Can IT management let go of IT operations?

Can IT management let go of IT operations?

Summary: The cloud might offer a lot of potential for your business, but what about maintaining IT skills and knowledge within your company?

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With Google making their cloud computing pitch to 400 CIOs today, how many of them are thinking about the effect on their business when taking many traditional IT roles offsite to cloud providers? I'm not talking about something as (comparatively) simple as outsourcing tech support, but rather asking the question of what happens to IT skills and knowledge when the people who have key skills are no longer employed in-house.

Senior IT personnel are expensive for a reason; ideally, you are paying them for their ability to apply their skills and experience to solve your business problems and to allow you to gain a competitive business advantage by utilizing the technology where there expertise resides to your best advantage.

But when you no longer need these skills to be there for day to day operations you'll need to find a new justification to keep these people (and skill sets) available, and it's going to be a lot harder to justify the bottom line expense of full time employees when your line-of-business IT needs are being delivered externally.

There are, and will continue to be, a wealth of corporate computing consultancies who will be happy to take your money and deliver consultants to solve your business problems. But the traditional consulting gig is on a project basis, even if it's a long-term one. So while you will be able to define the business needs of the project, managing the technical expectations will become more difficult.  Internal IT specialists not only have the skill-set to find the best way to utilize IT, they are motivated to find the best way to utilize their technological expertise to drive the business process. What will it cost to get consultants up to speed with your entire business model and motivate them to focus on your business needs beyond the scope of individual projects?

I talk to project managers all of the time who are responsible for monitoring projects that are completely outsourced and rarely do I hear stories of happy customers and first pass success.  These mid-level managers are critical in getting the projects completed and they are often the ones who ride herd on the outsourced technical staffs, even though the consulting contracts are very specific in terms of performance and deliverables.

To a large extent, these middle managers mask the potential problems with the outsourced contractors, because they hide both actual and potential problems from more senior management; not because they want to hide something, but because they are compelled to get the jobs done and senior IT sees only the successful project completion and not the arduous path that the project took. And no, I'm not saying that every outsourced contract is a source of problems, just that it is a common enough issue that IT middle management I deal with on a regular basis comments on it. And as more services move to the cloud, there will be little motivation for any but large enterprise IT to keep any significant middle management presence.

As you move more line-of-business services to the cloud, your internal day-to-day IT technical needs will continue to decline, but at what overall cost?  When you and all of your competitors are using the same technical resources and getting your corporate IT services from cloud providers, how will you be able to leverage IT for any sort of competitive advantage for your business? Where will the technical knowledge necessary to get the most from IT reside, and how will you access it?

Topics: CXO, Enterprise Software, Outsourcing

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16 comments
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  • Re: Can IT management let go of IT operations?

    Good point. Mid level IT Managers are key to the success of outsourcing IT projects. They should, if good, understand the business processes, politics, etc and how IT can compliment a particular business. I will post blog here http://itrambling.blogspot.com/ regarding a project in which outsourcing of CRM to salesforce.com without the proper original analysis and internal project management of said solution lead to failure.
    ITRamblings
  • Swing baby swing!

    The pendulum swings yet again to out sourcing. the real problem is that these out sourcing people are going to use the same people you would have used and then add a layer of profit to the cost. Unless you are a small org and can't find a good jack-of-all-IT, then going external does not make sense. The complexities and cost still exist regardless of location. The propoents of this approach are simply trying to get a new revenue stream.
    happyharry_z
  • RE: Can IT management let go of IT operations?

    The real question is, is Google outsourcing their operations? No, they are expanding them. Outsourcing only makes sense for fully commoditized services. Anything unique to the business necessarily needs in-house expertise. Unfortunately, the outsourcing contract doesn't allow for the same flexibility that the expert you used to employ provided. You are a slave to the letter of the contract.
    ncted
  • Outsourcing is an illusion.

