheriting a well-run operation (success is easy in the former situation and impossible in the latter), and provided the first rule governing the situation: Keep your mouth shut while you size up the situation.

The second column described the rule that applies if you find yourself managing a group you’d previously treated as the competition. Some managers foster an us-versus-them mentality as a team-building technique. While this technique is easy and effective, it has two disadvantages. The first is bad aim: You’re supposed to be competing with other companies, not with other parts of your own company.

The other problem? Your new employees aren’t going to forget all those disparaging things you said about them. Now that you have to lead them, what do you do? My recommendation was to focus on the future. You can’t repair or explain away the past, so they already don’t like you. If they also decide you’re weak — and apologizing is too-easily interpreted as a sign of weakness — your ability to lead them is gone.

This week we cover the third and final rule for taking over a department: Deal with your rivals. That’s where adroit confrontation comes in.

Remember the listen-don’t-talk rule? One key datum you’re looking for is the name of your principle rival. Almost certainly, one of your new employees thinks he or she should be running the joint, and may have applied for the job. If your hiring manager didn’t give you this critical factoid, you’ll have to uncover it on your own. Once you do, it’s time for that confrontation.

Machiavelli would have told you to publicly hang this miscreant. Kill your most dangerous rival and other potential rivals will get the message. In a modern organization, you can’t hang inconvenient employees (you did know this, didn’t you?) so the Machiavellian thing to do is to fire them.

Machiavelli wasn’t wrong, at least not from the perspective of effective maintenance of power. Leaving a rival in place can be dangerous to your career. Since you’re operating in modern America, not Renaissance Florence, you have a more subtle approach you can try before you terminate or transfer: Co-option. As soon as you can, meet one-on-one. You have two goals: To establish that you’re the boss, and to determine your erstwhile rival’s future. It should go something like this:

“I understand you wanted this job. That puts us in an awkward situation. I have to be able to trust you, you have to accept my leadership, and these are both unnatural acts. If you do accept my leadership this situation can work well for both of us. If you can’t, we’re both going to be better off if you find something different to do.

“The only way for this to work is for you to be my most vocal supporter. If you can’t, I’ll take the necessary steps and I’ll take them quickly. I’d rather not have to do that, but I can’t lead this department with somebody like you undercutting me.

“If you can work with me under these circumstances, it can be to your benefit. I’m ambitious enough that in a couple of years I’ll be looking for my next promotion. If you’re as good as we both think you are, we can make sure you’re the lead candidate next time.

“If you don’t think you can work under my leadership, tell me. I won’t resent it, and I’ll help you find another position in the company.

“Think it over. Let’s meet again next week — I’d like your answer then.”

Sound harsh? Maybe. Personally, I think it’s more compassionate than leaving someone in a situation they’ll end up hating while putting yourself in harm’s way.

And if you’re wondering … yes, I learned this the hard way. Twice.

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