Don't Send the Wrong Message on Outsourcing

By Kim S. Nash  |  Posted 2006-01-14 Print this article Print

CIOs who outsource must fight the perception they benefit from layoffs.

The stickiest management problem you'll ever have isn't getting outsourcing to work well, although that's probably a close second. It's surviving the angst of outsourcing tech work in the first place.

One network administrator, who said he lost his job to outsourcing in 2004, complained to me recently about how well chief information officers make out after they pull the trigger on an outsourcing deal. He was laid off when his employer, a $10 billion insurance company, hired Computer Sciences Corp. to run its data centers, networks, PC support and help desk for $600 million over seven years. The insurer's CIO remained and kept a compensation package of nearly $1 million per year.

My network administrator acquaintance admits he lacks objectivity. But he gets at an important point. There's a perception out there that the very CIOs who dismantle their staffs for outsourcing reap benefits from doing so.

Get the latest tips and analysis to help keep your projects on track, from project management from Kim Nash's project-management blog.

Look at the ranks of the top-paid CIOs in our annual compensation survey, based on salary data reported to the Securities and Exchange Commission ("Follow the Money," August 2005, p. 25). Eight of the top 10 tech execs outsource at least part of their technology operation.

BellSouth's Fran Dramis, who came in second in our survey, has outsourced selectively for years, including a $3 billion, 10-year contract with Electronic Data Systems and an Indian venture with Accenture. Dramis, who has been at BellSouth for eight years, pulled in $3.5 million in 2004.

Bruce Goodman at Humana (No. 23 on the list) also goes to India for some programming and gets mainframe maintenance from EDS. Goodman, at last tally, earned more than $976,000 in salary and bonuses.

Other outsourcing CIOs in our top 10 include those from Lehman Brothers, Cablevision and Northwest Airlines.

Make no mistake: The CIO should stay on after outsourcing. A company needs a senior leader to ride herd on the new service provider and help guide corporate strategy.

But let linger the idea among remaining staff, or important outsiders such as customers, that management benefits personally from outsourcing the jobs of the lower ranks, and you ding your and your company's reputations.

How to counter? CIOs can take several steps to make their employees feel like a vital part of the decision-making process.

They can provide high-quality training, open up project management opportunities, and rotate staffers through the business units—all of which help further the careers of I.T. professionals.

Still, many companies are stingy with education dollars. In a recent survey of 281 I.T. professionals by the Chicago-based Computing Technology Industry Association (CompTIA), 64% said they spent up to $2,000 of their own money on training and education in 2005. This year, 42% plan to spend $5,000 or more out of pocket. How much goodwill would be engendered if a CIO set aside some of the technology budget to help defray the costs of training?

It's even more bewildering when everyone knows that extra know-how yields dividends not just for the individual, but for the company as well. For example, the business intelligence guru who rotates through a business unit and learns how the sales team works will be able to apply that knowledge to his development work.

Most information-technology professionals are smart people who have seen enough technology changes to realize their realm doesn't stay still. And all employees, no matter what happens in their career, will think highly of companies who invested in them.

As Al Schmidt, CIO at Arch Chemicals, puts it, "Be proactive as opposed to reactive." And really proactive CIOs might even consider giving back part of those big bonus checks after they lay off staffers; Steve Jobs, for instance, led Apple for several years while taking $1 in salary.

Does returning bonus money put you on par with the newly jobless? No. But it's a goodwill gesture that resonates well—for you and your company.

Senior Writer
Kim has covered the business of technology for 14 years, doing investigative work and writing about legal issues in the industry, including Microsoft Corp.'s antitrust trial. She has won numerous awards and has a B.S. degree in journalism from Boston University.

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