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IT tarred with the brush of HR

In an article in The Age (Melbourne, Australia) called Getting down and dirty with HR (August 31, 2005) Leon Gettler asks:

How low does Human Resources rank in our organisations?

According to US academic and consultant David Sirota, who has taught at Cornell, Yale, MIT and Wharton, in most places it's right at the bottom, usually sitting somewhere alongside the IT department.

That's damning news for IT, since HR is often certainly at the bottom of the barrel as far as respect goes and value-added contribution.  HR has willingly exercised a "power without glory" role because it firstly liked the power and secondly proved incapable of articulating a value proposition beyond doing he transactional dirty work for line management.

I'm not sure that IT has the power, although it has been know to rule by fear in some organisations.  But it certainly has often found itself at a transactional/support end of organisatonal life without being able to consult and articulate value to the business.

Sirota's view is expressed in his book The Enthusiastic Employee and the views in the article in The Age are canvassed here at Human Resources - Wharton:

According to its critics, HR departments can be needlessly bureaucratic, obstructionist, stuck in the "comfort zone" of filling out forms and explaining company benefits, and too closely aligned with the interests of management yet lacking the business knowledge to be effective strategic partners.

Dealing with these types of HR departments "is like going to the dentist," says David Sirota, author of The Enthusiastic Employee: How Companies Profit by Giving Workers What They Want (Wharton School Publishing).

When people are asked to rate the quality of different functions within their company, he adds, "IT and HR are repeatedly rated the lowest."

The solution for IT can in part be achieved by strategic analysis of the role of IT in the organisation and the relationship and alignment between IT and the business strategy.

Those transactional pieces of IT that add little value can be effectively outsourced to a specialist group, and the relationship with the business can be improved by attention to alignment and business engagement.

Moving to a consultative role, and changing to a position of helping the business and management to use and buy IT services, rather than simply "selling" or responding to demands of IT services, is all part of a necessary transition if IT is to crawl above HR, and upwards! on the organisational perception scale.

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HR IT alignment Sirota employee satisfaction

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How do you think that IT can best raise and sustain its stakes in the perception stakes?  Post your Comments.  How can I help? Email me; Call (Australia) +61 403 345 632 (direct); +1(817) 382-4453 (SkypeIn USA); +852-8199-0189 (SkypeIn HK);

"We hired Walter to complete a technology audit, but he gave us much more -- he has the ability to identify business opportunities that benefit all sides, creating networks of customers, suppliers, investors and intermediaries. His breadth of knowledge and willingness to push himself beyond the brief are tremendously valuable." Zenon Pasieczny, Director, Saphet Capital Management

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And the problem is -- US! CIOs fail to help CEOs take advantage of IT

David Moschella, global research director for the Leading Edge Forum, (part of CSC's Office of Innovation) polled 200 business executives and 200 CIOs - more than 400 senior executives from large businesses in Europe, North America and Scandinavia - with this question:

What is the greatest obstacle to implementing technology at your organization?

CIO Magazine liked the question so much that they asked it on CIO.com, and lo and behold, both the Leading Edge Forum and CIO studies had the same finding.

The inability of the business side to take advantage of more powerful IT capabilities was public enemy number one.

In other words, as the LEF put it:

"a major barrier to more extensive implementation of IT is the capacity of general management to understand both its potential and its limitations".

What's our take?

Achieving effective alignment requires that discussion, communication and agreement take place about a range of IT "pillars" as they integrate into the business, including the collaborative development of value propositions.

If CIOs and their leadership team are adept at developing value propositions, then the general managers of the business will be engaged and will understand how IT can contribute.

While CIO.com and LEF hinted that their survey results are indicative of a user-side problem, the reality is that CIOs have to help their clients buy IT.

So in this worldview one of the roles of the CIO is to help their clients buy IT - to firstly understand the buying system that their buyers live in, and then to configure the buying environment (not the selling environment).

How to Configure the General Manager's Buying Environment

Ten tips for coaching GMs be intelligent buyers of IT

Understand the people and the other initiatives that they are involved with at the moment. Understand the rules and the way they they partner with other suppiers and service providers inside and outside the firm. Understand the norms and the beliefs driving the GM. Understand their values and reward systems. Learn how to help them justify change. Help them make sense of the changes that will be required when using a new technology or service. Understand how big the task is for the GM to achieve buy-in from others and help design that process. Understand and map the complexity of political integration for the possibilities offered by IT. Seek credibility in small steps. Accept that the solutions and priorities may not be in IT.

