READY OR NOT: GLOBAL SOURCING IS IN YOUR IT FUTURE

by Ian Hayes, Senior Consultant, Cutter Consortium

What began as a trickle is turning into a torrent. Once a single- location back-office function, IT is becoming as distributed as the computers it supports. Driven by our increasingly globalized economy, IT services are following the lead of industries such as manufacturing and agriculture in their shift to less-expensive geographic locales. Over the past decade, remote delivery of IT services has expanded from local off-site (in the US) to near-shore (predominantly Canada and Mexico) and offshore locations (India, Ireland, Russia, Singapore, Philippines, and even China). And it is not just the "undesirable" projects that are moving offshore. Globally sourced projects themselves have shifted from standalone efforts to highly interactive ones, thanks to advances in communications, hardware, and software. From database migrations to application support and advanced development projects, IT efforts are migrating to wherever they can be performed optimally.

Global sourcing is a hot topic in executive suites throughout the US and Europe. Legitimized by pioneers such as General Electric, global sourcing of IT has gained even more momentum. Offshore service providers have gained credibility by proving their value on Y2K efforts and by stepping in as alternative sources of IT professionals during past shortages. Their successes have created a truly global market for IT labor, attracting companies seeking lower costs, faster time to market, and access to a large pool of highly skilled resources. Market leaders now treat global sourcing as a defined, long-term strategy rather than a tactical solution for implementing a given project.

WHAT IS "GLOBAL SOURCING"?

Global sourcing occurs when buyers purchase goods and/or services from sellers located anywhere in the world. Global sourcing of goods, crops, and other commodities has been common for many years in industries such as manufacturing and agriculture, used as a proactive strategy to reap economic advantage. Take a look at the clothing and other manufactured products you buy. How many were made in the US? As third-world nations continue to implement free market policies, educate their vast workforces, and develop depths of expertise and knowledge, these emerging economies are a viable and cost-effective alternative to using more expensive, domestic resources.

Why Consider Global Sourcing?

For most IT organizations, global sourcing is a "when" not an "if" proposition. Highly attractive to CEOs and CFOs, global sourcing allows companies to improve their financial position through cost savings that contribute directly to the bottom line. It also makes companies more agile and better able to capitalize on emerging opportunities through "spot" purchases of labor and services. Companies are increasingly using global sourcing to engage in labor arbitrage, to shift work to less-expensive locales, cut costs, offer more competitive pricing, and grab market share. They are conducting work virtually around the clock on important projects to shorten implementation windows and speed time to market. Companies using global sourcing are able to compete more successfully, better their financial standing, and obtain more favorable valuations vis-a-vis their peers. With these compelling benefits, global sourcing will soon become a fact of life for IT organizations.

Factors That Enable Global Sourcing

Why is global sourcing so hot? Several enabling factors have converged to mitigate former risks and challenges of shifting work overseas. The most important ones are:

• Growing pools of highly skilled workers. Jobs in IT are considered prestigious and are highly sought after in most developing countries. While wage scales in those countries are significantly lower than in North America and Western Europe, they are quite high by local standards and thus attract well-trained professionals. Candidates with doctorates and other advanced degrees are common, and larger service providers typically offer extensive additional training to their staff.
  
  
• State-of-the-art facilities. The work environments in today's offshore service providers are a far cry from the "sweatshop" images that plagued them in their early days. The high-end organizations have facilities, equipment, tools, and processes that rival, and often exceed, their US and European counterparts. India, for example, has more facilities rated at CMM Level 5 than any other country. Eager to attract foreign capital, many governments offer considerable support to services firms, providing facilities, infrastructure upgrades, and tax incentives.
  
  
• Advances in telecommunications. Recent advances in international telecommunications capabilities have improved the reliability and quality of communications. Cost-effective infrastructure options -- from wired, landline communication services to wireless, satellite services -- are available. The standards introduced by the Internet have also fostered quick deployment and interoperability of networks and communications in virtually every country and company around the globe.
  
  
• Improvements in collaborative tools and platforms. The emergence of robust, high-quality collaborative tools, platforms, and processes has permitted dispersed project teams to work together as though colocated. Work units are easily assigned and synchronized between team members, and work products are controlled and shared in a central manner.
  
  
• Maturing delivery models. Service providers have learned that physically situating project liaisons at the client site helps facilitate strong communication and interaction between the client and offshore teams. Service provider personnel are responsible for handling the logistics of communications -- including time zone differences, protocols, and cultural nuances -- insulating the client from these facets of global sourcing.
  
  

-- Ian Hayes, Senior Consultant, Cutter Consortium