From Body Shop To Mind Shop

Body shop to mind shop Businesses look for more from third party consultants May 2009

Most organisations have had to supplement their IT capability with some form of external help at one time or another. However, as financial pressures mount and technology continues to evolve and its relationship with the business becomes increasingly complex, how does this change the expectations and needs of those external relationships?

Rob Bamforth Quocirca Ltd Tel : +44 1962 849746 Email: [email protected]

Bob Tarzey Quocirca Ltd Tel: +44 1753 855794 Email: [email protected]

Jason Colombo C&C Technology Tel: +44 1256 660000 Email: [email protected]

An independent report by Quocirca Ltd. www.quocirca.com Commissioned by C&C Technology Consulting

Body shop to mind shop

May 2009

Body shop to mind shop Businesses look for more from third party consultants IT departments rarely have the luxury of spare capacity or sufficient knowledge of all the products and technologies that the rest of their organisation expects. However, IT is an integral part of most businesses, and supporting diverse or specialised technologies and understanding their impact on the business is a necessity. Organisations not only require help from third parties, they need it to be focussed, expert and cost effective, and based on a long term partnership to ensure that internal and external staff work effectively together. IT departments are often overloaded and overstretched, impairing their view of new technology New technology, even in the IT function, can be viewed as a burden requiring extra work, rather than an opportunity to add value to the business or something interesting for them to tackle. Those companies that use third parties to augment their IT function are less inclined to see things this way and have a far more positive attitude to new technology. Despite the recession, one in five companies think staffing levels in their IT function will increase This might be a little over optimistic for those who are not tightly linking IT with business needs and, if they ignore this, they risk being overtaken by events. It might not be necessary to make wide-ranging cutbacks which may damage the capabilities of the IT function, but it might be worthwhile to check how the skills currently available meet the needs of the business, prune where necessary and bring in outside help to fill gaps. Experienced external consultants bring vital operational skills and offer support for strategic thinking While in-depth technical knowledge is still important, companies are expecting third parties to deliver business consulting skills and industry experience. As well as compensating for missing in-house skills, being able to trust an experienced partner to take care of operational matters can allow more time to work with them to look at the bigger picture. Companies making use of third party help seem much more comfortable in dealing with their overall strategic needs for planning. With rapidly evolving technologies, trusted external partners can help with product selection Although using an external consultant for guidance on vendor selection is not high up the list for most companies, product selection is, as is help with looking at the direction of new technologies. This is an even greater issue for smaller companies who are often too busy trying to deal with existing requirements to look too far ahead, and would appreciate independent advice. Achieving an alignment of IT with business requirements and measuring its impact is more common for those organisations using external support Those having to justify spending on third party help are likely to be familiar with measuring the results and, as a consequence, are more likely to formally measure the impact of IT projects. This is part of the process of ensuring that IT is well aligned to the business, something that companies working with external contractors are also more likely to achieve. Conclusions As budgets tighten, it is even more important for a company’s IT function to demonstrate its fit with the business and obtain the best value from all resources and services at its disposal. Simply scaling up by regular recruitment or ad hoc use of contract staff is not always a sensible option. Companies can cover gaps and needs with outside help, but they need trusted partners that can supply transferable business knowledge, as well as offering an extra pair of IT hands.

Body shop to mind shop

May 2009

1. Introduction The options for companies looking to outsource some or all of their IT needs have increased as suppliers look for innovative ways to offer software products such as Software as a Service (SaaS) or on-demand and hosted IT offerings. However, for as long as there has been IT, it has been common to ‘in-source’ or bring in external third party consultants and support staff to work alongside the in-house IT personnel. At one time the approach would have been to just hire technically adept ‘bodies’ from consultancies, but now broader skills have become important (Figure 1). No IT department can ever hope to have all the skills required at any given time, especially as this is a rapidly changing and evolving industry. Even in the largest companies with a well staffed IT function, there are always new products coming to the market. Often, the IT department will have to juggle many support and management issues, or not have sufficient resources to fully investigate new technologies. Staff enthusiasm may be worn down from constant fire-fighting and, even if the interest is there, assessing the impact of new technologies may not be high on the management agenda if there is not the right level of expertise to do the job well. Those brought in are not only expected to complement and fill in gaps in the knowledge of the internal personnel, but also to perform skills transfer, coaching and training. In addition to technical expertise, there is an expectation of business consulting skills and advice on product or vendor selection. Understanding new technologies and products is an area where close working with a third party can be beneficial. Not only can individuals with the right skill sets be brought in to help with evaluations, but the experience and knowledge gained can be transferred to in-house staff should the new technology actually be purchased. The value of this is noticeable by its absence among companies that do not use third party support. These companies tend to view new technologies as extra work rather than something that might add value to the business (Figure 2).