    When I was a child, my mother used to buy my shoes at a local shoe store. The shoes were made with union U.S. labor (Dunn and Macarthy was a shoe manufacturer in my home town, the shoes were made there) The factory used technology from the 50s and 60s even though it was the late 70s. My mom paid 20 US dollars for them. In todays money that is about 50 USD. So far I haven't been able to buy the same quality shoes at 50 USD. The same quality costs me around 95 USD. So breaking the union, off shoring the manufacturing resulted in a conservatively 100% mark up or double the previous price for the shoes. As a consumer where is the benefit in outsourcing? My country lost jobs and I am paying a premium for my products.

    My prediction is the same will happen for I.T. at first you will see a price dip as outsourcing companies compete to convince small/medium/large business to outsource their I.T. Once they have a market lock and few if any companies would ever conceive of going the "in house" route, prices will creep up until they reach premium rates. Because most businesses are run by short sighted people they won't even notice that they are paying at least twice the cost for I.T. as they would if they did it themselves. It will simply be written off as "the cost to do business". Meanwhile more jobs will be lost and the services won't really get better. You as a business owner will just pay more for them.
    mr1972
    • Outsourcing is killing this country

      Outsourcing is killing our ability to compete.

      Our companies are spending way more money in an effort to save money
      than they would if they just hired American workers. Outsourcers are
      consistent. They consistently deliver shoddy work and consistently drive
      your costs up as every new "team" has to be constantly retrained on your
      business.

      But hey, it all looks good on the balance sheet, so that's all that matters.
      Wade Williams
  • RE: Can IT management let go of IT operations?

    Outsourcing costs a lot more in the long run, and achieves a lot less. In addition, your company does not have a chance to use the institutional knowledge they may have already gathered, nor do they gain any more knowledge when the project is outsourced. Any shot term gain by outsourcing is overshadowed by the long term costs. Having recently worked to help fix a project outsourced to an Indian company, I can also safely say that the quality of the work was much worse, and the project was overstaffed.
    abear4562
  • How about those of us in IT

    Its great and wonderful if your employer can save lots of money by outsourcing or using the cloud.

    But I venture to guess that most of us here care about OUR own career. What good is it to you if your company displaces your job.

    Is it selfish? Of course it is but no more so than your employer wanting to save money. Regardless of whether the savings are true or not, how do you propel a company/country forward if you dismantle a highly knowledgeable base of employees?
    rengek
  • Diluting skill disease

    Cloud-conversion seems like a great idea, assuming that the Internet will always be as unregulated as it is today. But, what happens when greedy politicians realize that they can tax our connectivity utilization or regulate speed? Consider what the FCC has recently attempted with ceratain broadband companies. What is ISPs go back to the old way of doing business: charging for amount of data or timespan used?

    If that happens, we will suddenly see no financial benefit to use cloud-based solutions, and a rush to internalize infrastructure will reveal the amazing lack of I.T. skill available.

    If you think it can't happen, then consider how people believed that we'd never have government-owned banks or car manufacturers.

    I believe that companies should keep a decent amount of their I.T. in-house and only dump certain functional/automated peices to the cloud. This way, proprietary I.T. skills can remain in-house with retained employees.
    Bit-Smacker
  • RE: Can IT management let go of IT operations?

    In the end, companies should abolish the IT Department completely if they want to survive. Outsource everything, and then bring back the old Computer Services department. These folks worked with your people to improve productivity through point-applied software that has immediate effect, not control your people with multi-million dollar useless software so that they are trapped and can't improve the business!!!!!

    Does anyone think that a $10 million dollar a year computer system that forces your salesmen and engineers to fill out their own expense reports instead of a $30K clerk is a good use of company resources?
    tburzio
    • Only outsource what you have to

      Another issue is that companies should only outsource for expertise they do not have in house. Almost invariably, your in house people will have a better idea of what the company is looking for, and how the business processes work in your company than anyone you could outsource to. Sprint is a classic case. They had lots of people with excellent knowledge and IT skills, but they outsourced all their work to consultants. Their middle managers ending up doing nothing but managing contractors when they should have been getting their own full time people to do the work. And now we see the result, Sprint is at the bottom of the Cellular market and not likely to get any higher. And it seems like they announce a major layoff every month.
      abear4562
  • RE: Can IT management let go of IT operations?

