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Leadership

Short-lived teams.

Short lived teams.

I want to talk to you about a time when IT systems failed, and I put it to you that they failed because of a flawed outsourcing strategy.

Outsourcing Strategy

One of the case studies was the Royal Bank of Scotland (RBS) where their systems were out of place for several weeks, to the extent that you couldn’t access your banking statements or make any online transactions.

Apparently, the bank had an outsourcing strategy that included maintenance, development, and innovation of their banking system to companies around the world but especially in developing countries.

The primary driver of this outsourcing strategy was to lower costs as much as humanly possible, which created salary pressures for the suppliers.

In developing countries, talent and skills acquisition are incredibly important and highly competitive, as they are in developing countries, and so the suppliers were battling to retain skilled and experienced staff members.

The bank’s primary strategy of lowering costs created a vicious cycle where the outsourced companies were unable to pay competitive salaries and skilled, experienced developers were leaving the environment, creating bottlenecks and system failures.

In the bank’s IT department, leadership teams believed that they were transferring the knowledge and competencies of their environment to an outsourced team in a developing country, however, the people who acquired that knowledge and skill were leaving the outsourced companies faster than they could find and train new talent.

This process had been going on for years and resulted in an increasing number of failures in the IT systems and a decreasing capability in the outsourced companies who served RBS.

Insourcing Strategy

One of the things I do when I work with an organization is recommend that they develop an insourcing strategy that aims to grow, nurture, and develop high-performing teams.

People within the organization that acquire knowledge and skills, unique to their application, who grow as a team and become more effective, creative, and collaborative with time.

  • Bring the work back into the organization
  • Encourage the team to learn, iterate and evolve.
  • Grow knowledge of the systems and environment through in-house teams.
  • Grow skills and capabilities within the in-house team environment.
  • Focus on creating value. View IT as a value creating engine within the organization.
  • Instead of a CIO, focus on having a CTO that views value creation as a critical capability instead of a cost that can be outsourced.

So, my recommendation to executive and leadership teams is to invest in growing long-term teams who have the knowledge, skills and capability to innovate and create value within the organization.

As John Seddon says, “when you try to optimize for costs, your costs actually go up”.

Be careful with cost optimization and invest in skills and talent acquisition that grows the organization’s ability to innovate and create value over time.

John Coleman has deep experience and expertise working with executives, #leadership teams and product development teams to achieve increased #businessagility and create environments where creativity and collaboration produce high-performance teams.

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Tags
Agile Leadership,Executive Agility
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