Recovering from Outsourcing – A CIO’s Tale

This post sponsored by the Enterprise CIO Forum and HP.

In my last post titled Driving transformation with IT starts with transforming IT, I pointed out a nice video on the Enterprise CIO Forum of Canadian Pacific’s CIO Heather Campbell titled describing her work of transforms the Canadian Pacific IT function by focusing on the needs of the business (among other things).

After I wrote that post, I saw part 1 of that series…which is just as good as the other video I pointed to.  The other video, titled Canadian Pacific: When outsourcing goes too far is a great one to watch as well.  Jump over and watch it…and come back for a brief analysis and my thoughts.

The premise of the interview is this: At some point, the majority of the Canadian Pacific IT group was outsourced. This outsourcing destroyed their ability to function, destroyed morale, careers, ambitions and a long and thorough knowledge base held within the IT group.

I’ve seen the effects of outsourcing on IT groups…and in most cases, it is devastating.  That said…we aren’t here to debate the pros/cons of outsourcing…we’re here to see how Ms. Campbell was able to recover from the devastating outsourcing that occurred at Canadian Pacific.

According to the interview, Ms. Campbell joined Canadian Pacific as CIO and had the difficult task of rebuilding the IT group.  What was her first task? Was it to clean house and bring in her own team to run things? Nope.  Her first task was to get to know her team.  Simple but powerful.  How can you “clean house” if you don’t understand how the house got dirty (or if its really dirty at all)?

Rather than clean house, she started another tough task…changing the culture of IT. She began helping her staff rebuild their skills (and their confidence?).  Rather than just focus on pure technical skills she also helped her team build / rebuild their project management skills.  Why PM skills specifically?  So she could be sure the projects that they needed to get done actually got done on time.

The key outcome here is this:  Ms. Campbell was able to rebuild her staff’s skill-sets, their confidence and their capabilities by focusing on them rather than on how much more to outsource or how to save more money.  She focused on her people first and their capabilities.  She turned a staff of IT ‘workers’ into IT Professionals…she turned a group of people who were embarrassed to call themselves IT employees and made them proud of what they do and who they are.

Kudo’s Ms. Campbell and to the Canadian Pacific Team.

This post sponsored by the Enterprise CIO Forum and HP.

Small Business Technology Outsourcing

small business technologyI’ve been thinking about approaches to small business technology initiatives and whether it makes sense for small business to outsource a good portion of their IT infrastructure and platforms.

Most of the things I’ve read on the topic of small business IT outsourcing has been fairly light in terms of advice for small business owners. Most articles are written with the vendor in mind but there are a few focused on the small business owner who’s looking to outsource.

One of the better articles was found on Small Business Computing in an article titled “Ten Points to Ponder before you Outsource“. The “ten points” offered in the above article are quite good but I felt like they could be expanded a bit to include some examples.  Below is a summary of the ten points plus some additional discussion and examples.

Outsourcing Small Business IT & Technology – Key points to consider

  • Look at the big picture. Do you need to be focused on keeping an email server or web server running or focus on marketing and business development?   Should you be focused on keeping your small business technology running or growing your small business?  If you want to be around next year, you’d better focus on growing your small business.
  • Look at value over price. As a small business, you need to save as much money as possible whenever and wherever you can…but….you also get what you pay for.  If you pay someone for email service, do you pick the cheapest vendor that will setup a few email accounts for you and then never answer your phone calls….or do you pick the mid-tier vendor who asks for a bit more money and then holds your hand throughout migration process and offers 24/7 support?
  • Pay for expertise. If you are going to spend your hard earned money for something, you should get as much value as possible from that outsourced service/product/person.   Part of the decision making process for outsourcing should include the amount of expertise you are paying for.  For example, if you outsource your payroll, you sure as heck better get an expert payroll provider.
  • Stay on the cutting edge When you outsource your IT functions, do you want to give your business to someone who’s using yesterday’s technology or tomorrow’s?  Let’s look at a web developer as an example.  You need to outsource your new website…do you hire someone still using Frontpage to design/build websites or do you hire someone who can build a website using a much more modern technology/platform?  Hint: go with modern on this one.
  • Does the vendor have similar values as you? Have you ever hired someone to do some work for you and then found out that they didn’t have the work ethic you had?  That would be a huge issue for a small business owner outsourcing IT functions.  When looking to outsource, take some time to get to know your vendor(s) (and they should want to get to know you too) to make sure your values are their values…or at least that their values don’t clash with yours.
  • Meet the Vendor’s team before signing the contract.  While many people meet with the sales person or perhaps the vendor’s leadership team, I strongly suggest that you reach out and try to meet with the team that would be working on your project.  Sometimes this is impossible to get to know the whole team but if possible, do it.
  • Know what you’re getting.  This is a no-brainer on the surface. Let’s say you want to outsource the design/build of a new website.  You hire a firm to design and build your website and you expect them to completely migrate content and/or create content. Content is part of the website correct?  They sell you a design/build project without clearly stating that content migration isn’t included.  When they finish, you have a website that looks pretty and works well but with no content!  Now you’ve got to spend more money to get content into the website.  Not a good situation to be in.
  • Understand Responsibilities. While the deliverables of the service/product should be clearly outlined in any contract, you’ve also got to fully understand the responsibilities of each side.   This should be clearly stated in a scope of work document when working with a good vendor…but you need to be absolutely certain you know who’s doing what before signing the contract.
  • Should you outsource to a big player or small business? This is a personal decision for each business.  You can outsource your email service to Google or you can find a local small business that can do something very similar for you.   You’ll sometimes pay more to the local business, but you’ll also receive more personalized service from a good vendor.
  • Find a vendor that can educate. Ever talked to an IT person and heard lots of acronyms and technical mumbo-jumbo and had no clue what they were talking about?  Would you hire them to do your IT? Maybe you would…but you’d have a hard time understanding what they are doing or want to do for you.  Find a vendor that can speak to you in terms you can understand.  Find someone that can educate you along the way. That’s the person you want to hire.

