OC CIO Roundtable Minutes 3-13-08

1993-2008
Southern California/Orange County CIO Breakfast Round Table
March 13, 2008 meeting

Present: Sean Brown, William Zauner, Randy Miller, Tak Fujii, Joel Manfredo, Rich Hoffman, Dave Phillips

The minutes of this and prior breakfasts are available online at the Peer Consulting Group’s website, www.peergroup.net, with links to the host’s presentation material, when available. Please provide us with the “url” of your presentation materials.

We welcomed Tak Fujii, The Olson Company, to the OC CIO Round Table.

Topic – Offshore Outsourcing

We thanked Sean Brown, RJTCompuquest, for agreeing to introduce the topic for discussion at the last moment. No sooner did Sean start his presentation by defining terms that Rich challenged the first definition, and after a little discussion we tended to agree. Outsourcing is more than the act of obtaining IT services; it is the transfer of responsibility (but not accountability) to an external firm for the provision of an IT service. Offshore outsourcing adds complexities to that transfer. There are many potential advantages for offshore outsourcing, but be clear WHY you are considering this option. Sean listed some of the advantages, including an available cheaper talent pool, domain expertise, and world-class providers with infrastructure. There are disadvantages too, including differences in language, culture, 20% greater management overhead, and IP security risks. The best approach is to hire someone who has experience in offshore outsourcing, including helping you think through the WHY, creating an RFP, sending it to many vendors who fit your needs, negotiating a rigorous contract, contemplating both the transition in and out of the contract, defining appropriate service level agreements, and including penalties for lack of performance. Practices that pay off include making sure that you go offshore for the right reasons – don’t outsource a mess, or a broken process. Choose your model carefully – will it be a captive operation (an offshore subsidiary, like the B of A model) or a contracted service? Get your people on board, including your management – takes lots of communication because your people can make it happen, or not. Be prepared for serious investment of management time and money. Sean included lists of Do’s and Don’ts, and of the major players in the game. He also gave a list of countries providing services, dominated by India but including lots of other countries. Gartner lists 5 critical steps – set objectives, judge the current situation, analyze the market, identify risks, and evaluate options. Sean’s presentation slides are attached. He also distributed 2 handouts, which are available on-line:

DER management: Offshore lessons learned http://www.dermanagement.com/archives/9

CIO Magazine: 10 Outsourcing Predictions for 2008 http://www.cio.com/article/print/166108

We asked each member to share with us his experience with offshore outsourcing.

William Zauner, JAMS, said that they had not done any offshore outsourcing but he was very interested to learn from others the dos and don’ts involved. He has outsourced network support to a company within the USA.

Randy Miller, Toshiba ABS, shared with us his experience with Patni Computer Systems, India. He had to fire their project manager because of his very belligerent attitude, and the rest of the Patni team walked off the job - he got little timely support from the company. He had checked out the company rigorously and they have a good reputation, but he neglected to check out the project manager. Make sure you include a termination at will clause in the contract.

Tak Fujii, Olson Company, said that the company is small and privately held. The Board has asked him several times about outsourcing to India, and they have done a trial run with a good project, and a well-defined spec. They have successfully outsourced their infrastructure and network support, and the Helpdesk to Sigmanet in Ontario.

Joel Manfredo, ex-Irvine Company, said that they have very limited experience with offshore outsourcing. They did use Deloitte to implement SAP, and they used some offshore resources. They do outsource their Helpdesk to Everdream, which is being purchased by Dell.

Sean Brown, RJTCompuquest, said that RJTCompuquest is partly an India-owned company. They do offshore BPO to their Indian office, so they do have skin in the game.

Rich Hoffman, ex-HISNA, said that they did use offshore companies for fixed priced contracts. You have got to be good at writing contracts. He has nothing against using offshore resources provided it is measurable better than other options, but be careful with the contract. There are significant cultural and legal differences. He would never run critical applications offshore. He was talking with GE about their approach to offshore outsourcing, and they also recommend against using offshore operations to run business critical applications.

We thanked Sean again for a very interactive discussion, good slides and the handouts.

See you on April 10, 2008 – 7:00 a.m. in the RJTCompuquest conference room at:

940 South Coast Dr., Suite 260, Costa Mesa, CA 92626.It’s opposite the Carl Strauss Brewery on South Coast Dr. If you are driving N on the 405, take the SOUTH COAST DR EXIT, and turn RIGHT on South Coast Dr. If you are driving S on the 405, take the FAIRVIEW EXIT, make a LEFT over the freeway and turn RIGHT on South Coast Dr. Turn LEFT on Greenbrook, and immediately right into the parking lot of 940. Proceed to the 2nd floor to Suite 260.