Partially outsourcing the Web-based application development project was supposed to make development of the order entry system faster and easier. Instead, it slowed development to a crawl.
The project divided the IT staff at Chase-Pitkin Home & Garden. Tensions rose. In-house staff provided partial answers or none at all to the outsourcers developers, making it almost impossible for the external staff to understand the file structure or which files contained certain data.
"Its fair to say the internal IT staff didnt go into it with an open mind," said T. Christopher Dorsey, then-CIO and controller at Chase-Pitkin, the home improvement division of Wegmans Food Markets, in Rochester, N.Y. IT staff members were dragging their feet, afraid they would lose their jobs once the new system was in place, Dorsey said.
Troublesome incidents such as this are playing out at more and more U.S. companies, judging by the results of a recent survey on IT outsourcing by eWEEK sister publication CIO Insight.
As outsourcing and offshoring increase, so, too, does the toll on IT personnel and their productivity. Of survey respondents, 45 percent said fear of losing jobs to outsourcing has had a disruptive effect on their IT organizations; thats an increase from 39 percent last year.
It matters more as outsourcing continues to gain in popularity. Its currently taking up about 20 percent of IT budgets—the same as last year. But while outsourcing spending is increasing by just 2 percent at SMBs (small and midsize businesses), it is growing at 5.4 percent at companies with more than $1 billion in revenues.
Not surprisingly, employees fears of losing their jobs to outsourcers also continue to grow; 45 percent of respondents say fear of losing positions has disrupted the equilibrium at their companies, compared with 39 percent last year. Those fears have some justification, too. In last years survey, 49 percent of respondents engaged in offshore outsourcing said their companies had cut full-time jobs due to offshoring; this year, that number went up to 56 percent.
How does outsourcing disrupt an IT organization? The simple answer is the FUD (fear, uncertainty and doubt) factor: People who are afraid of losing their jobs are less productive, either because they are anxious or because they are less motivated to put in the extra effort.
"Why would I bust my butt for my company if I know they are going to outsource my job and get rid of me?" asked Jay Jamrog, executive director of the Human Resource Institute, in St. Petersburg, Fla., a not-for-profit organization affiliated with the University of Tampa.
The problem with Chase-Pitkin was that partially outsourcing development led to internal IT staffers who feared for their jobs. It wasnt until the internal IT staff learned that they, not the outsourcers employees, would manage the new system and that they would be taught the new language it was written in that tensions eased, said Dorsey, now vice president of IT and strategy at Rochester-based Constellation Wines U.S., part of Constellation Brands, a $4 billion wine and spirits supplier.
According to Tom Weakland, a managing partner in the global sourcing practice at management consulting services company DiamondCluster International, low morale makes people less careful or less thorough, and that results in project delays, budget overruns and post-implementation breaks and bugs in code.
"Whereas you might have a great relationship with Joe, who sits right next to you in a cube, when suddenly Joe is writing code in Bangalore, [India,] you are not going to call him as proactively or get him involved as much. You will treat him differently if you are afraid of losing your job or if your friend lost his job," said Weakland in Chicago.
Marcus Courtney, president of WashTech/CWA, in Seattle (an arm of the Communications Workers of America), agrees. Courtney spent time as a contract worker at Microsoft.
Time-zone differences made collaboration difficult when Courtney tested code written by developers who were thousands of miles and several time zones away, he said, with transferring knowledge between employees and outsourcer yet another trouble spot.
Open, honest communication is the first and most obvious solution to the problem. But sometimes what CIOs have to say—no matter how honestly, openly or thoughtfully—isnt what IT professionals want to hear. So what else should CIOs do to keep their staff motivated and productive when they outsource?
Jamrog said IT professionals are most likely to remain committed and motivated if the company continues to train them to do the sort of innovative, creative work that is less likely to be outsourced and offers them challenging, interesting projects to work on and if their supervisors inspire and coach them. "[IT professionals] will be very loyal and committed to a supervisor who treats them well, is inspiring and motivating, and communicates with them honestly and openly. In other words, a leader," Jamrog said.
Allan Alter is an executive editor at CIO Insight magazine.