See these: ITinsyn.com - Business-IT Alignment CIOs - beat the outsourcing bullies by getting insync IT-Business Value Propositions - Setting the Agenda

The bottom line - CIOs have to design solutions, working with the GMs, which fundamentally support the justification for change and how the GM is going to get systematic buy-in within his network of stakeholders for that solution.

Often, CIOs and their teams provide just information.  Information does not show people how to buy and how to change their behaviour. 

The solution space is bigger than the problem space

The core rule here is that any solution space will be bigger than the problem space. The IT-side is thinking about the design space, and the GM is pre-occupied thinking about the solution space.

Bridging this gap, and helping GMs understand the potential of IT through helping them understand how to buy an IT solution, will go a long way towards removing the obstacle revealed by David Moschella.  IT will also be a good start on the journey towards IT alignment.

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CIO IT Alignment IT architecture CEO IT

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What is the greatest obstacle to you as CIO working with your business General Managers?  Post your Comments.  How can I help? Email me; Call (Australia) +61 403 345 632 (direct); +1(817) 382-4453 (SkypeIn USA); +852-8199-0189 (SkypeIn HK);

"We hired Walter to complete a technology audit, but he gave us much more -- he has the ability to identify business opportunities that benefit all sides, creating networks of customers, suppliers, investors and intermediaries. His breadth of knowledge and willingness to push himself beyond the brief are tremendously valuable." Zenon Pasieczny, Director, Saphet Capital Management

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How to get vendor buy-in to create a reference architecture

CIO's Meredith Levison ran a very interesting article article about how WGBH, the public television station in Boston had struggled to create a DAM system that integrated with the rest of the organization's workflows and production technology.

Two key points emerged - a terrific succinct set of guidelines for how to get vendors interested in sponsoring your application solution, and the power and important of a reference architecture which incorporates open source product opportunities.  As for getting the vendors to participate, the story goes:

When Dave MacCarn, WGBH's chief technologist and asset management architect, began evaluating DAM technologies in the mid-1990s, he spoke with several vendors, including IBM, EMC and Silicon Graphics. They all offered solutions but with hefty price tags that the public broadcaster couldn't afford. His colleague, WGBH Director of Information Technology and Asset Management Amy Rantanen, met with some Sun executives at a conference for broadcasters in 2000...

... Sun agreed to pony up free professional services and equipment if WGBH would help the vendor build a reference architecture for DAM.

"Developing a reference architecture is an opportunity for a vendor to figure out what is necessary to make the architecture replicable and affordable to a larger number of clients," says Forrester principal analyst Robert Markham. "That's why Sun was willing to do this."

Work With Me, Baby

Five tips for getting vendors to do what you want

Appeal to a vendor's bottom line— that is, their need to sell their products. Leverage your strengths and the strength of your company's reputation. Dangle your know-how like a carrot. Apply torque from the top by meeting with the vendor's senior executives. Play them off their competitors.

Working with Sun to create a reference architecture fit the public broadcaster's mission to share knowledge, but the effort would slow WGBH's goal of getting a DAM installed because it would need to test a variety of products for interoperability, even if the station had no plans to use those products. In the end, Sun's offer of free hardware and consulting (combined with Sun's long-standing support for open standards and the station's existing six-year relationship with the vendor) convinced WGBH to go along with the plan.

Markham notes a valuable lesson that for-profit companies can learn from WGBH's effort.

"If you have a strategic vision that's important to your business, and if you can find companies that are on the leading edge of a technology and that can help you fulfill your business strategy, it pays to be an early adopter," he says. "There are pains involved in it, but in many cases, what you learn through that adoption, and the fact that you're working with a company that is pouring a lot of resources into it and willing to negotiate very fair pricing for the technology, can really give you a leg up on your competition."

Those five tips are the clearest and most constructive I've seen written down.  Good advice and worth a shot where you can afford the time and coordination costs, and where you might want to set a open standard in your industry segment.

Technorati Tags:
CIO IT Alignment IT architecture open sourcing

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How do you make a reference architecture which includes open source an effective part of your IT strategy?  Post your Comments.  How can I help? Email me; Call (Australia) +61 403 345 632 (direct); +1(817) 382-4453 (SkypeIn USA); +852-8199-0189 (SkypeIn HK);

"We hired Walter to complete a technology audit, but he gave us much more -- he has the ability to identify business opportunities that benefit all sides, creating networks of customers, suppliers, investors and intermediaries. His breadth of knowledge and willingness to push himself beyond the brief are tremendously valuable." Zenon Pasieczny, Director, Saphet Capital Management

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Web-based software updates 6X more than spam internet traffic

Research shows software updates are costing Australian consumers $144 million a year in bandwidth according to research by Australian internet optimisation specialist Exinda Networks.

