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Outsourcing firm finds lack of customer metrics 'staggering'

James Hall, managing partner of technology and systems integration at Accenture, discusses IT outsourcing strategies. The missing key? Attention to metrics.

Are you measuring the productivity of your IT department? James Hall, managing partner of technology and systems integration at Reston, Va.-based outsourcing giant Accenture, is amazed that so few of his outsourcing clients actually measure the level of services they're getting. Hall talked to about the importance of measuring productivity and what a CIO can do to make sure IT is driving innovation within the business.

What do you think is the biggest cause of the productivity gap?
No one measures it. The real issue is that people are not as obsessively focused on productivity as they should be. If you looked a two factories making the same product, and one was measuring the productivity of every shift on every day and the other knew exactly what the costs of the labor forces were but weren't measuring productivity, you wouldn't be surprised to find that there's a gap.

We do incredibly little productivity measurement in the IT field, whether development, maintenance or operations. One reason outsourcers have been successful is because they measure the activity and work on improving the measurements.

One thing that's staggering in outsourcing marketplaces is that clients tell you they want the same level of service at a lower cost. We ask what level of service they're getting and they have no metrics to define it.

If we started measuring, do you think outsourcing might not be as necessary?
The benefits of outsourcing are partly from economies of scale or synergies that are difficult for an organization to achieve on its own. Those will still be legitimate rationales for outsourcing. But if every company was focused on measurement, I think it's absolutely right that some of this will go away.

There's another element which is that in order to run a successful outsourcing contract, you have to have a commercial framework for who does what. You need those rules. It's actually a lot easier to have those rules in a commercial framework with a third party than inside an organization. So would outsourcing go away? No. Would some of the benefits of those contracts be taken up by the organization? Yes, if they were as focused on this as outsourcers have to be.

How can IT be a good starting ground for innovation?
If we project 10 years forward on the changes that IT has created in our lives, the changes will be at least as great as we've seen in the last 10 years. So the technology is there; what we're frustrated by is that we've been through a massive economic recession. Technology people are actually very conservative people, and we're not thinking sufficiently about what the future holds. I think technology can be a catalyst for innovation in a business, or it can facilitate innovation being driven from other parts of the business.

We ask [clients] what level of service they're getting, and they have no metric to define it.

James Hall, managing partner, Accenture

If I was a CIO, what I'd be doing to facilitate this is connecting with research labs, getting my business executives out there to open people's eyes, and helping people lift their eyes up from the day to day and think about what they could be doing in a year or five years' time. Some companies support this with very sophisticated scanning processes, but most companies can't.

Nick Carr doesn't believe that IT and innovation have much to do with each other anymore. He also argues that companies shouldn't be tech leaders but should let the risk takers do that.

Does that make sense to you?
It would make sense if I believed that we had reached some sort of plateau in the use of technology. If you took the view that we basically have all the technology that we're going to get, then you're going to say that technology is necessary but not a mechanism for differentiation. So my focus ought to be on driving that technology to be delivered as cheaply as possible.

I do believe that companies should be careful about technology, but I don't believe that they've reached the end of what technology can do. There will be many waves of technology that allow the innovative businesses to differentiate, to deliver superior customer service or more responsive manufacturing, or whatever they want to focus on.

Do you think that Web services standards give IT any dramatic new opportunities for productivity gains?
They're important but probably not dramatic. The most important thing about Web services to me is that the adoption of standards by the major players in the industry shows that they've finally recognized that they can't continue to disrupt their customers' lives by deliberately adopting non-standard solutions. A lot of integration problems have been imposed on users by software and hardware manufacturers who deliberately made it difficult to connect things together. This slowed down the deployment of new technology and everyone suffers from that.

We've done some studies on the costs of integration, and for a typical large corporation, 40% of the costs of a new business application may have nothing to do with the functionality of what you're deploying and everything to do with connecting to what's already there. And that figure's going up because there are more things to connect to. And in IT, nothing ever goes away. That's a huge barrier to people rolling out new business functions. This problem isn't going away quickly. It will be implemented incrementally over time. And like innovation and technology, it will be over-hyped in the short term and under-hyped in the long term.

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