An article from CIO agenda: 2009 publication.
The ability to strategically leverage information is a key CIO goal since it is key to business success. However, continued market pressures, workforce challenges, competition, and technological changes have raised the barriers to success. CIOs must retain and build the skills and capabilities needed to deliver the high-value insights the business requires while continuously controlling costs and headcount.
IT executives need to ensure their workforce resource strategies have the ‘right resources’ with the ‘right skills’ working on the ‘right projects and activities.’ The wrong balance of skills, resources, and focus can have serious impacts on overall IT service delivery, cost, and performance. There are some complicating factors currently influencing CIOs’ ability to adequately develop and implement their resource strategies:
aging workforce – the long-anticipated shift in demographics is here with an aging workforce introducing potential skills shortfalls and recruitment challenges. In the US by 2010, 40 percent of the workforce will be poised for retirement (64 million workers).
offshore sourcing – the supply of technical skills and resources from the emerging markets continues to grow and should be leveraged as part of a successful resource plan as a cost-effective source for future talent. The supply of analysts from emerging markets outstrip demand some 36 times.
talent management – IT managers need a close understanding of their business customers and needs, so active management of internal talent can be a key success factor. Senior executives from outside have a failure rate of 34 percent compared to 19 percent internally (Kelly-Radford, 2005).
The key questions that IT executives need to address are, “what is the right resource strategy to provide the IT capabilities needed to meet current and future business requirements?” and “what role should our best IT employees play?”
The ‘right’ resourcing model will drive long-term performance using the most effective and efficient resources. IT departments can no longer hire and train a team of programmers to ‘run IT’, but need to consider the core technical, management, and business competencies required for the organisation as well as the optimal source for these competencies – be it internally developed, hired, or outsourced.
An organisation’s resource strategy needs to focus on the desired outcomes the business requires, what capabilities are needed to deliver these outcomes, and most importantly, which mix of internal and external resource options will best provide the capabilities to achieve this. Internal capabilities need to be developed and focused on the most important and challenging work for the business while other activities can be performed by lower-cost, more flexible resource options.
So what does a resource strategy look like? Figure 4 illustrates a strategic framework for thinking about what resources should be used to do which activities. Internal resources should be focused on the most strategic and differentiating activities as these capabilities and skills help drive business performance, and success. It is important to note that organisations recognise that they ‘can’t do everything’ and leverage a mix of resource options to deliver IT services – investing in training and developing internal staff to work on the most high-profile, differentiating, and important work. Organisations that effectively implement such a strategy tend to show stronger performance. CIOs looking to realise the greatest value from their resource strategies should heed the following advice:
1. Focus on hiring and developing internal resources to deliver the ‘core’ skills needed for organisational success. Develop the required key skills and institutional knowledge by focusing them on the highest importance projects and activities. An understanding of what it takes to deliver successful projects for the business will create more rewarding roles and improved career development opportunities for staff, thereby reducing turnover. We have seen companies hire the ‘best and brightest’ only to have them work on system maintenance projects while the ‘change the game’ business enabling work is handed over to a third-party contractor or system integration firm. This not only is costly, but exposes the company to significant operating, knowledge, and intellectual property risks.
2. Extend your resource sourcing model to adequately leverage contingent workers and third parties. Expanding the pool of resources available as well as bringing new market insights and capabilities into the organisation will increase flexibility and help control costs. These resources should be used to deliver standard, non-differentiated services or provide short-term specialised advice if needed to minimise risk and to optimise value. Many companies, realising that it is impossible to do everything themselves, gain value from the flexibility and variable cost structure an extended enterprise resource model provides. However, getting the mix right is not as simple as ‘putting 100 bodies in India’ and requires planning to determine the optimal resource mix.
3. Active management and review of your resourcing strategy is essential – successful CIOs will work with the business to define the competencies that are critical for future business success. There is no ‘one size fits all’ strategy and each organisation must think about the appropriate mix of resources, which will change over time as business needs change. Those who do not periodically refresh their resource strategy and vendor pools run the risk of having long-term contractors, co-employment issues and complacent suppliers that are not delivering continuous value. In addition, and of greater concern, employees may not be developing the ‘next generation’ skills and capabilities, resulting in over reliance on third-party resources for key skills to meet business needs in the future.
There are some key steps IT executives need to follow to develop the optimal workforce and resource strategy. Firstly, IT executives need to have a deep understanding of current and future business objectives as well as the IT capabilities and skills needed to deliver the solutions and services to help achieve these goals. They can then ascertain whether their current internal skills and capabilities are aligned with required skills and capabilities. Difficult decisions need to be made on which mix of resources and sourcing strategies will provide these capabilities with best quality at lowest total cost and risk. Although this may result in some short-term pain when ‘fixing the mix,’ it ultimately ensures that internal staff are developing the most critical skills and working on the most strategically important projects to the business.
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