In house – Outsource Decision Flow for Organizations with Captives
CIOs & IT managers Banks with large captive units outside the home country constantly face challenge when a new project is ideated. How to optimize resource utilization of both in-house and outsourced teams? How to best deliver the project utilizing the most cost effective resourcing plan? While there is no dearth of articles on outsourcing models, there are few serious studies done on factors that IT management should consider while making decisions on in-house-vendor execution. The preliminary data collected from leading global banks show that over 60% of projects are initiated with resourcing plan finalized based on management intuition/previous experience. In other words in 6 out of 10 projects, the IT project manager/ delivery manager decides who will execute the tasks at what stage of project based on a mix of experience and intuition. While this approach may work for small, non business critical projects, it fails miserably when it comes to large complex projects. Although not very apparent the unscientific approach to project resource allocation is one of the primary reasons of the high failure rate (65%) of IT projects. (Source CHAOS Summary 2009 report – Standish Group)
We* analyzed the process inside and have come up with what we think is a more scientific approach to deciding vendor-in-house IT staff ratio for projects execution. This decision flow chart can be applied largely for businesses with a captive unit(s) outside their home country.
Methodology
1) Framework and Hypothesis formation
2) External and Internal data collection
3) Data Analysis
4) Benchmarking with processes in similar banks/ best practices
5) Identified gaps in process
6) Devised solutions to fill the gaps
7) Developed decision flows which could be followed for decision making
(Steps 1-6 consisted of intensive brain storming, extensive primary and secondary research, detailed data analysis and benchmarking to chart the decision flows.)
Decision Flow
Although the decision flow is self explanatory and not rocket science, a bit of explanation on each element in the flow and the overall process will be add to the overall understanding
Key Considerations
Project Type: IT projects in any organization vary in size and criticality. Two projects seldom carry same business value and impact. Therefore it is only logical to segregate the projects based on certain parameters to avoid assigning same decision flow process to different project types.
Broadly there are two categories of projects in a typical bank: - Strategic and Tactical. While a high value high risk project qualify as strategic most of the times, a low value and less risky project maybe an operational one.
A good example of a strategic project will be the core banking transformation in any bank. The project 9 out of 10 times transforms all critical operations in the bank to the new system or process or both. These high cost projects are expected to pay back within 2 years of Go Live and are critical to the overall business future of the bank.
A database monitoring and maintenance project or testing software implementation projects are good examples of operational projects.
Key Assumptions:
Law of land and client factors: With the changes in economic, political and regulatory scenarios in the past 5-6 years, an organization may not have complete authority on off shoring decision. Also there are clients of these organizations who insist on getting the work done in home country due to security concerns, slower access times or any other reasons.
The decision flow assumes that the projects are authorized by regulatory authorities and clients to be off shored.
Components in Decision Flow
The new project which is decided to be off shored and has regulatory and client approvals are analyzed across multiple parameters to decide on the type.
Time to Market is a key factor in the decision making process as the competition landscape has got tougher for banks across the globe in post recession era
Vendor Ratio and Management Control are factors which are inherent to a project. These are purely head count numbers to be decided by project manager.
3 models could come out of the flow – Fully In House, partly out source and fully out source
Conclusion:
The process flow brings out important factors for consideration in the making one of the critical decision for IT management. While this will not conclusively provide an answer as there are multiple other factors such as previous project experience in play, the flow will certainly help to provide a quick and structured thought process for IT managers.
*Team:
1) Anil Karthik
2) Ashish Bakshi
3) Madhu Kurian
4) Mohideen Abdul
5) Pratik Kumar
CIOs & IT managers Banks with large captive units outside the home country constantly face challenge when a new project is ideated. How to optimize resource utilization of both in-house and outsourced teams? How to best deliver the project utilizing the most cost effective resourcing plan? While there is no dearth of articles on outsourcing models, there are few serious studies done on factors that IT management should consider while making decisions on in-house-vendor execution. The preliminary data collected from leading global banks show that over 60% of projects are initiated with resourcing plan finalized based on management intuition/previous experience. In other words in 6 out of 10 projects, the IT project manager/ delivery manager decides who will execute the tasks at what stage of project based on a mix of experience and intuition. While this approach may work for small, non business critical projects, it fails miserably when it comes to large complex projects. Although not very apparent the unscientific approach to project resource allocation is one of the primary reasons of the high failure rate (65%) of IT projects. (Source CHAOS Summary 2009 report – Standish Group)
We* analyzed the process inside and have come up with what we think is a more scientific approach to deciding vendor-in-house IT staff ratio for projects execution. This decision flow chart can be applied largely for businesses with a captive unit(s) outside their home country.
Methodology
1) Framework and Hypothesis formation
2) External and Internal data collection
3) Data Analysis
4) Benchmarking with processes in similar banks/ best practices
5) Identified gaps in process
6) Devised solutions to fill the gaps
7) Developed decision flows which could be followed for decision making
(Steps 1-6 consisted of intensive brain storming, extensive primary and secondary research, detailed data analysis and benchmarking to chart the decision flows.)
Decision Flow
Although the decision flow is self explanatory and not rocket science, a bit of explanation on each element in the flow and the overall process will be add to the overall understanding
Key Considerations
Project Type: IT projects in any organization vary in size and criticality. Two projects seldom carry same business value and impact. Therefore it is only logical to segregate the projects based on certain parameters to avoid assigning same decision flow process to different project types.
Broadly there are two categories of projects in a typical bank: - Strategic and Tactical. While a high value high risk project qualify as strategic most of the times, a low value and less risky project maybe an operational one.
A good example of a strategic project will be the core banking transformation in any bank. The project 9 out of 10 times transforms all critical operations in the bank to the new system or process or both. These high cost projects are expected to pay back within 2 years of Go Live and are critical to the overall business future of the bank.
A database monitoring and maintenance project or testing software implementation projects are good examples of operational projects.
Key Assumptions:
Law of land and client factors: With the changes in economic, political and regulatory scenarios in the past 5-6 years, an organization may not have complete authority on off shoring decision. Also there are clients of these organizations who insist on getting the work done in home country due to security concerns, slower access times or any other reasons.
The decision flow assumes that the projects are authorized by regulatory authorities and clients to be off shored.
Components in Decision Flow
The new project which is decided to be off shored and has regulatory and client approvals are analyzed across multiple parameters to decide on the type.
Time to Market is a key factor in the decision making process as the competition landscape has got tougher for banks across the globe in post recession era
Vendor Ratio and Management Control are factors which are inherent to a project. These are purely head count numbers to be decided by project manager.
3 models could come out of the flow – Fully In House, partly out source and fully out source
Conclusion:
The process flow brings out important factors for consideration in the making one of the critical decision for IT management. While this will not conclusively provide an answer as there are multiple other factors such as previous project experience in play, the flow will certainly help to provide a quick and structured thought process for IT managers.
*Team:
1) Anil Karthik
2) Ashish Bakshi
3) Madhu Kurian
4) Mohideen Abdul
5) Pratik Kumar
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