    IT is helping the managers to tap the new arens cannot be replaced. I thank you Firozali A.Mulla DBA
    famulla
  • I got the reverse of this

    I displaced a couple of consultants by being hired as a Director of IT. I single-handedly massively improved voice and data delivery at a lower cost than the consultants. So much so I got a bonus for it. Esp. with a Tier 3 LEC no way my company is going cloud for core operations. And my consultancy clients were looking at a cloud option and I pointed at their reliance on their T-1 for everything core to them.

    I swear ZDnet is like Jim Cramer on CNBC just do the opposite you will do fine.
    someitguy79
    • I think you read this backwards

      The company that hired you obviously considered the type of scenario I described; that's why they made the choice to hire you. The opposite would have been to add more consultants. ;)
      David Chernicoff
  • Even if IT Ops goes, I still need Senior IT Folks

    I would like to know exactly how you define "day-to-day IT technical needs." To me, day-to-day means operations and maintenance. (I am included systems integrators in this group as well.) And yes, if Enterprises use more Cloud Services, they will need less technical folks dedicated to operations and maintenance. Are these the most "senior IT personnel?" In my experience, the answer is no.

    That is not to say you are way off base here. Far too many IT shops are neglecting many of the processes (and therefore, the roles) to ensure IT is:
    - aligned with the business
    - delivering value to the business
    - appropriately managing risk
    - appropriately managing resources
    - appropriately managing performance

    I agree the inevitable move to Cloud Computing will decrease the need for IT Operations and Maintenance personnel. But what about these other roles?
    - Biz/IT Strategic and Tactical Planners
    - Enterprise and IT Architects
    - Business and Systems Analysts
    - Client Relationship Managers
    - IT Risk Managers
    - IT Security Managers
    - IT Portfolio Managers
    - IT Program and Project Managers
    - IT Research and Development Staff
    - IT Outsourcing Managers
    - Application Development Managers and Staff
    - Provisioning Managers

    These are my most senior IT folks. I argue I need each of these folks even if I have all of my apps in the Cloud. Yes, I will need less of them, but I will still need some.

    But again, most Enterprises I encounter neglect the processes requiring these roles so your contention that they will lose critical IT knowledge is a valid concern.

    Steve Romero, IT Governance Evangelist
    http://community.ca.com/blogs/theitgovernanceevangelist/
    Steve Romero
  • Excellent story--you have distilled the essense of IT and the Cloud

    There will be many 'Ivory Towers' that come tumbling down when CEOs get fed up with the adversarial relationship of IT to departmental needs.

    The cloud gets work done.
    Dietrich T. Schmitz, Linux Advocate
  • A Knowledge Asset Perspective

    When traditional IT roles move offsite to cloud providers, in essence you give up your investment in IT-specific knowledge assets (skills and knowledge). You do this expecting to lower IT costs. It makes sense. IT specific knowledge is a best a tactical knowledge asset, a commodity that is interchangeable and inevitably disposable. You know that corporate computing consultancies will still be a ready source of tactical IT knowledge assets. All you need to do is to pay them to apply that knowledge on your behalf. They shoulder the cost of developing and maintaining this tactical knowledge, you get the results.

    However, it is a different case when you consider the unique knowledge of how IT fits within your specific business model. As others have said, this strategic IT knowledge is likely at the heart of any competitive edge gained from your IT dollars. When the IT roles are in-house, the cost of retaining, maintaining, and growing this specific class of knowledge asset is usually an implicit aspect of IT operations and budget. When IT roles move offsite, this needs to change.

    One option is to make the implicit (perhaps tacit) decision to pay the cost to re-acquire this strategic IT knowledge. You may need to do this on each project or, if you are lucky, just when changing consultants/vendors. These higher knowledge re-acquisition costs can leave a company hostage to the ?power of the incumbency.? The power if incumbency is the bias enterprises have toward their existing service provider. This is common in offshore outsourcing and, I suspect equally likely with cloud outsourcing.

    The other option would be to make the explicit choice to invest in retaining and maintaining your strategic IT knowledge in-house. Yes, there will still be the cost to conveying this knowledge to the consultants so they can appropriately apply their tactical IT knowledge to solve your specific business problems. However, given the high costs and risks associated with knowledge re-acquisition, I expect this would be the preferable path.
    kmArchitect