The Unmet Promise of Standardization | Article

Companies frequently turn to outsourcers to harness the tremendous power of spiraling IT technology and shape it into a tool for standardizing their information functions across business lines and geographic borders. Unfortunately, all too often they then tie the outsourcers’ hands by failing to establish standardization as a top priority within their enterprise.

“Multinationals come into outsourcing wanting to standardize across their units,” said Tony Macina, general manager, global managed operations, IBM Global Services. “What we find, though, is they’re multinational only on a very high level. The individual units within a country operate differently, and even though we have fairly standard tools and processes, we end up tailoring and supporting individual subcompanies within a company.”

In the process, the companies lose the competitive advantage of being able to manage the integrated data the outsourcer can provide. “We can deliver desktop services in the US and in Europe in a very similar fashion,” he said. “We have the same tools, the same processes. We can interconnect those and share data. But no one really uses that to manage across the enterprise.”

Macina said those situations generally evolved from chief information officers (CIOs) growing IT organizations as individual business units. “That structure has not broken down,” he said. “They’re not managing at a corporate level; they’re still managing their IT at a business unit level. Even though there’s an outsourcer providing service, we end up tailoring the service to the individual IT business unit.”

The benefits are there for the taking, but companies must have a mechanism for forcing standardization, process and tools worldwide. One way to accomplish that, said Macina, is through controlling budgets. “We still see a fair amount of allocation of budgets,” he said. “There’s still that ability of individual units to do what they want. You have to pull the financial management into a more central environment and drive standardization that way, and that’s difficult in a corporation. You end up replacing a lot of CIOs who grew and own their own environments.”

Having an outsourcer on board doesn’t alleviate the situation. Culture must be changed from within the corporation.”In some cases, we essentially work for the corporate CIO, but it’s left up to us to sell our wares and services to each individual business unit, which then wants to tailor them,” said Macina. “Some companies let that happen, and consequently they don’t realize as much savings as they should.”

And savings is one of the forces driving outsourcing. Companies look at the rapid growth of distributive services, such as desktop, network, server management and LAN management. They see how dependent their organizations are becoming on the tremendous amount of integrated data being delivered to the desktop and how complex IT technology is becoming. So they reach out for a technology partner to take over all or part of the IT function, to stabilize it, standardize it and bring down their costs.

When standardization works, those cost savings usually are delivered. Macina said economies of scale can deliver savings in areas like back up and recovery and multiple data centers. Worldwide licenses alone can reduce the cost of a contract by 20 to 30 percent, he said. Unfortunately, some companies are failing to reap the benefits of standardization.

“Client/server has been here a long time,” said Macina. “But the realization that it isn’t working for customers the way it ought to has just happened over the past couple of years.

That can change, according to Macina. For multinationals with large infrastructures, networks offer opportunities for economies of scale. “Availability, backup, recovery, network access…rather than replicating them, the key is to take advantage of them,” he said.

Lessons from the Outsourcing Primer:

  • Be prepared to enforce standardization.
  • Centralize financial management.
  • Support economies of scale from the top down

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