Former GM CIO says BPO/ITO mega-deals wrong for current IT climate

This year's World BPO/ITO Forum will focus on how the cloud is shaking up IT outsourcing. Conference chairman Jim Noble talks to SearchCIO about why mega-deals are a losing proposition for CIOs.

Jim Noble, former CIO at General Motors, AOL Time Warner, and Philip Morris and former chief strategy officer at BP, has done his share of IT outsourcing deals. So when Noble, who recently launched his own CIO coaching business, says that IT outsourcing mega-deals kill innovation and may actually put a CIO career in jeopardy, readers might want to take note.

Noble is the conference chair of the World BPO/ITO Forum's 8th annual summit in New York City, June 16-17, where he will address this year's theme: harnessing the cloud for successful transformation.

Your keynote talk at the BPO/ITO Forum is titled, "The Technology Climate: Clouds and Shadows." I assume this is a not about global climate change -- or is it?

Jim NobleJim Noble

Jim Noble: No, it is about winners and losers in the IT function.

What about the current technology climate will result in winners and losers?

Noble: Well, the traditional concept was nobody ever got fired for outsourcing to -- put in a name -- Big Blue, or HP or Capgemini. The strategy was based on having a small number of very large providers. For example, when I was head of IT strategy for a big oil and gas company, we decided to standardize on six global, third-party IT services companies, and we would parse out the work to them. I know that is also the case with a number of Wall Street firms. For example, Deutsche Bank announced recently that they are awarding a very large infrastructure contract to HP. And so, the mega-deal is not dead. But, in my view, the ability of these companies to continue to innovate will be more than a little restricted by these mega-deals. And I much prefer the concept of a large number of small relationships rather than a small number of large relationships.

That's pretty radical for a BPO/ITO strategy.

Noble: It's hard to do, because it requires a very different skill set on the part of the client company. If you put all your eggs into one basket, you just have to watch that one basket. But after a while, that supplier becomes complacent, they have run out of good ideas, they probably used up all of their marketing investment money to delight their customers, and eventually it becomes engrained. A lot of these contracts are renegotiated after a few years because they have become obsolete.

You can't really surround yourself with people who are thought leaders and also great at execution. At least, I've never found that there are many people like that in the world.
Jim Nobleconference chair, World BPO/ITO Forum

Now, if you believe in the cloud, which I do, then you don't need to have these large mega-deals. You can engage with much smaller niche suppliers -- boutique suppliers, if you like, best-of-breed -- and you keep them agile by having an easy exit strategy. So, for example, if you were to use Box for your cloud storage then you could easily move your data to Microsoft or Amazon or Apple or Dropbox or whatever -- and avoid the lock in. It keeps your third-party suppliers agile and innovative and fresh and best-of-breed. But, it is very hard to do, and you shouldn't underestimate the difficulty of making it work.

Just making the decisions about who to go to, I would imagine, requires a tremendous amount of judgment.

Noble: Tremendous amount of judgment and dedication to understanding the supply side. I just wonder how many CIOs -- or chief IT strategy officers or chief enterprise architects -- how many of them are in touch with what is available on the supply side. How do they stay current, and how do they stay aware of new products and services? That is really tough.

The obvious answer is the advisory firms, like Gartner and Forrester and, of course, my own group [The Advisory Council International]. I have a vested interest here. And if you seek advice from these third parties, you'll at least know who the major players are, and then you have to make a decision. But the good news is these decisions are not career-ending decisions. If you get it wrong, you can change it. It's not a $100 million deal you're doing; it's maybe a $5 million dollar deal you're doing, and so it's relatively easy to change horses in midstream.

The reality today is you have to be alert to products and services out there; you have to piece them together. It's like a jigsaw puzzle, and you have to be able to orchestrate. I use the word 'orchestrate' not in the technical sense as it's used in service-oriented architecture, but more in a supplier management sense: How do you orchestrate 10 different vendors who are part of a business process? If you outsource a business process to a third party, you don't have to orchestrate anything; but if you choose best-of-breed for the different links in the chain, then you've got to be pretty good at making them sing in harmony.

IT soft skills essential to 'operating model 2.0'

What attributes do you need to have to do that orchestration? Or, is there technology out there that will help?

Noble: The technology is called ITSM -- information technology service management -- and some of the big players like BMC and CA Technologies and some others have good ITSM tools. That's part of the solution space. BMC has Remedy. CA has Clarity, and there are others.

These are OK, but they don't deal with the human skills you need to manage and orchestrate. I compare it to what I call operating model 2.0. The IT operating model 1.0 is conventional wisdom. IT's all the usual stuff of holding meetings with our suppliers and having a good contract and having good incentives -- all the normal conventional wisdom. Operating model 2.0 says you've got to make the orchestra sing together: the percussion instruments, the wood instruments, the string instruments -- you get it. That is a soft skill and IT people are hopeless at soft skills. We're good at hard skills -- we can tell you how to do C++ and Java, but we cannot make two business partners pull together. And that is what the IT operating model 2.0 should be about.

CIO as systems integrator: Surround yourself with thought leaders

If you think about all the things a CIO has to be expert in -- one year it is social media, and the next year big data, and the next year cybersecurity, machine learning-- it seems like the CIO job is being stretched to the breaking point. Any thoughts on how the role of the CIO is evolving or what the CIO role should be?

Noble: My first thought is if you don't step up, then you will become irrelevant. The end-user community is now much more sophisticated than when I was young. When I was young, the business people didn't understand computers and they needed to come to us because they couldn't do it any other way. That is no longer true. Today they can go to Salesforce and get their CRM. They can go to Workday and get their HR. They can go to Box and get their cloud storage. And they don't need approval from the IT function. So, if the IT leadership doesn't step up, then they will be marginalized -- and that is shadow IT, run riot.

My other observation is this: There's a saying, 'You're only as good as the people you surround yourself with.' Jack Welch at GE knew that, and all of the great business leaders I've ever worked for, they knew that. They knew that they couldn't possibly know everything but they had to have a team of direct reports who were really good in their disciplines. [In IT] it might be cloud, it might be big data, predictive analytics or whatever.

You can't really surround yourself with people who are thought leaders and also great at execution. At least, I've never found that there are many people like that in the world.

And so, what I would advise an IT leader to do today is to surround themselves with thought leaders and then engage third parties to do the work, and the IT leadership team of the company coordinates that work. It puts us back in the role of SI -- systems integrators -- and it is a much more complicated, multi-dimensional, fast-moving job and that's what makes it so exciting.

Email Linda Tucci, executive editor, or find her on Twitter @ltucci.

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