Exinda found web-based software updates are absorbing more than 12% of total HTTP traffic on the web (web browsing) costing consumers $12 million a month based on a $2.2 billion internet industry (ABS March 2004).

Using its "world-first" URL bandwidth monitoring system, Exinda was able to determine that downloads for Microsoft, Adobe and Symantec comprise more than 50% of the top 10 web sites by bandwidth usage.

Web browsing in turn is 50%-60% of all internet usage, according to earlier Exinda research.

The impact on business is also high. Exinda monitoring revealed updates are costing Australian companies $440,000 a week or $23 million a year in bandwidth costs for downloads that occur during business hours (8am - 6pm).

The number one offender detected is Microsoft, with its Windows XP and other Microsoft updates which alone absorb more than 4% of total internet bandwidth.

"On a global scale the costs are staggering, and rising, as security becomes more important and hackers are constantly finding new holes in penetrate software security. As a result software updates are slowing the world's communications and adding billions every year to the bandwidth costs of consumers globally," Exinda Networks Director Mr Con Nikolouzakis said.

He said the figures were an excellent example of how computer networks needed to be optimized to allow minimum disruption to daily operations. Nikolouzakis estimated that in extreme cases a branch office responding simultaneously to an update request could be off-air for up to two hours.

"There is no such thing as a free download and these patches and updates are costing Australian businesses $23 million a year on top of licence fees and the purchase of the software and are having a potentially serious impact on LAN and WAN performance," according to Nikolouzakis.

He said Microsoft XP had an automatic update function that could cripple a poorly configured network system. Globally, there are more than 112 million Windows XP-based PCs configured to receive priority updates automatically.

"Individual computers are programmed to automatically search the Microsoft web site for upgrades. When an update is posted every computer on a network would be downloading that update crippling system performance," said Nikolouzakis.

He said Microsoft had alerted users to the problem on its corporate update site but it needed to be major warning on all software delivered. "Basically the major software companies are getting a free ride, again, at the expense of consumers and the enrichment of global ISPs."

Perhaps surprisingly this level of HTTP web-based updates is unlikely to cause congestion overall on the Internet.  The overall HTTP traffic runs at about 16% of total Internet packet traffic.

However, if Exinda's figures are extrapolated globally, then their 12% of the Internet's 16% HTTP traffic is 1.92%.

Junk mail is about 50% of mail packets on the Internet (although has been seen at 88%) and mail runs at about 0.6% of packet traffic.  This means that auto updates account for three times the volume of global email and about 6 times the volume of global junk/spam mail traffic.

- Exinda based its figures on the March 2004 Australian Bureau of Statistics Information and Communication Technology (ICT) Indicators. The sample used came from a Tier-two ISP via a 20 Mbps pipe which is equal to 0.024% of the total Australian Internet traffic (ABS), for all ISP's. Figures are based on a cost of 8 cents per megabyte at business rates.

- Interestingly a UK company claims to own a number of patents that relate to the process of downloading software and virus-protection updates over the Internet and is seeking royalties from software companies.

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What do you think is the world-wide cost of automatic updates in terms of network traffic costs? Post your Comments.How can I help? Email me; Call (Australia) +61 403 345 632.

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The answer to Koch's pickle - new generation zero-pain enterprise software upgrades

When Christopher Koch, CIO's Executive Editor - Investigations, wrote about the The Erp Pickle (DEC 20, 2004) he hit a nerve with me, and caused a tingle of excitement.

QUOTE: "CIOs were forced to tinker with the innards of these packages to avoid losing valuable chunks of business processes and it made their lives hell... When a new version of the highly integrated suite arrived with cool new features, customers literally could not afford to install them...

Gradually, enterprise software vendors came to realize that to serve customers better, they needed to break up their suites into application components and create complex ways to link to them over the Internet so that customers would not have to rewrite connections to pieces of the suite like financials, which didn't change much.

But when they broke up the suites, they broke up the value proposition that had been so enticing in the first place - "free" upgrades.

Freed of the suite model, enterprise software vendors started charging fresh license fees for the new components they developed. And CIOs stuck with the suite began wondering where all their maintenance fees had gone.

They couldn't afford to upgrade to the newer, componentized version of the vendors' software models and if they could, they'd pay a new license fee for their trouble."