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It is not just about numbers, as having the right mix of staff with the right capabilities to meet changing IT needs is vital too. Those focused on day to day operational roles may lack the skills necessary to evaluate a particular technology, or to make strategic decisions about its impact. It might be that, with time and suitable training, those skills gaps can be closed, but when time is precious, or specific knowledge is only required for a limited period, other options will need to be considered. This report looks at how the in-house IT function might be able to work better and closer with third parties, treating their staff as valued and valuable resources for knowledge and skills transfer, rather than just cost-effectively getting ‘extra hands to the pump’. This report is based on 100 interviews with managers and users from organisations in the UK with annual turnovers of up to £500m.

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Body shop to mind shop May 2009

2. Sufficient resources The size of in-house IT departments varies considerably, and although some companies have dedicated IT departments, smaller organisations may have only one to four individuals and, for some, IT will only form part of their duties (Figure 3).

Many organisations augment their in-house staff with third party resources providing onsite support, training and guidance. These numbers of external people may be fairly low, but only around a third have no onsite third party support whatsoever. Almost all businesses rely on IT to a greater or lesser extent, and many recognise that business performance is linked to IT capabilities. Even though the recession means budgets are tight, the majority do not expect to be changing their IT staffing numbers over the coming year, and around one in five think they will be increasing headcount (Figure 4).

expecting to grow staffing levels actually do so or are just being over-optimistic may depend on how well the IT function aligns with the business. This is always an important metric, but is critical in times of financial restraint. Those already making use of third parties to augment or fill in the gaps internally are more likely to exhibit a better alignment with the business (Figure 5).

Partly this will be because they have already had to justify the external spend, and partly they will be setting more specific and measurable goals against the external organisation than they would for their own staff. It is often easier for managers to be more objective and hardnosed with staff when they are not responsible for man-managing them or their career development. Also, external contractors and consultants are often thought of as better paid than internal staff, so more is expected of them even if this is not always the case.

3. The right skills Bringing in external help is sometimes to make up numbers or just throw ‘bodies’ at a problem and, when budgets were more freely available, this probably happened quite a bit. Now these relationships will come under closer scrutiny.

This is likely to be somewhat optimistic, and managers will be coming under strong pressure to either reduce headcount or, at the very least, freeze recruitment. However, IT departments will still have to deliver and, while some may be reducing the number of contract staff to cut costs, others are looking to grow their external staff numbers. Whether any of those ©Quocirca 2009

Canny businesses will no longer tolerate being presented with senior or highly experienced third party staff during the sales process, only to realise the project is fulfilled by juniors. They are looking for solid experience and deep expertise, with the hope that this will not only be more cost effective, but also help develop the skills of their own staff. Those who believe they are outgrowing their sector peers, in particular, are more focussed on growing the capabilities of their staff in line with this (Figure 6).

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Body shop to mind shop May 2009 As a minimum, companies should request profiles that outline the complete breadth and range of skills and experience that a third party team can offer, and the scope of projects that can be tackled. This should also detail past examples of customers where similar projects have been undertaken. Beyond the technical skills and experience, a significant number of companies are looking for third parties to provide help with strategic planning and an understanding of the impact of technology on the business. This, alongside advice on technical, product and vendor issues, seems to generate more confidence in the IT function’s ability to plan for the future (Figure 8). In order to turn these skills, whether existing internal or being bought in from outside, to worthwhile use, they have to be targeted at the IT management and planning aspects that add the most value to the business. There is an expectation that third party skills can be applied to a broad range of IT planning challenges, although few specific issues strike a chord with more than a third of companies (Figure 7).

