Outsourcing

The CIO's most important tech investment: A piece of paper

Editor's Notebook: Whether it's offshoring or cloud computing, you don't want to outsource risk...

Adopting cloud computing, outsourcing or offshoring might do away with your physical hardware, but you can't outsource the risk - and opportunity - that new technology can offer. And nor would you want to, says silicon.com editor Steve Ranger.

While the technology infrastructure - virtualisation, plentiful bandwidth and cast-iron security - needed to enable new types of computing is doubtless important, the most important ingredient in protecting your future computing infrastructure could be... a piece of paper.

For whether it's packing up IT and offshoring it to India, or virtualising and dematerialising a datacentre into the cloud, nothing takes the burden of risk off the IT chief or finance director.

Cloud computing versus offshoring

Whether you choose cloud computing or offshoring, cast-iron contracts are key to managing risks, according to CIOsPhoto: Shutterstock

It's a point that has long been made about outsourcing - no matter where you outsource your servers to, you can't outsource the risk. And it's the same with cloud. The technologies change fast, but the underlying business principles move much more slowly.

I was speaking at an event recently when someone suggested that CIOs would pay a premium if their suppliers took on the risk associated with cloud computing. A nice idea, but I'm not convinced that even suppliers with pockets as deep as the Mariana Trench would be willing to take on such an open-ended challenge.

While different members of the board have different perceptions of risk, as a recent silicon.com feature pointed out, responsibility for risk is shared across the executive team. The CEO's primary concern might be reputational damage, for example, but the finance director might worry about the consequences in terms of fines by regulators, and the CIO might focus on the broader systems impact.

And what one member of the exec team finds scary might not worry another manager at all. A recent survey by analyst house Ovum claimed that CFOs see the offshoring of finance and accounting functions as a riskier strategy than using cloud computing, with finance chiefs citing a loss of control over processes and a lack of sufficient savings as reasons for shunning offshoring.

So when I asked silicon.com's CIO Jury the question, "Is offshoring your IT a more risky option than putting it in the cloud?", the response was interesting: most said offshoring was no more risky than cloud. However, CIOs said in both cases watertight contracts with penalty clauses that can be enforced - and that you are willing to enforce - are vital to making projects a success.

It's impossible to jettison all technology risk just because the servers aren't in your datacentre anymore, and that means whichever flavour of technology you choose, solid contracts are an essential element in making it work - the all-important piece of paper I mentioned earlier. Of course, it's much more complicated to reboot a contract than a recalcitrant server, so it's essential to get it right first time.

Outsourcing, offshoring and cloud all necessitate letting go of that infrastructure, so negotiating contracts and building supplier relationships are top skills for any aspiring CIO. This is nothing new. Unless your IT infrastructure is entirely homegrown, managing contracts and suppliers has been part of the CIO skillset for years.

But what cloud removes is the psychological prop of having a server somewhere, even in a dank basement, that you can call your own.

As Nic Bellenberg, IT director at Hachette Filipacchi UK, said: "Whatever you do in business, it has to happen with eyes open and a full understanding of risk and any other consequences. You have to read the fine print. You have to negotiate what works for you and your company. You have to be brave enough to tell your board what the consequences are to actions that are taken, even if they don't want to hear.

"And above all, you have to have someone in your organisation who manages the service," Bellenberg added. "Outsourcing, offshoring and moving to the cloud does not bring with it an abdication of responsibility for the CIO."

Of course, taking risks is what makes life fun - and what makes the big profits for your organisation.

Why would you want to outsource that?

Want to be part of silicon.com's CIO Jury and have your say on the hot issues for IT departments? If you are a CIO, CTO, IT director or equivalent at a large or small company in the private or public sector and you want to be part of silicon.com's CIO Jury pool, or you know an IT chief who should be, then drop us a line at editorial@silicon.com.

About

Steve Ranger is the UK editor of TechRepublic, and has been writing about the impact of technology on people, business and culture for more than a decade. Before joining TechRepublic he was the editor of silicon.com.

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