- for more from Koch see CIO's Koch's IT Strategy

The tingle of excitement was caused by the reinforcement Koch's "pickle" gave to my recognition of the value of the enterprise software of one of my clients.

MidComp International set out 5 years ago to solve this, and other, "ERP problems".  In fact as technologists with an already successful international software business their mission was to develop and implement sound technology solutions based on a strategy to reduce costs and increase customer value for clients of enterprise software.

The result, after developing the platform for 3 years without writing a line of user application code, is a Distribution System called Odyssey.

All user business process modifications remain intact and without change, and the upgrade proceeds transparently while at the same time retaining high availability and systems backup. —Odyssey CEO Steve Bridges.

Odyssey has intentionally addressed the nightmare of both user modifications and upgrading to provide a point of difference.

This is achieved by using user-selectable 'plug-in' business processes (objects which they call Policies). And the base software engine can be upgraded whilst retaining what might be considered custom processing logic.

Odyssey's embedded Total-Availability (TA) solution has the capability to upgrade the entity model and processing logic on a Disaster Recovery fail-safe machine whilst in Production Mode on the other.

Total Availability, with careful planning, is used to eliminate downtime during updates of programs and data entities.

The update of programs and data entities is performed on the fail-safe machine and once the entity model and program upgrade is complete, the two machines can then be seamlessly and transparently synchronized. All production changes are applied to the new system and data entities during this synchronization .

All user business process modifications remain intact and without change, and the upgrade proceeds transparently while at the same time retaining high availability and systems backup.

This gets users out of the pickle, provides cost-effective upgrades at the user's convenience, allows tailoring to business processes without lock-in, and forms a sound architectural platform with which to link to other enterprise systems.  (Remember Odyssey is a Distribution System, not an ERP system - other systems are necessary.)

More details: Odyssey Enterprise Edition ships with a fully integrated Total Availability and Data Replication (Data Storm) option.

Total Availability (TA) is the concept of having two systems remain perpetually in synchronization. Odyssey supports this concept through the Cyclone Engine, which maintains the transaction integrity. At any time the connection between the source and target be lost, without disruption to any of the systems. Upon successful reestablishment of the connection, the two systems will automatically synchronize.

Both systems are not required to be the same hardware and/or software.

Data Storm is the Odyssey term for replicating one instance of the Odyssey Application to another.

There are two purposes for this functionality:

1. Initiating a cross-platform Total Availability system.
2. Upgrading from one technology platform to another where direct data restore is unavailable.

Essentially a Data Storm allows all data from one instance of Odyssey to replicate itself into another database, regardless of platform.

The replication process takes place over TCP/IP and does not require the source system to be stopped whilst the replication takes place.The replication can be performed independent of the type of Relational Data Base (RDB) used in the source and target system, and indeed the two RDBs can be from completely different vendors on completely different platforms.

An Odyssey Enterprise Edition target system can switch seamlessly from being Data Stormed to acting as a Total Availability system.

Sure, successful enterprise systems implementation is "not about the technology!"

But the technology, and technologists, can offer new solutions to reduce costs and increase customer value.

Those with memories dating back to the SAP R3 revolution in manufacturing know well enough that all ERP systems have their roots in a basic methodology directed exclusively at the needs of a highly integrated manufacturing-driven company.

Odyssey has intentionally recognised the problems arising from this heritage and intentionally presented new more-effective user solutions and also intentionally distinguished itself from "ERP" by noting its focus as a Distribution and Accounting business system build for distribution enterprises.

For distribution-focused enterprises Odyssey provides a path towards freedom from Koch's tyranny of ERP.

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What do you think is the highest-priority issue for mid-sized businesses contemplating upgrading their enterprise systems in 2005? Post your Comments.How can I help? Email me; Call (Australia) +61 403 345 632.

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Effective Engagement: How CIOs Can Solve the Business-IT Alignment Gap

From IT Business Edge - Sept. 1, 2004 Issue 35, Vol. 2 Editor: Loraine Lawson.

Loraine Lawson, Editor of IT Business Edge, published answers to three questions she asked of me although at the interview she actually asked me four questions. The fourth was a kind of a back-up in case we went off-track in the first 3.

She published the first three answers here, but there's no need to miss out on the fourth - I've blogged it below as the Bonus Question!

Bonus Question: Your blog also recommends CIOs hire people who can act as a bridge between business people and IT.

What skills do these people need and where should they come from - IT or business or outside the company? Does it matter to whom they report?

Adamson: IT often has as many good business people as any other unit of an organisation so the idea that successful IT people are not business people is an outmoded paradigm.

