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One quarter of business processes will be outsourced by 2018

Outsourcing evolves CIO role

Staying ahead of the technology curve key to supplier management

Written by Neon Kelly

Steady growth in outsourcing is changing the responsibilities of chief information officers (CIOs), and forecasts of continued expansion will have even greater impact.

In one long-range forecast it is estimated that by 2018 about one quarter of business processes will be handled externally.

For Nico Westpalm van Hoorn, CIO for the Port of Rotterdam, this evolution has involved a greater degree of involvement in business activities, rather than operating solely as a technology specialist.

“In the past, the CIO was simply a techie who ran your datacentres or headed application development,” he said.

“Now the CIO is much more involved in improving business processes, working directly with unit managers and helping them through the delivery of IT. You are much more a vendor manager now, so if you outsource you spend as much time working with sourcing firms as on your own operations.”

The Port of Rotterdam outsourced to Getronics last year and generates annual savings of about €2m (£1.6m). Aside from the cost reduction, the move was driven by the potential problems of an IT structure handled by a relatively small team.

“Our operations were too vulnerable and too dependent on the few people who knew the systems. If about 15 people left, the whole business would suffer,” said van Hoorn.

The outsourcing deal has changed van Hoorn’s role as CIO, shifting his focus away from technology and towards business processes. Not every CIO will have the option of such drastic change ­ a port is far more able to contract its main IT services than a bank, for example.

But there is no chance that the technical side of the CIO role will completely fade, says Gartner analyst Robert De Souza. Even when the tools and services are provided by a third party, knowledge and experience plays a vital role when it comes to managing vendors.

“One of the main reasons that the services market ­ and outsourcing in particular ­ is growing is that firms do not have the internal resources to keep up with technology,” he said. “By going to a service provider, you get better skills and equipment.

“At the same time, CIOs must ask themselves: do the people in my firm know the right technologies to demand ­ even if someone else provides them?”

While it is true that CIOs must have the skills to lead change and manage partners, these requirements are nothing new, said Mark Kobayashi-Hillary, director of the National Outsourcing Association.

“These skills were not required for technical management, but now most IT departments are loose federations with some services in-house and some contracted out,” he said. “Someone has to manage that strategy, marshal the right resources into the right place at the right time and ensure the company is using IT as a business enabler.

“The big question is how to ensure that outsourcing is flexible enough. The worst thing to do is to outsource a problem, then find you no longer have any control over fixing it.”

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