Outsourcing anything, whether email, payroll or brochure design, takes the same type of thought process for small business owners.   While price is a consideration for you, there are many other items to think about when outsourcing part of your business.

Stay tuned for more small business technology related posts…looking to make this a regular feature.

Small Business IT Outsourcing – don’t go too far

Outsourcing Small Business ITCan all of the information technology assets within a small business be outsourced?  Could we see the IT desks within small businesses be as empty as those in the photo? I hope not.

The question of outsourcing all IT functions within a small business was asked of me by an acquaintance after she read two of my Small Business CIO articles: Small Business CIO – Manager of Constraints and Outsourcing, Value & Capabilities – Priorities for Small Business CIO’s.

This person, who I’ll call Heather,  is the owner & CEO of a ~ 100 person firm. She’s thinking long and hard about dropping her entire IT team and starting from scratch.  As part of her thought process, she had been looking at outsourcing a good portion of her IT infrastructure and only keeping the core assets that she needs in-house.

Heather had already determined that she’d offload her email platform.   To her, that was an easy decision…they’ve had nothing but trouble with their in-house exchange server.  She’s also determined that her website hosting will go off-site to a managed services firm.  Both are pretty straightforward decisions and are easily supported by an cost/benefit analysis.

But…she’s now rethinking her entire plan. When she contacted me, she’d come to the conclusion that she should do away with 75% of her IT staff, outsource all IT platforms and save hundreds of thousands per year.

Outsourcing Small Business IT

While I’ve been a big proponent of outsourcing some information technology functions, especially within Small Business IT shops, I’m alarmed at the level of cuts Heather’s proposing.

Heather’s core business revolves around services.  Her company provides marketing services to real estate firms.  In talking through the issues with Heather, she doesn’t see her information technology team and assets as a core piece of her company’s competitive advantage.

During a few phone calls and email exchanges on the subject with Heather, I was able to convince her to take a step back and rethink her approach.

While she is still convinced that she can outsource most of her IT platforms, she’s realized that there are a few that would be nice to have some ownership on.

For one, her financial IT system(accounting, billing, etc).  She had thought she could easily outsource the entire technology platform but has come to realize that her livelihood is based around how her financial platform.

Another outcome of Heather’s rethinking her IT outsourcing initiative – the majority of her IT staff will keep their jobs.    Like many IT teams in the small business world, their focus will be changing from platform maintenance to technology initiatives that help the organization position themselves as a leader in their field.

Cutting Small Business IT to the bone

Heather is the second small business owner that I’ve talked to in the last month who’s been thinking about outsourcing their entire IT team.  In addition, many CIO’s and IT leader’s that I’ve talked with have said the same thing (you can read more on the subject in my post titled Outsourcing, Value & Capabilities – Priorities for Small Business CIO’s.

I’d caution everyone out there who’s looking at outsourcing part (or all) of their information technology function to be careful. Sure you can get away with going to the cloud for some IT platforms and you can easily outsource things like web and email hosting, but outsourcing to much IT can be deadly.  More on that in another post.

PS – While I wasn’t paid for my time by Heather and didn’t ask for payment…I offered my suggestions on her plans and, thankfully, she listened. That said, I may start up a consulting practice solely focus on Small Business IT…seems to be a lot of folks in the SMB space needing assistance.