Successful IT leaders have to be business people who are highly skilled in understanding the relationship between IT and business. It doesn’t matter to whom they report and where they come from – with two key qualifiers.

The first qualifier is that if they aspire to the very top of IT leadership and the CIO role then they must be very competent technologists in addition to being business people. They have to understand technology, and the forces driving technology, and how these translate into threats and opportunities for their organisation.

The second qualifier is that the recruitment, people development, leadership assessment and performance criteria for these people should be within the responsibilities of the CIO. This is critical no matter where they report. After all this is a key element of the success of IT within an organisation so how could it be any other way?

About the Editor: Loraine Lawson is a freelance technology journalist based in Louisville, KY. After five years of political and crime reporting, she left newspapers to serve a brief stint writing bids for a Year 2000 disaster recovery company. She went on to become the Kentucky Transportation Cabinet's Webmaster and later joined TechRepublic, a technology site for IT professionals, as a writer and editor developing content for CIOs and high-level IT managers. She can be reached at bizalignment@ itbusinessedge.com.

Alignment Audit:

See the phased Work Plan for my Business-IT Alignment Audit Service

For CIOs read my articles:

- The CIO's Leadership in Business Innovation
- How to Eliminate the Perennial Problem of Mis-aligned IT-Business Strategy
- Why Successful Projects regularly create Discontented Clients, and What to Do About It
- How and Why India's and China's World Class Outsourcing will Continue to Grow.

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Complete and Free Articles on Business-IT Alignment at www.digitalinvestor.com.au

IT-Business Value Propositions, Setting the Agenda
Business-IT Alignment, a Business Core Competence
Business-IT Alignment Process Surveys
Business-IT Alignment, Challenge - Why Is It Difficult?

Technorati Tags:
IT alignment IT insync CIO IT Governance

What's your view on the enduring problem of lack of alignment between IT strategy and business strategy? Where does the key challenge lie? Post your Comments.

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How can I help? Email me; Call (Australia) +61 403 345 632 (direct); +1(817) 382-4453 (SkypeIn USA); +852-8199-0189 (SkypeIn HK);

"We hired Walter to complete a technology audit, but he gave us much more -- he is relentless in forcing managers to identify and articulate their value proposition, the singe-most important factor in working out why they even get up in the morning. It's hard to believe how many people ignore this basic tenet of business life." Zenon Pasieczny, Director, Saphet Capital Management

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How to Eliminate the Perennial Problem of Mis-aligned IT-Business Strategy

"IT investments failing to provide returns" screamed the headline in Silicon.com.

"IT investments are failing to provide the benefits and returns expected, according to a survey of senior IT executives. IT directors ranked the importance of aligning IT and business objectives as high at 8.3 on a scale of one to 10, but the respondents only rated their success in achieving alignment at 6.2," said the article.

For more than a decade, strategic planning and strategy have been at or near the top of the list of topics CIOs report as a perpetual challenge.

But unlike other topics, it's something that's hard to get your hands around. When and how do you do it? With whom? What does it look like when completed--if it ever gets completed? How long is it good for?

According to a study of Global 2,000 IT executives, commissioned by Mercury Interactive Corporation and conducted by Forrester Research of Cambridge, Mass. in August and September 2002, 34 percent rated as a "huge challenge" the task of ensuring that IT plans supported business needs and strategies.

According to McKinsey (The McKinsey Quarterly, 2002 Number 4 Technology) most companies have failed to create true partnerships of this kind, "because IT units often report only to the chief information officer, while business leaders have no incentive to run IT with the same rigor they bring to running the business". They continue ... "If companies really hope to become smarter about technology, they should make their business leaders accountable for getting results from IT investments and make their IT managers accountable for the performance of the business."

AT Kearney, from a survey conducted in December 2001, report that only 17% of businesses had IT strategies that were "fully aligned and developed simultaneously" with corporate strategy. Futhermore, 45% of participants did not feel that their IT strategies were developed to support or align with their corporate strategy.

AT Kearney concluded: "There is much more value to be realized through improved business and IT alignment".

As difficult as it is, there is a solution which I believe will remove the "IT alignment problem" from the top-10 list of executive's concerns.

What needs to be done? There is no one-size-fits-all approach to IT alignment. But you can start by ensuring that you have an IT strategy that everyone, especially non-IT people, can own and understand. Explain how it links to the overall business strategy and make sure that it contains enough short-term actions that drive visibility and credibility.

The CIO's challenge is to make:

client engagement;

value propositions; and,

change management

the IT strategy's key principles of design and operation. The goal is to ensure that these become core management competencies of the leadership team - and not just for the IT department.

