Outward bound

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CHOUDHURY: Application development is outsourced because it can be a very difficult skillset to find.

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NAGARAJAN: When I brought in outsourcing staff for some projects, existing employees felt like they were being sidelined.

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BHADAURIA: Saudi Arabia is definitely the leading market in terms of outsourcing in the region, followed by the UAE.

Outsourcing is often touted as the answer to IT costs spiraling out of control - but does it really work? Imthishan Giado investigates.

For years in the world of IT, outsourcing has been the equivalent of a no-brainer.

In theory, it allows CIOs to, at the stroke of a pen, cut their overall headcount, with all the attendant benefits that brings not just in terms of salaries, but also in terms of management overhead and human resources. It allows IT teams to be smaller, better skilled and more focused on achieving business objectives, as opposed to dealing with relatively petty issues like user support or server management. And most importantly, it cuts costs while improving standards, as enterprises can grow faster while using teams of best-in-class service providers to carry out their projects.

This is the theory - and for most of the world, it's nothing less than a fact. However, the Middle East has noticeably been slower in its uptake, and large IT teams are still very much a fact of life in this region. Kavita Bhadauria, senior analyst for IT services at IDC Middle East, Turkey and Africa reveals more.

"Saudi Arabia is definitely the leading market in terms of outsourcing in the Middle East, and then followed by UAE. The uptake has been relatively slow in other countries. In KSA, spending has largely been in verticals like telecoms, transportation and e-government projects and also smart cities. They are definitely a huge potential for outsourcing," she says.

Most companies tend to think of outsourcing as still following the same pattern it did in the early 2000s, when companies farmed out call centres and basic telephonic support to overseas firms, usually in India. Today however, outsourcing is a much broader umbrella term that can cover a whole spectrum of functions.

Yes, it may still involve setting up a pipe to Bangalore where a team of agents respond to your helpdesk tickets, but it can now also cover all day-to-day general operational functions within an organisation - from basic server maintenance to capacity management and even application development. This type of outsourcing - different from outshoring, described above - is where the managed services provider sends in a team of individuals to work alongside the regular IT team on the projects at hand. It has the added benefit of considerable savings in HR management - for example, if an employee goes on leave, the outsourcer must replace them regardless, as it would be a breach of contract not to provide the stated headcount.

At this point, one might ask - why would CIOs prefer to have these teams present in the country at all? Would it not be easier to have the entire operation based overseas - or more appropriately, "true outsourcing"?

IDC's Bhadauria admits that the more basic model is widely prevalent here and that cultural concerns still win out at the end of the day:" That has yet to happen in this market - the Middle East is not really open to that model. There are service providers providing the highest level of support services from their offshore centres, but that model is not very accepted in the ME market. It's a desire to control the entire system and also related to the security concerns some people still have in this part of the world."

In terms of what functions are actually being outsourced, there is no clear consensus, but most organisations tend to dip their toes in the water first with service desks and desktop support, and if successful, move to outsourcing their entire IT operations.

BT's Tareque Choudhury suggests that application development and security are also growing areas of interest: "Typically, it's about application development, because it's very difficult to get that core skillset within your organisation. A lot of security monitoring is being outsourced - people are taking security quite seriously right now and they don't know what's happening on their part of their organisation. They tend to outsource it to companies that can, like a security guard, watch their organisation for threats."

Not everyone agrees with this view. One such company is the UAE's Road and Transport Authority(RTA), which has invested heavily in outsourcing through Indian vendor Wipro - but has yet to entrust security to an external party. Indranil Guha, manager for IT infrastructure management, explains his point of view.

"The most easy bit people are ready to try is desktop support and service desks. The next step is core operations - server and datacentre operations. I have seen many companies that are a little reluctant with that but they are OK with the idea when they see some successful implementations. But security is an area, I still think everybody including RTA would give it a really microscopic look before outsourcing. I've seen a reluctance among people to put their security environment, logs and all these things in the hands of the outsourcers. How transparent would the company be with the parent company?" he suggests.

Guha elaborates on the RTA's outsourcing mindset: "Our strategy is: any non-core activity which does not need day-to-day decision making should be outsourced. What IT has done is taken that strategic decision and has implemented it from day one since we launched our IT services in April 2006. We had our service desk outsourced and our IT operations completely outsourced. What I mean by the latter is day-to-day backing up of servers, checking the server health and doing the capacity planning.

"As a policy, we said that we will not hire too many field engineers here. We'd rather manage multiple projects or specific large projects and have these engineers outsourced. That has come up as a very successful model," he states.

While this may sound as everything within IT is up for grabs, Guha adds that there are some things which should be never be up for discussion: "Strategic decision making, innovation. CIOs and the key people in the department involved in innovation and strategic decision making or recommending strategic initiatives to the respective verticals, whichever business they are in - I don't see that being outsourced."

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