OC CIO Minutes March 10, 2011

1993-2011
Southern California/Orange County CIO Breakfast Round Table
March 10, 2011 meeting

Present: Jeff Reid, Keith Golden, Jennifer Curlee, Jeff Hecht, Sean Brown, David Mann, Tony Aldemir, Ashwin Rangan, Joe Desuta, Dave Phillips

We welcomed Ashwin’s guest Tony Aldemir, Edwards Lifesciences, to his first visit to the OC CIO Round Table. The following is a list of future topics and speakers:

4/14/11 The value of QA Joe Desuta
5/12/11 Enterprise social networking David Mann
6/9/11 IT as a service Jennifer Curlee
7/14/11 Cloud computing update Jeff Hecht
8/11/11 i-pad and mobility Ashwin Rangan

Topic: Outsourcing

Jeff Reid started by defining terms, making the distinction between outsourcing, off-shoring, near-shoring and remote infrastructure management (RIM). The total value of outsourcing contracts in 2010 was $62B, a 6% growth per year – 8 of these were mega deals of $1B or more. India still leads by a large margin, but China is catching up, with the Philippines also growing. Jeff also listed cities by nation as big outsourcing centers. For outsourcing, he listed some of the pros (lower costs, increased efficiency, focus and corporate profits) and cons (increased PM complexity, loss of control and IP vulnerability). For off-shoring, the US pros include increased corporate profits, and the cons include unemployment, loss of industrial base and high trade deficits – the developing countries benefit, which is good if there are reciprocal agreements. He noted that the City of Costa Mesa was considering outsourcing several business services and functions, and he quoted the proposed cost savings and other benefits. The reasons for outsourcing include cost restructuring (move to variable costs), improved quality (with SLAs), service contracts, access to best practices, access to knowledge and a pool of talent. The reasons not to outsource include the outsourcer tends not to work directly for the process managers, loss of quality, language/accent difficulties, culture gaps, security and effect on employee morale. The set-up time for the switch to an outsourcer can be longer than expected, especially if both parties are not equally prepared. Communication is key; ability to create SLAs is important; training and repeat training is needed; the legal contract is important but doesn’t guarantee success; the issues don’t go away, just change; continuous change management is important; so is governance. Jeff attached a page or two on how to get started.
Jeff mentioned that most of his experience with outsourcing was from prior jobs – his new employer does not do very much, except with a local company.

We asked those present to share with us their experiences with outsourcing.
Keith said that he is not outsourcing IT at the moment – his current challenge is with manufacturing in Mexico. In the past he was involved mainly with task outsourcing. His main concern is when you outsource, knowledge retention is a problem.

Jennifer is looking to outsource as much as possible. She is down to 3 people in her development group, and is looking for skills in small measures.

Jeff Hecht said that they do a lot of business process outsourcing, such as claims processing. They acquired a company out of Dallas, which did a lot of outsourcing. The weakest area is QA. A great deal of IT is outsourced to China and India, where they found it very important to align the teams – the in-house contact(s) with the remote supporting staff, team by team. 24 by 7 support is outsourced, and the head of the remote staff was here for 3 weeks.

David echoed what Jeff said. His new employer provides outsourcing services to clients who demand both on-shore and off-shore services. They are US-based but have 100 people in India.

Tony said that they are in the process of outsourcing their upgrade to the JDEdwards ERP system. It’s a big enough job with the primary responsibility assigned to a core team within IT, supported by a major effort offshore. The reason for this approach is to mitigate the risk and protect against staff and knowledge retention issues. There is a timing tissue, a target schedule and a concern about change management.

Ashwin said that his direction is to do more and more off-shore, and to only do things here that add value. The timing is the only issue. He has had good experiences with outsourcing both at Conexant, where they started with IT and Y2K, proved that it was a viable approach, and by 2006 had outsourced 1200 design engineers at 4 locations in India. His experience with B of A was even more expansive outsourcing to 32 centers.

Thank you, Jeff, for the introduction and the handout, which I recommend to all those who did not attend then session. They are at: http://www.slideshare.net/occio