Tapping the outsource

Outsourcing appears to be the topic of the day, and from what I can tell, that conversation will only grow more intense this year.

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Outsourced software development is focused on new product development, custom development for the enterprise, and support and maintenance, especially for mainframe and other legacy systems. There are two issues that those working in IT appear to be most concerned about. First and foremost, what are the long-term repercussions on IT of using outsourced resources? And, what are the issues facing a North American IT shop that deals with a service supplier thousands of miles and many time zones away?

I talked with Brian Kelly, executive vice president of product strategy at Kana, a midsize CRM ISV that has been working with HCL, a software engineering company in Uttar Pradesh, India. Through our discussion, not only did I get a taste of what it’s like to work with coders who are not down the hall or a simple phone call away, but I also glimpsed the future of IT.

For every dollar Kana would have to spend on development here, it spends 25 cents with HCL. Budgeting the original amount for development costs, Kana was able to put almost four times as many resources toward new products and to add three apps to its CRM suite in less than six months.

What’s it like working with HCL? Kelly said the coders have strong technical skills in languages and platforms but that they don’t know how to build enterprise apps. Kelly said he did not find them to be skilled in architecting a package for scalability, modularity, reusability, and integration.

“That is what we bring to the table. But they are quick studies,” Kelly added.

As a company, Kana had to bear down on the design. It was forced to be “much more clear and detailed in our product definitions and in our design documents,” Kelly said.

That’s not a bad thing, mind you. It took more time, but it also forced Kana to have a better documented product and a better design.

While all of that is goodness, as they say, there was also an unanticipated result at Kana that changed its IT shop. I suspect that similar results will create a fundamental change in IT’s future as outsourced development becomes an integral part of a company’s operating procedures: “We created new roles,” Kelly said.

First of all, to use HCL, the Kana design team was significantly enlarged because of the amount of detail that has to go into the design. Second, and this is bigger, the program manager role and management responsibilities at Kana were extended.

I did my own reality check with a couple of outsourcing experts who believe there will be a profound shift in the nature of the skills required to do this work. “Outsourcing development is shifting the value of the IT organization further upstream,” said Joe Murphy, head of North American outsourcing at Sapient.

The traditional IT department will change to an IT sourcing and governance-type model. IT will need additional managerial and business-oriented skills. As an industry, we do not now have a vast cadre of skilled application program managers.

“IT will have to learn to do TCO and manage multiple engagements simultaneously around the world,” Murphy said.

Next week, I’ll look at how much Kana really saved and will take a deeper look into the future.