Outsourcing, Value & Capabilities – Priorities for Small Business CIO’s

Small Business CIO SurveyOver the last few weeks I’ve been conducting a very unscientific survey of small business CIO’s, VP’s and Directors of IT.

Using LinkedIn, I gathered a list of fifty people in the US who had the title of Chief Information Officer (CIO), Vice President of IT, or Director of IT with small businesses.  Note:  My definition of a small business for the purposes of this survey is one with fewer than 500 employees per the Small Business Administration website.

I reached out to these fifty people.  I’ve met some before and talked with others…but I haven’t talked with the majority of them before. Out of the fifty, I received a response from 21 (42% response rate – not bad).  For those that responded, I sent a short email with some questions about background ,experience, team size, projects, strategy, etc and I received 18 responses.

The Survey

My questions:

  • How many years of experience do you have?
  • How long have you been in your current role?
  • How long have you been with your current company?
  • How many employees do you have in your company?
  • What is the size of your information technology staff?
  • What are your top 3 IT priorities in 2010?

So…from those 18 responses, I got the following information (I’ve rounded the numbers).


  • Average Years of Experience in IT: 17 years
  • Average Tenure in Current Role: 3 years
  • Average Tenure at Current Company: 5 years
  • Average number of employees in company: 178
  • Average IT staff size: 8
  • Top 3 Priorities: Outsourcing, Driving Value, Growing capabilities

NOTE: The top three priorities I listed above are my interpretation of what was sent to me.

Let’s take a look at that last question in more detail.

Top three IT Priorities for 2010

As I noted above, the top three priorities for 2010 (as I interpreted them) are:

  • Outsourcing
  • Driving Value
  • Growing Capabilities

The responses from each respondent where obviously widely different in makeup, but the majority of responses could be classified into these three areas.


Most of the respondents claimed that they are actively seeking to find ways  to outsource those things that create ‘busy work’.  Specifically,  the area most targeted for outsourcing was the IT Infrastructure area.

Driving Value

Most respondents told me that they’ve been tasked in 2010 with helping their company get ‘more’ from their current information technology assets.

I had 3 respondents actually say that their budgets for IT projects were completely taken away by the CEO until they (the CIO / IT Group) could show the value of their current investments.  Sounds like an interesting environment.

Growing Capabilities

At the same time that these leaders were telling me that they were looking at outsourcing some of the IT infrastructure, they also told me they were looking to grow the capabilities of their teams.

One important area that many hit on was to grow their information technology staff to be more business oriented. They were trying to focus more on being business analysts rather than technology implementers.  Very very interesting.

What does this survey tell us?

Very interesting results.

I’m excited that are senior IT leaders in the small business segment that understand how important a role that information technology can play for their organization.

These Small Business CIO’s, VP’s and Directors all understand that they can do more with less if they change their focus.  Unlike the past, it doesn’t seem like these small business IT leaders are focused on keeping the servers running any longer…they are more focused on being a business partner.

I’m going to try to make this survey a bit more formal for future work…check back soon.

Small Business CIO – Manager of Constraints

I received quite a few positive responses to my Small Business CIO post last week so I thought I’d continue the topic this week.

Over the last few days I’ve been reading ReWork (affiliate link) by Jason Fried and David Heinemeier Hansson from 37Signals. Great book BTW…go pick it up now. In that book, the authors wrote something to the effect of (I’m paraphrasing here):

Constraints are advantages. Limited resources will always exist and force you to make do with what you have. There’s no room for wasted effort and/or resources. These resources force you to be creative.

Great concept.

Constraints exist everywhere in the world, but can readily be found in the world of the Small Business IT Group. CIO’s in small business have always had to worry about money and resources but the latest recession has forced even more constraints on them.

So…small business IT groups can complain about the constrains or try to work around them by looking at creative methods to address their issues with the resources at hand.  Constraints require a bit of Creative Thinking.

I have an example that shows this type of creativity. Read on.

Creative Approaches to Constraints

Last year, I spoke with the CIO of a small company who has a team of 3 full-time IT folks working for him. All were fully loaded and were putting in many hours of overtime to maintain the current IT systems. Quite a few projects had to be postponed because his staff was just too busy and there was no money to hire the work out.

During our conversation, I asked him to outline his current system setup. It surprised me to hear that he has quite a large number of systems and platforms for a small IT shop. They had a SQL Server Cluster, an Exchange server and quite a few other servers handling various network and storage task. All these servers were housed in an impressive data center built and managed by his organization.

My first response to him was to ask why he felt he needed the data center…that’s a huge expense that could be offloaded. He explained the reasons behind the data center and, based on his description, it made sense to have this capacity in-house rather than outsourced (there were a lot of privacy issues plus other reasons).

