An Idea Whose Time Has Come

Taking a cue from their bigger peers in the industry, the SMB must actively look at outsourcing their IT activities

Like Alvin Toffler’s Third Wave, Nicholas Carr’s IT Doesn’t Matter is also on us. An article published in the May 2003 Harvard Business Review created the right kind of noise. In a nutshell, the article tried to put forth the idea that the strategic importance of information technology has diminished and its status is likely to be that of no more than a commodity. “When a resource becomes essential to competition but inconsequential to strategy, the risks it creates become more important than the advantages it provides,” said Carr in his piece. Something that spawned a mini industry of sorts. Words to fill reams and reams of pages were written about the article and not to forget the fact that the author also wrote a book of the same name, laughing his way to the bank in the process!

But the issue is unlike the piano keyboard, where the keys are either all black or all white. The answer lies somewhere in between. Lets stop here and for a brief while go to a 160-room mansion in California. Construction started in 1884 and continued till 1922 (that’s 38 straight years). The house boasts 10,000 windows, 950 doors and 47 fireplaces, not to mention the other numbers that speak of its grandiosity. It was built for $5.5 million, as much a neat sum then as it is today. But wait, the story doesn’t end here. The house is as bizarre as it is grand. The house also boasts 13 abandoned staircases (one of them leading into a ceiling), 65 doors leading to blank walls (just hope one never rushes into a door like that!), and 24 skylights embedded in floors. Some of its features are so bizarre that the common folk thought the house was haunted. And it was therefore christened the Winchester Mystery House.

But there is one thing that the house did not have. A blueprint! Mrs Sarah Winchester, heir to the Winchester Repeating Arms Company, did not have a single blueprint for a project as huge as this. Some of the sketches though were made on paper and tablecloths! The obvious question is what’s the point? The point is simple: let the experts do the job. Had Mrs Winchester allowed an architect to build and plan the house for her, the name of the bizarrely beautiful mansion would have been different. In other words, had the building of the house been outsourced to someone with the right skills, the effort and expertise of the 147 builders who worked day and night to build the place would have been mentioned today in a different light.

It may be extending the logic a little too far, but it is true that the Indian society since ancient times has been foundationed on the concept of core competence. Divided into four classes, primarily on the basis of their occupation, our ancestors did what they were best at and outsourced the rest. The Brahmins were the educators and left their security needs to the Kshtriyas. And its time the information technology industry realized this fact.

Coming back to Mr Carr, he is right in saying that information technology is more like a commodity today. So what really matters is not what you do with it, but how you do it. The use of technology and deriving the right benefits out of the same has never been and never will the issues for a technocrat. They have always been and will continue to be managerial issues. “It would be a mistake to think the overspending on and under-managing of technology during the bubble years were a one-time aberration. In fact, the failure to reap technology’s potential is symptomatic of deeper structural flaws in how technology is being managed,” feels Frank Mattern of McKinsey. Skills to manage and reap technology’s potential are far and in between. So it’s best to give it to some one who knows how to do it.

The best IT strategy for the SMB in India will be to do no IT at all. Some estimates suggest that the Indian business landscape is populated by over 3.5 million small and medium sized companies all of which have an ever-increasing need for IT. And a typical problem that most companies in the SMB space feel is the inability to react to the rapidly changing needs of the market. This was a key issue that Sterling Tools, an auto ancillary company supplying to the best names in the industry. Straddled between the ever demanding customer and a minimal IT staff, Sterling Tools was finding it difficult even to manage aspects like e-mail and user issues arising from office applications. And of course the regular hardware glitches were another thorny issue. The matters stood compounded by the fact the company was growing at a very rapid pace. It has grown to eight times its size in the last eight years and has grown from a single manufacturing facility to six. And I would frankly not blame the CEO of Sterling if IT was not too high on his list of important to-dos for the day. But this does not mean that the gentleman ever undermined the need and importance of a robust and scalable IT infrastructure. We partnered with Sterling Tools and took ownership of their entire IT infrastructure-hardware, software, network and even the manpower. Lock, stock and barrel as the Brits would say.

And it would not take a rocket scientist to guess the outcome. The number of complaints has headed south. Process based tracking of activities has moved productivity in the exact opposite direction. With all day-to-day IT activities being handled by us, Sterling Tools management time is freed to ficus on the more strategic issues (I am not implying that IT is any less strategic!)

Some studies suggest that by outsourcing all non-manufacturing related IT activity a domestic company can shave off as much as 30% from its IT budget. You don’t have to be a Bharti or a Dabur to engage an outsourcing partner. You can do exactly what the Sterling Tools of the world are doing. Do no IT at all, pass it on to those who know and can do it. And I certainly think IT outsourcing by the smaller companies is an idea whose time has come.

This also is based on a theme from one of my lectures for an IT class!