Outsourcing is helping CIOs play a more strategic role within their organizations; it helps them to streamline operations, reduce costs, better meet business objectives and even to “manage managers”. This was the consensus among the CIOs that participated in the “Smarter Outsourcing Practices for the new Digital Era” panel at the FutureSource Summit that took place in Mexico City last week.
Moderated by Toby Redshaw, CEO at Kevington Advisors, the panel also benefited from the participation of Adriana Islas, CIO at Estafeta Mexicana; Juan Carlos Cedillo, CIO at Pacific Star Food Service; Oscar Mario Garcia, IT Manager at Financiera Planfia; and Marco Tulio Sandoval, President of the Mexican CIOs Association.
These CIOs agree that the image of an inefficient but expensive IT organization whose only function is repairing computer equipment is a thing of the past. “For years now we have been functioning much more strategically, even participating on the Board of Directors. It would be impossible to do this without the help of outsourcing services,” explained Adriana Islas. “You have to outsource all activities that are considered to be a commodity; taking into account the specific needs of the business and areas in which IT can add value.”
Outsourcing plays a key role in meeting organizational objectives and strategies, says Oscar Mario Garcia. He also highlighted how outsourcing has helped raise internal service levels as well as greatly improving the clients’ perception of the company: “Before, my prevailing concern was to acquire infrastructure and expand our data centers; now our focus is the exact opposite.”
According to Juan Carlos Cedillo, one of the best practices used by Pacific Food Service is that of managing managers. He explained how the experience he has gained in his eleven years working as CIO at Hasbro (where he helped start up operations in Brazil, Chile, Colombia, Mexico and Peru) taught him the importance of fully collaborating with outsourcing service providers.
“I work closely with some of the industry’s leaders and seek to establish win-win partnerships with service businesses. We like working with successful businesses that are used to making money as our own business is also used to making a lot of money,” he stated. “Incorporating a wide range of technology under the outsourcing scheme allows me to reduce operative costs, boost productivity and get rid of technology that has become obsolete.”
Cedillo explained how he has set up monthly meetings between the Directive Committee and outsourcing providers – now known as the IT Steering Meeting. During this meeting, new IT initiatives are presented, and the providers explain which factors are key to the success of the operation as well as any problems that may be encountered along the way, and how best to solve them. “Outsourcing is definitely the key factor contributing to the success of my professional career,” states Cedillo.
Outsourcing and the Government
Marco Tulio Sandoval pointed out there is one main challenge facing government that outsourcing can help to overcome: management changes to local, state and federal governments. When management changes are made, the new managers often have to reintegrate both the teams and the systems.
He says working closely with outsourcing technology providers gives you access to resources that know how to get things done well. The providers offer high levels of service and a stability that helps the government in question achieve better results.
Sandoval also spoke of his personal experience working as Director of the Miguel Hidalgo Delegation of Digital Government in Mexico City, where his department implemented (with the support of an outsourcing service provider) a system assigning appointments to obtain a driving license that allows citizens to make an appointment without the hassle of spending hours waiting in line. “This only came about thanks to the help of experienced outsourcing providers, who provided the high levels of service required by us, as defined in the contracts we signed with them,” he explained.
Sandoval also highlighted how during his work as Assistant Director of Sports Prognostics Computing for Public Assistance, a federal gaming agency, 80% of operations were outsourced. “We had to keep up with the best practices in the world and outsource the most critical tasks. This resulted in improved profitability, and helped me play a more strategic role – participating in the Board and making high level decisions,” he explained.
Agility in the Cloud
At Estafeta Mexicana, the Cloud has also had a significant influence on business agility. According to CIO Adriana Islands, many of the company’s services are hosted in the Cloud.
“Now we do not worry about email, whether servers are available or not, or if a new application is required,” she said. “Now we don’t have two-year plans, which (used to be) unthinkable. Now we don’t have developments that take months before we can respond to the client; now we have to respond in weeks. And if we have a new client that needs to be integrated into the process, we can do it in a matter of days.”
“I think that in order to be able to advance at the necessary speed today there is no alternative to outsourcing services to third parties,” she added. “It’s like an octopus, you open all your tentacles and you extend your capacity for development, maintenance of infrastructure and all the rest. It’s something that now doesn’t have to consume so much of our time, instead it allows to look at what the business needs and how we’re going to support it and how we’re going to work at the speed that our clients ask for, both internally and externally.”
Creating Win-Win Scenarios
The CIOs also considered the importance of contracts when it comes to implementing IT outsourcing. For Oscar Mario Garcia, IT Manager at Financiera Planfia, this is one of the aspects that requires the most care and close collaboration with different departments, including the legal department, acquisitions and security, among others.
“For all the details that you can insert in a contract to integrate the technical aspects – the service agreements and matrixes of scale – there will always be differences, because businesses are changing as their needs and technologies evolve. Given the flexibility that may exist in contracts it’s very important to establish clauses for early termination, changes to infrastructure, and even clauses allowing the participation of other third parties as a backup should the provider not produce the expected results,” he said.
Adriana Islas emphasized the importance of the supplier being involved from the conception of the project, to assist in its development and work in a coordinated manner with the organization. This can help generate new ideas and identify alternative means of carrying out the project.
“While we always take care of the legal side and seek the support of the legal department of the company, it is important to define the way in which both parties work. We always look for a win-win situation. The penalties do not exist so that we can use them, I don’t want to have to document a fight with a business partner. What I want is for everything to go well and for both parties to win, and for everything to go according to plan,” Islas said.
With this in mind, Juan Carlos Cedillo of Pacific Star Food Service said that he aims to ensure that many of the outsourcing contracts that his company establishes are based on fixed prices and “not in time and materials.”
He also believes that it is important to provide incentives for outsourcing service providers. “If the provider finishes on time or ahead of time, they may receive a bonus. Of all the occasions in which we have signed a contract under these terms, half of the time the bonuses have been met. I prefer to reward people for getting thing done on time and in good quality than to fight with them for having failed.”