We dove into reasons for each platform and I quickly realized that the Exchange Server and Support was taking cycle time from his team. One of his team members spent an inordinate amount of time managing (and fixing) that one platform. I dug into the specifics and realized he was running Exchange 2003 on an antiquated server.

The CIO knew the Exchange server needed to be replaced but just hadn’t really looked into the economics of keeping it versus replacing it (or outsourcing it). We ran some quick calculations and he realized just how much that system was costing him.

I offered to put together a few options for him to replace the Exchange Server. The options were:

  1. Replace with Exchange 2007 w/ Outlook 2007 + new hardware + backups + higher availability + install services – cost ~$27K
  2. Outsource Email to a hosted Exchange company – cost ~$3K to $6K per year
  3. Outsource and Migrate to Gmail – cost ~$2500 per year + ~$2K for migration

Needless to say, Options 2 & 3 were preferred based on initial outlay of capital.

They chose to move to a MS Exchange hosted solution for roughly $5K per year after realizing just how much time the Exchange admin was spending supporting and managing Exchange.   After doing a time study, we found this person was spending roughly 50% of their time working on Exchange and email issues.

By moving to the Hosted Exchange, this small business was able to realize a savings of ~$20K in the first year by going with an outsourced solution….not bad.  In addition, this business can use the Hosted Exchange for 5 years and still come out ahead.

But…that isn’t the end of the story. That simple act of outsourcing Exchange freed up one of his team members to pick up other projects….not only did he save money but he gained a resource. A badly needed resource that he wouldn’t have been able to hire from the outside.

An additional advantage: this CIO was able to take that $20K per year savings and put it toward three new projects that were desperately needed for growing the business.

Rethinking Constraints

While the big constraint for the above CIO was money (he didn’t have enough to hire more people ore outsource projects), the money constraint isn’t the easiest to solve.

So what did we do to solve his problem?  We did what any consultant would suggest you do…spend money!   BTW – before you get up in arms about the consulting barb…remember…I’m the consultant in this story 🙂

We had to look at the problem differently.  Many people might just complain about lack of money or resources but this CIO had the brainpower and nerve to make the decision to do what needed to be made.

We spent money to overcome the constraint of not having enough money. The reason this made sense was because the old Exchange Server was taking up half of an IT staff members time, which was equivalent to ~$25K per year. The CIO spent $5K to get a return of $25K in freed up time.

By outsourcing something that wasn’t a core competency, the CIO was able to overcome his constraint (money), even though it actually required him to spend money (his major constraint).

Constraints will always exist in business.  Especially in the small business.

The Small Business CIO must be able to understand the constraints imposed on their business and find ways to overcome them. This will require innovative and creative approaches to running IT shops.

Just another reason why the CIO of tomorrow must move away from a pure technical role and into a role that requires strategic & creative thinking.  In addition, you’ve got a to have a bit of courage too to be able to make the decisions necessary to address your constraints.

Outsourcing Bill of Rights

When I saw the InformationWeek story titled “Outsourcing Bill of Rights Proposed” I had to do a double take.   The words ‘outsourcing’ and ‘bill of rights’ haven’t historically fit together.

The story is interesting. Apparently, Alliance Global Services has created a Bill of Rights for their outsourcing clients, or IT Partners as Alliance likes to call their clients.  AGS lists the bill of rights on their website (see more here) and I’ve taken the liberty of reproducing it here:

  1. The right to demand transparency throughout every step of an engagement — from sales to contracting to delivery and termination
  2. The right to fully understand the nature and character of an IT partner and the service that it provides to them
  3. The right to fully understand the financial viability of an IT partner
  4. The right to be made aware of any impending legal charges against an IT partner, should they arise, as soon as they occur
  5. The right to arrive at a mutually agreed upon definition of the term “trusted partner”
  6. The right to expect a clear contract that defines fees and expenses up front before any agreement is signed
  7. The right to terminate a relationship with no financial penalty in the event of any admitted fraudulent activity
  8. The right to demand the existence of a truly independent board of advisers
  9. The right to expect the presence of an independent financial auditor accompanied by a set of checks and balances
  10. The right to demand accountability for any actions taken within the scope of a technology project or as part of a firm’s broader business practices

Alliance is trying to get 100,000 signatures on the Bill of Rights and they are trying to get other vendors to sign off and adopt these rights.

I have to say I’m a bit surprised that this was created by an outsourcer but I applaud the effort.  The ‘rights’ listed in the Bill of Rights should be something that any organization includes in their outsourcing agreements.  Outsourcing has always been frought with dangers and unclear contract language…these ‘rights’ might just help with that.

It will be interesting to see where this goes. Regardless of where this bill of rights goes, I think its in the interest of outsourcing companies and organizations looking to outsource to seriously consider implementing these clauses in their contracts.

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