4. Measuring impact While self-confidence of the IT function is welcome and necessary, it is not sufficient and needs to be tested against the effect IT has on business performance. Larger companies often have sufficient internal IT resources to give them a spread of knowledge and experience across different technical disciplines, but sometimes this will lack depth and would benefit from sharpening up in specific areas. Smaller companies with fewer IT staff may struggle to understand the implications of specific new technologies or make informed decisions about product selection.

Ideally this should be a formal process, so that there is consistency between different types of projects, and take place over time as staffing changes. If such a formal process is impractical, then some form of post implementation check should at least be applied to every project to provide some evidence of value to the business.

Companies of all sizes have different needs when they look to third parties for assistance and so, rather than identifying partners that can supply sufficient numbers of additional heads, even of the right quality, they need to look more deeply at the skills on offer. This means looking at the third party staff on offer as individuals, rather than just numbers, as it is ‘minds’ that are being paid for, not bodies. ©Quocirca 2009

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Body shop to mind shop May 2009

One client where C&C Technology helped to align IT with the business: A major global law firm struggling with a large IT budget was finding projects were virtually never delivered on time or to budget. There was a lot happening—too much change, too many projects at once—so the value was not clear. C&C established a new function to manage the portfolio of projects and formal systems to measure progress and provide governance. This created clarity between roles and buy-in from the internal teams. As a result, not only are projects delivered on time and to budget, but the perception of the IT function internally is enhanced. There has been a reduction in costs, partly from rationalising the number of projects, but also from reducing the impact of change on the business. Internal staff expertise has also increased, creating more confidence and enabling new procedures to be kept on track.

Those companies using third party help know they need to justify the cost, are more used to making objective measurements, and are more likely, therefore, to employ a formal process (Figure 9). Unfortunately, many companies still only perform some form of impact analysis on some of their IT projects, and many others are even more lax.

This will do little for the reputation of the IT function in the broader business, and in more difficult economic times will make it even harder for IT to justify the expense. No wonder then that many financial controllers are viewing IT as a costly internal ©Quocirca 2009

function that could perhaps be more effective if outsourced completely. Certainly, cost control is a major expected improvement for those employing third parties and, in particular, for those organisations that believe they are outperforming their peers (Figure 10).

Beyond that, these growth-minded companies are looking for third parties to support that growth through enhancing their competitive advantage, customer service and overall business performance. Price, however, is rarely out of focus and, as a reflection of the current economic challenges and need to justify budgets, is, on balance, the most important factor when selecting partners. However the knowledge they bring and the fact that they have successfully delivered before for other organisations and have established a reputation follow close behind (Figure 11).

Again, when looking for external support, those companies growing faster than their peers are seeking skills that will enhance the business, making their own staff more effective and productive, and not just to fill gaps. The aspects they believe are most important revolve around business skills and values, and it is these that are more important differentiators when choosing between different third party consultancy companies. Page 6

Body shop to mind shop May 2009

5. Conclusion Companies should always try to get the best out of their IT resources, and this includes people too. However, no matter how large, no company will ever have the perfect mix and numbers of IT staff to cope with changing market conditions or technology evolution and development. Finding external help, guidance or support will always be part of the equation. Some will choose to entirely outsource IT to one primary partner, others will try to do it all on their own, and many will use a mix of internal and external manpower. Selecting the wrong third party partner could be a costly exercise and, while a short term fix of renting temporary headcount might get the IT function out of a hole, a broader perspective is important in order to obtain lasting business value out of any engagement. This means: Keep an eye on costs, but understand that the impact of the lack of internal resources to the business could be significant. Work out the real internal cost of in-house headcount, and use external resources where it is more cost effective. Do not be tempted to cut corners on cost. Consultancies with a good reputation and industry knowledge will cost more initially, but will benefit the business more in the long run and avoid costly mistakes.

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Seek out consultancies that provide specialist and distinctive skills that are difficult to recruit for. Look to those who provide senior and experienced staff through the lifetime of the engagement and not just at the beginning or during the initial sales pitch. Integrate external and internal staff. Encourage in-house staff to engage with and learn from the external specialists, and foster a long term relationship based on trust and sharing of information and skills. Ensure that third party engagements have defined measurable outcomes and that these include an element of skills transfer and coaching, but not the interviewing and poaching of internal staff.

