Aligning Information Technology (IT) and business strategy has been documented as one of the top concerns of CIOs. Network-centric outsourcing can help technology executives reach that goal if they have the proper perspective on control. So says Nigel Bufton, vice president, worldwide business development and marketing, Operations Management Services, Compaq Computer Corp.
“Executives should be measuring control by how much impact they control,” he says. “For those who are trying to control impact, working with a services provider to look after the infrastructure allows that CIO or technology executive to work on the more business-oriented, IT-enabling strategic issues of their corporation. It enables them to spend more of their time on the bridge and less time in the engine room.”
At the other end of the spectrum, says Bufton, are the executives who measure control by the number of people or the amount of activity controlled.
“They stay in the engine room,” says Bufton. “I don’t know how they can align IT and business strategy if they’re in the engine room.”
Along with freeing executives to concentrate on strategic issues, Bufton says network-centric outsourcing provides more predictable costs, more productivity and better return on investments. He also cites agility as a customer benefit of network-centric outsourcing.
“When you’re using someone else’s capabilities and facilities,” he says, “you’re able to move faster and jump in new directions without being hampered by your own fixed infrastructure.”
The Three Cs: Capacity, Coverage and Capabilities
That need to be able to tap into an outsourcer’s capacity at whatever level needed is one of the three key drivers for network-centric outsourcing, according to Bufton. Coverage is another. As networks broaden to include a wider range of constituents and become increasingly global, companies are faced with the challenges of supporting people in various parts of the world.
“Unless they have facilities and capabilities in all areas, they have themselves a little global coverage issue,” says Bufton. “Or it could be time coverage. They now need to provide 24-hour coverage, and they don’t want to move to a three-shift system. Services vendors such as ourselves run our help centers 24 hours anyway.”
The third key driver is what Bufton calls ‘capability,’ the skill sets to handle evolving technology. “Many people are moving to Internet technologies, moving to NT technologies, integrating their local area networks into their wide area networks and creating a truly connected enterprise,” says Bufton. “And ‘enterprise’ increasingly means vendors and customers as well as just the folks within the corporation. There are a lot of new capabilities.”
Corporations are looking at that situation and asking why they need to build their own infrastructures, according to Bufton. “They’re looking at it, in many ways, as they might look at heat, light, gas, water or any other ubiquitous service within the corporate environment provided from the outside.”
The New Utilities
Bufton says he expects network-centric outsourcing ultimately to be considered a utility, similar to telephone service or power. He already sees some movement in that direction. E-mail, he points out, has reached utility proportion. “That could happen to all kinds of things in the future,” he says.
That includes electronic applications situations. “In a couple of areas, we’ve announced SAP as almost a utility where medium-sized companies, for a fixed monthly price, can just plug in and avail themselves of a SAP environment,” says Bufton. “We’re beginning to see indications that, at some point in the future, this will become increasingly utility oriented.”
The movement is just part of the evolution of the computer industry, according to Bufton. He compares it with the transition from custom-written business packages to off-the-shelf applications.
“I see that, over time, moving into the IT operations world,” he says. “If I buy off-the-shelf applications rather than writing my own, why don’t I buy off-the-shelf network operations capability rather than building my own?”
The utility concept is not new. Bufton relates it to the time-sharing bureaus of 15 years ago. “That was a way where end users and departments and divisions could get access to computing capability they couldn’t get internally,” he says. “It was all done at the bureau’s facility. All the customer needed was terminals. So a lot of it’s come full cycle.”
While the trend toward network-centric outsourcing is growing, Bufton reiterates that whether or not an individual company will decide on that approach depends on the vision of the technology executives.
“If they’re obsessed with running the engine room, they will not outsource, and in most cases, they won’t keep their jobs for more than a year or two,” says Bufton, “because as they themselves articulate, the biggest challenge is the alignment of IT and business strategies. That discussion happens on the bridge.”
Lessons from the Outsourcing Primer:
- Executives should measure control in terms of impact rather than number of people and activities.
- Network-centric outsourcing frees technology executives to work on alignment of IT and business strategies, as well as other issues.
- The three key drivers for network-centric outsourcing are capabilities, capacity and coverage.
- Network-centric outsourcing may ultimately be considered a utility, similar to telephone service and power.