Information technology may be tending toward commodity status, as some pundits believe, but the people who build the systems and provide the services that make up modern IT are not commodities and never will be.
Nonetheless, it is easy for managers to view them that way, especially if work is done throughout the world by people managers may never meet in person.
To be competitive and derive value from IT, however, companies will have to invest in their IT people, even if they have fewer of them on-site. IT skills are notorious for not having a long shelf life, and companies that dont invest in training may save money today but will face crises tomorrow.
This is true both of in-house staff and of those employed by outsourcers. However, an e-mail exchange with eWEEK Corporate Partner Robert Rosen elicited a troubling response.
"One of the great training resources is Share," said Rosen, who is currently the president of that IBM enterprise user group. "In talking to outsourcing companies on why they dont send people to Share, they expressed an attitude that ultimately will severely hinder them.
"They said, We buy a skill for a contract. If we need a different skill, we eliminate the staff we have and hire new staff with that skill. We dont see a need to pay to train our existing staff. We just want them billable." Rosen concluded, "Thats very shortsighted and ultimately, if carried to an extreme, will doom a company."
So, if IT resources are becoming outsourced services and if the outsourcers wont keep their employees skills up-to-date, who will? Its a good question, and its one that offshore outsourcers will have to face as well.
Think of it: Indian institutions are churning out IT engineering grads by the thousands with state-of-the-art skills—as of 2005. But what about 2007? 2010? Unless Indian companies invest in their work forces, they will be offering little in the realm of skills advantage in a few years, and, as statistics show, Indian wage inflation is gradually erasing the significant Indian cost advantage.
On the other hand, if Indian companies do invest in their people, keep them from job hopping and find a way to moderate wage inflation, their position in the IT firmament will be secure for decades.
In Rosens experience, Indian and Chinese companies do seem to be investing in ongoing learning, starting from a strong engineering foundation, not just, say, MCSE (Microsoft Certified Systems Engineer) certification. Said Rosen: "Indian engineers do seem to have the real engineering training. Ive also seen the Chinese invest in that kind of training. As long as they invest in training, they will continue to thrive."
Out and about
Offshore outsourcing customers are discovering the game is about much more than just price. Skills do matter. A recent study by DiamondCluster International showed some surprising trends for the past 12 months. It found significant dissatisfaction with providers, particularly those that were—surprise—the lowest priced.
DiamondCluster found the number of customers prematurely terminating contracts was way up. Last year, that number of customers rose to 51 percent, up from 21 percent the year before. "We were surprised," said Tom Weakland, managing partner of the global sourcing practice at DiamondCluster. Roughly half of the terminations last year "were for cause," Weakland said.
In another telling statistic, Weakland reported that only 62 percent of respondents said they were happy with their deals, down from 79 percent the year before. Weakland says that outsourcing providers and their customers will get over the rough patch of the past year, which he views as a correction. "We think that will shake itself out over time," he said. The reason for his optimism: 74 percent said they plan to increase their outsourcing next year. The survey covered 242 outsourcing providers and 210 customers.
Another notable finding of the study was that outsourcing providers and customers are looking seriously at China as never before. Of the respondents, 40 percent said that they expect to be doing business in China in the next five years, up from 6 percent the year before.
Stan Gibson can be reached at firstname.lastname@example.org.
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