If you get this right, everything else should start falling into place. Apply this principle to your strategic IT governance, planning, executive sponsorship, IT investment, IT architecture, project & risk management, portfolio management, IT people management, IT research and development, IT services management and internal/external IT sourcing, and infrastructure decisions.

By developing plans and executing actions based on this IT alignment principle, collaboration will be built from a common framework. The importance of this framework is that it provides a tool to get the managers of business units and the managers of the IT units that support them to align their different goals.

In my experience it is critical to ensure that you have people who can act as "bridges" between business people and the IT experts. There are some real differences of culture, values and language to be handled. Again, make engagement, developing value propositions, and change management their critical success factors.

Ensure that there are business benefits defined at each stage of the program, so that you can clearly align the outcomes from the projects and the technology implementation back to the realisation of business benefits. The regular mapping of business benefits to projects is often overlooked or not managed well, leading to a lack of reconcliation with the business case and lack of credibility. You should trace benefits even though it is a rare, and difficult, process.

Behind the scenes, plan IT architectures for the right reasons.

They need to constantly reflect the latest business vision, key strategy themes and technology trends, and must evolve as the business and technology evolves. Use them to position individual projects in the pportfolio model so that they contribute to a cohesive, efficient whole. This means you can avoid fragmented, hard-to-integrate and expensive-to-maintain solutions. The IT architectures need to echo and contribute to the strategy, not dictate it.

To re-focus on alignment, the key to creating and capturing value through enabling technology is to follow a path of building collaborative value propositions. That is, collaborating at the earliest stage with the business leaders in understanding their customer value proposition and enhancing and enabling that proposition with an IT value proposition.

CIOs must become leaders in the process of creating collaborative value propositions with their customers and their customers' customers. This is a essential competency and the key to achieving alignment between IT and business strategy, and the path to removing this alignment issue from the list of perennial top 10 concerns.

Alignment Audit:

See the phased Work Plan for my Business-IT Alignment Audit Service

For CIOs read my articles

- The CIO's Leadership in Business Innovation
- Effective Engagement: How CIOs Can Solve the Business-IT Alignment Gap (blog) and,
- How CIOs Can Solve the Alignment Gap (published article)

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Complete and Free Articles on Business-IT Alignment at www.digitalinvestor.com.au

IT-Business Value Propositions, Setting the Agenda
Business-IT Alignment, a Business Core Competence
Business-IT Alignment Process Surveys
Business-IT Alignment, Challenge - Why Is It Difficult?

Technorati Tags:
IT alignment IT insync CIO IT Governance

What's your view on the enduring problem of lack of alignment between IT strategy and business strategy? Where does the key challenge lie? Post your Comments.

---

How can I help? Email me; Call (Australia) +61 403 345 632 (direct); +1(817) 382-4453 (SkypeIn USA); +852-8199-0189 (SkypeIn HK);

"We hired Walter to complete a technology audit, but he gave us much more -- he is relentless in forcing managers to identify and articulate their value proposition, the singe-most important factor in working out why they even get up in the morning. It's hard to believe how many people ignore this basic tenet of business life." Zenon Pasieczny, Director, Saphet Capital Management

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How and Why India's and China's World Class Outsourcing will Continue to Grow

I was talking with a colleague recently about offshore outsourcing and he said with a solid conviction about India "Forget all that CMM stuff, we have just been through a major project and what you get is cheap average quality software".

And a CIO recently told me how he now regretted outsourcing to an Indian company. He said that although the project was delivered on time change requests take months and are jeopardizing the total acceptance and benefits from the system.

On the other hand, NASSCOM, the chamber of commerce of the Indian IT software and services industry, recently announced their review of the past year and their forecast for the coming years for software exports. Jerry Rao, the Chairman, said that India was "riding on the crest of a wave" caused by the squeeze on IT budgets in the west over the last couple of years.

Indian IT-related exports are predicted to rise +32% for the current year to March 31, 2005, and that on top of a 31% rise for the 2003/4 year. The predicted export value is US$16.3b, and by March 08 is predicted to reach $50b. The US remains the largest buyer, representing 70% of Indian exports, and the UK 15%.

To me, it doesn't make sense that a $50b export industry can be built on cheap and average quality software alone. Perhaps the bulk can be built on "average and cheap", but there must be a core of top quality world-class software practices underlying such growth. Even if this top quality work is only 10% of the total that will still represent a $5b industry by 2008.

So what's the missing ingredient leading to the comments quoted in the opening?

