Outsourcing Overseers NeededBy Larry Dignan | Posted 2004-02-05 Print
"Want to protect your job from going overseas? Become a 'chief resource officer,' right away. "
CRO is short for Chief Resource Officer, a title coined by the Outsourcing Institute of Jericho, N.Y. The CRO will be the technology executive who oversees all of your company's outsourcing agreements and makes sure all your vendors cooperate.
This will be a manager of managers to determine whether these subcontractors are living up to their service-level agreements.
This über-manager will be a peer of the chief information officer and may report directly to the chief executive officer, as more outsourcing takes place.
It's not hard, for example, to envision a company that outsources the management of its human resources to IBM's services division; its technology infrastructure to Hewlett-Packard; its applications maintenance to Computer Sciences Corp. (CSC) or an offshore firm such as Wipro; and customer care to Affiliated Computer Services.
Sounds great—until one or more of those vendors fail to cooperate and your firm struggles to implement companywide projects such as an enterprise-planning system.
Vendor cooperation is a relatively new concept. A 1996 attempt, dubbed the Pinnacle Alliance, included the likes of CSC, AT&T, Accenture and Verizon (which was then Bell Atlantic). These companies tried to set aside their individual interests to service J.P. Morgan, managing data centers, desktops, networks and some applications in a seven-year, $2-billion deal. Pinnacle unraveled last year when the bank, now called J.P. Morgan Chase, went live with a seven-year, $5-billion outsourcing agreement for managing data centers, voice networks and its help desk with a single vendor—IBM.
In many companies today, a division head may manage all the outsourcing arrangements reached by his or her business unit. That's fine as long as a company only outsources a few functions. But once a company uses several vendors to provide computing or communications services, the complexity increases and governing multiple relationships becomes an issue.
To determine whether your company could use a CRO, ask the following questions:
- Does spending with outsourcing firms represent more than 20% of your annual technology budget?
- Does your company employ more than two such firms?
- Do you plan to contract out such functions as human-resources management?
- Do the leaders of each business unit negotiate their own service-level agreements?
If you answer yes to any of these questions, it's highly likely your company could better govern how outside firms provide your most basic resources: people and technology. "If these arrangements are hitting your bottom line you need to have senior-management representation," says Mitchell Goldstein, director of consulting services for the Outsourcing Institute.
One executive may not be enough, says Don Flores, project director for the sourcing practice at Technology Partners, Inc. TPI, which counseled Procter & Gamble on its arrangements, favors a committee approach—with the chair being the chief executive or chief operating officer.
Then, the committee and particularly its chair can say with authority to all vendors: "Here's what we're doing, here's the plan and you need to work together to get it done."
"The key is to know where the intersections are between business units," says Flores. "The goals have to be mandated from above. If outsourcing deals are treated separately there will be collisions."
And there will be collisions. If you want to set yourself apart, you need to get a seat at the table where these deals are governed. The best time to start thinking about this? Yesterday. "If you outsource and you're asking questions about this now," says Flores. "You're already in trouble."
Larry Dignan is news editor of Baseline magazine. He can be reached at firstname.lastname@example.org.
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