Offshoring can increase costs: Vic police CIO

Outsourcing had become an established practice -- though not always a successful one -- and "it was perceived that there was a need for something new," she said. If executives' job descriptions call on them to make changes, that is what they will do, and the rapid turnover of executives encourages short-term thinking. Offshoring "buys some time" while they find out if it really works, she said.

Some functions can be successfully offshored, Berzins suggested, especially those involving highly standardised processes such as help desks and data centres, though communications costs must be taken into account.

Part of the problem is that offshoring introduces new costs, she said, especially where software development is concerned. In particular, there is a tendency for offshore providers to deliver what was specified rather than what was required, leading to "a pretty ordinary sort of result". Closer interaction between users and developers is required, as it is cheaper to get things right the first time, but that's harder when the parties are in different countries.

In any case, development makes up only a small proportion of the total cost of a project. Systems increasingly integrate with others both inside and outside the organisation, and integration and end-to-end testing cannot be realistically carried out at a distance. "I'm not sure how that's going to happen" if the project is offshored, said Berzins.

Other considerations include training ("a pretty expensive component"), support, future enhancements, and project management.

Offshore companies are setting up in Australia to provide a bridge between their developers and customers, while Australian banks using offshore development are sending staff overseas to supervise their projects, she said, but either way the result is extra costs.

"We've got to cost out all of this," said Berzins, an advocate of fully costed IT programs. The risk is that when all or part of a project is offshored, the IT-specific costs will be charged to the IT department but additional costs associated with users may be absorbed by their departments. This might help the CIO's image as a cost cutter, but is it good for the company as a whole?

Offshoring is being adopted because "people have to try things that are different," she suggested. "The politics say that offshoring is probably the way to go... It sounds like the right thing to do for the [CIO's] career". Berzins predicts people will soon start making proper assessments, although it won't be the CIOs that say offshoring didn't work.

Berzins was previously CIO at Australia Post and has held other senior positions in IT and finance.