Probably faults on the buyers' side – the main one being inadequate due diligence and the second poor management and the third mis-aligned objectives and expectations.

This means that where due diligence is done properly, and where world-class software is required, then Indian for certain can produce it, now and into the future.

How about China and how does it compare to India?

In simple terms China is a viable option now, but with a different risk profile.

The facts speak for themselves to China's role in becoming a major software and IT exporter. For example, IT-related activities account for 6% of GDP, and the GDP is growing at around 9%, leading to massive compounding of IT activities. IT export related activity grew 31% lat year, and in fact Chen Kai CEO of Comlent Holdings believes that China will be the world's #2 IT exporter by 2008, as well as being the #1 semiconductor producer and exporter.

The number of college graduates will exceed 2.8 million in 2004, passing India’s 2.4m and 1.2m from the US. While in India the market is "hot", as acknowledged by NASSCOM’s characterization of "riding the crest of a wave", in China there is still underemployment of graduates in IT. Thus while India is approaching saturation of recruiting opportunities, and suffering from wage escalation and difficulties in retaining stable teams, China will be immune from these problems for a considerable time ahead.

India has the obvious advantage of English, and of course this is so obvious that the Chinese are addressing this need by insisting on English skills in their recruits, and sometimes enforcing an all-English policy at work.

There is no doubt that Indian has the benefits of experience in producing world-class software, and a long history of good training, both of which are lacking in China. On the other hand China offers raw engineering talent and huge pools of it.

In terms of sheer cost-competitiveness I don't know how to compare the two countries, but for China most commentators see raw ratios of about 1 to 8 in favor of China versus the US (Silicon Valley costs) for programming costs. But of course this is not comparing "apples with apples" since the US programmers have actually developed world-class software and the comparable Chinese employees have not.

According to Frank Yu from Augmentum the real ratio of all-up fully absorbed costs to the company is 1 to 5 in favor of China, bearing in mind escalating costs in the major Chinese cities like Shanghai where development is centred.

Silicon Valley VCs are all too aware of these cost ratios. The first outsourcing company to produce a solid track record in delivering world-class software from China will be in huge demand to reduce burn rates and to allow investment dollars to be directed towards marketing and sales.

The key for outsourcing to China is to select the right local partner, by doing a full and extensive due diligence and ensuring objectives and expectations are aligned.

Don't make any assumptions about experience since the experience is not in delivering world-class software (this is India's advantage not China's).

Make sure that you have your right management team in place but do not impose your foreign "world-class software team" structures and processes on the local team. Choose a partner that understands how to build a Chinese world-class software team being cognizant of the local work ethic and culture. Putting this another way, China can produce world-class software but not by imposing a "US world-class software team" on the local culture.

And finally, put in place a proper risk management process and apply it diligently in order to offset the different risks in China from India, and involve the local partner deeply in this process.

The truth is that successful outsourcing requires a lot of effort and planning, and in China training, and the best return will be derived over the medium term of say 3 years, not on a single short-term transaction.

In the case of both India and China they will continue to grow and succeed, and in China's case begin, in producing world-class software and be attractive to global partners. The industry and country and demographic forces are unstoppable as enablers for this outcome.

The challenge for the established countries like the US and Australia and the UK is how to most effectively enhance their productivity through engagement with Chinese and Indian IT service providers.

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Sourcing Strategies for Telco IP Core Network
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Venturing into China in IT Investments

What's your take on the quality and future of Indian and Chinese outsourcing, do you agree that it will continue to grow and produce world-class software? Post your Comments.

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Why Successful Projects regularly create Discontented Clients, and What to Do About It

When Project Managers gather one of the common griefs they share with each other is the client who hates them. All the more puzzling and enfuriating to the group because in many cases the project has been "delivered successfully" - at least as far as the aggrieved project manager in concerned.

In my experience, when I ran a Systems Integration business, and when I consult to Systems Integration business clients, this lament of project managers is not uncommon. And even more infurating is the fact that competitors, who our lamenting project managers regard as technically inferior, are liked by the same clients for their project work.

What's going wrong here - what's the cause of this project managers' lament and how do we fix it?

The first point to make is that it can be fixed.

Again, in my experience there are two key mental models and operation issues that need to be fixed in order to solve the problem.

Understand the difference between successful delivery and delivering success

The first problem occurs because project managers fail to understand the difference between successful delivery and delivering success.

Project managers typically measure the success of a project by its meeting their project metrics, yet often successful projects do not deliver business success. Typically when things get tough, as they do on all major projects, the project manager hunkers down and focuses on "just getting the project done". If this is what the project manager believes to be "their real job", if this is their mental model, then they are heading down the road of delivering a project but not delivering business success.

When things get tough success can only be delivered by working more closely with the business, not by focusing internally at the project scope and requirements.

Think of it this way: it is certainly not fundamental technical problems that cause most IT project failures. The wave of failed enterprise resource planning and customer relationship management (CRM) projects in the past few years have not come about because of problems with the technology. Almost all have resulted from a failure to mesh the project effectively into the business, and to implement the business process changes required to reap the benefits.

Here's the nub: project directors and project managers measure the cause of failure and success of major projects from an implementation perspective, from a delivery milestone perspective and from a sense of pride as a project manager. This has been shown by numerous reputable surveys, and borne out by my own experience.

Therefore the first step in rectifying this fundamental problem is for project directors and project managers to understand not only how to successfully deliver but also how to collaborate and work with the business to deliver business success.

This begs the question - how to do this, and herein lies the revelation of the second major problem that I have observed in the stereotyped project managers in my opening theme.

The Project Manager has to be part of a Enterprise Engagement Model and Account Team

The second problem occurs because of an inadequate engagement model.

Project managers are often pleased to say that they are not Account Managers - and they aren't.

But they should be an active and integrated part of an account management team. Without that team operating effectively then the project manager inevitably becomes the scapegoat for the business and the project becoming increasingly disconnected, and increasingly disenchanted with each other.

This is seen so many times in practice that it would seem to be obvious. However the failure of effective account management and the lack of responsibiity project managers take for their role in that failure is quite endemic. What often happens is that when the client relationship starts to strain project managers bury their heads in the project, and also declare that the relationships 'on the ground' with the client's team are all OK.

The problem is that the client's team on the ground have also often disconnected from their management's disenchantment, and also they are not the final arbitrators of business success. In fact the point is that the very definition of 'business success' will have changed, and the proejct team from all sides had better find out what the new definition is. They can't do that by confiding in each other!

To address this challenge and solve this potential problem a team needs a very well thought out engagement model, operating at all levels, and integrated with the key aspects of project control. That is, an account management plan needs to be integrated with project control, change management and risk management.

Without air cover the project manager becomes collateral damage

The part that is most often missing with our stereotyped problem project managers is the high-level cover provided by the account management team, and the continuous and close link the with business and its pertubations and changes in business activity and goals during the life of the project.

For example, if there is a problem at the project level this engagement process provides the high cover. The very fact that the higher level relationships exist and are in good shape helps shape a softer landing. On the other hand, if the business requirements change and the project has to change scope and objectives - despite the project manager's rules - then the account management team can help shape the priorities and work out with the client how to share the pain and gain.

It has been my experience that where project managers feel most disliked by a client after delivering a "successful project" it is always the case that the engagement model was faulty, flawed or non-existent. This is not a direct reflection of the project or the project team, and cannot be fixed by focusing internally.

Successful large-scale Systems Integration companies have learnt long ago to place enormous emphasis on the client engagement model and process, more so than even project management. Companies like Accenture, IBM, Cap-Gemini, CSC, and EDS fall into this category.

For companies who feel technically superior, but lack the engagement models, this can be very frustrating to their project managers who see themselves as delivering a "superior technical solution" and yet being the butt of their clients' dissatisfaction.

The key here is that conscious competence in managing technical projects can often become unconscious incompetence in running a large scale systems integration business. This is the challenge for companies like HP who have tremendous brand and technology assets but lack the SI experience of their competitors.

By project managers grasping the challenge and altering their mental models to:

• delivering success rather than successful delivery; and

• understanding the engagement model and how to make it work collaboratively to maintain alignment with the client's business objectives,

their major projects are certain to succeed more often and their clients tell them so.

Technorati Tags:
CIO IT Alignment IT Governance IT strategy

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How the CEO Should Move the Monkey for Major IT Projects

What's your take on this topic, do you agree that lack of a proper engagement model can threaten even the best project team and project delivery? Post your Comments.

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How can I help? Email me; Call (Australia) +61 403 345 632 (direct); +1(817) 382-4453 (SkypeIn USA); +852-8199-0189 (SkypeIn HK);

"We hired Walter to complete a technology audit, but he gave us much more -- he has the ability to identify business opportunities that benefit all sides, creating networks of customers, suppliers, investors and intermediaries. His breadth of knowledge and willingness to push himself beyond the brief are tremendously valuable." Zenon Pasieczny, Director, Saphet Capital Management

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