Not only are external services under greater scrutiny for the value they bring, but internal services, such as the IT function, need to be demonstrating their effective impact on business performance. More than ever before, companies need to identify external partners they can trust to deliver not only technical knowledge, but also wider market understanding and an ability to transfer some of their expertise to further develop internal capabilities. Partners will still be expected to deliver all this at what is perceived to be a keen price but, providing they add demonstrable value to the IT function and the business, they will be able justify the cost.

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About C&C Technology Consulting Bringing IT Know-Why & Know-How C&C Technology Consulting provides independent consultancy to businesses that want increased benefit from technology. C&C works to bring a more integrated approach to Applications, Infrastructure and Networks, —from Desktop to Data Centre. C&C’s unique approach encompasses IT Know-Why & KnowHow, to deliver IT that really works. IT Know-Why is concerned with clarity of the purpose behind what you do; Know-How is capability and expertise. C&C recognises that there is a great deal of Know-How in the market, but it is the combination of Know-Why that is missing. This powerful combination ensures C&C works with the customer to help make the right decisions and implement solutions more effectively; meeting their business agenda and helping them do IT better. C&C has established a reputation as a trusted advisor to its clients, combining a strong heritage in technical IT disciplines with a flair for developing an understanding of how their business and people operate. Working with clients across the mid-market and public sectors, C&C provides a totally dependable and objective service. C&C provides consulting, coaching/education, resources and services to help clients align IT activities to business vision and goals. It assists clients in developing and implementing a well thought out, structured and appropriate IT strategy—covering both the ‘why’ and the ‘what’, which can be divided into smaller, manageable activities or projects. To C&C, it is the ‘why’ aspects of IT which are so often undervalued, which leads to increased complexity, risk and cost within IT. ‘Why’ is the link between IT and the business, ultimately the brief and purpose for action. C&C’s work with previous clients, centring on helping them do IT better, has resulted in an enhanced reputation of the IT function across their businesses. C&C firmly believes that IT needs to be represented at board level in order for the maximum benefit to be realised; which C&C helps clients achieve. C&C provides its services by partnering with clients across its three key areas of IT model: 1. Strategy & Management - formulate IT strategy & plans in alignment with the business objectives 2. Build & Change - manage projects & programs, designs solutions/transitions & manages the delivery of IT related change within the business 3. Operations & Service Management - manage the IT infrastructure & operation. Optimising & delivering C&C Technology uses this model when helping clients develop and manage their own IT capability, across a broad spectrum of activities. C&C believes that in order to deliver successful IT projects within any business requires more than a simple choice of technology, it must cover the following aspects: An understanding and interpretation of the business plan and requirements A clear IT strategy The ability to objectively source and select technology solutions For each activity a clear scope, budget and set of requirements Clear definition of roles & responsibilities across all areas The right resources & skills to complete the task efficiently Structured approach and process to IT project delivery Structured approach to managing IT operations Right support from partners who understand your agenda With this approach in place projects are completed faster, on or even at lower than originally budgeted and according to the original scope. C&C believes that IT capability drives great IT performance, which in turn results in outstanding business performance.

REPORT NOTE: This report has been written independently by Quocirca Ltd to provide an overview of the issues facing organisations seeking to maximise the effectiveness of today’s dynamic workforce. The research behind this report involved interviews with 100 managers and users from organisations in the UK with an annual turnover up to £500m. The report also draws on Quocirca’s extensive knowledge of the technology and business arenas, and provides advice on the approach that organisations should take to create a more effective and efficient environment for future growth. Quocirca would like to thank all the participants for their time to take part in the telephone interviews from which the data for this research was derived, and to thank C&C Technology Consulting for its sponsorship of the research.

About Quocirca Quocirca is a primary research and analysis company specialising in the business impact of information technology and communications (ITC). With world-wide, native language reach, Quocirca provides in-depth insights into the views of buyers and influencers in large, mid-sized and small organisations. Its analyst team is made up of real-world practitioners with firsthand experience of ITC delivery who continuously research and track the industry and its real usage in the markets. Through researching perceptions, Quocirca uncovers the real hurdles to technology adoption—the personal and political aspects of an organisation’s environment and the pressures of the need for demonstrable business value in any implementation. This capability to uncover and report back on the end-user perceptions in the market enables Quocirca to advise on the realities of technology adoption, not the promises. Quocirca research is always pragmatic, business orientated and conducted in the context of the bigger picture. ITC has the ability to transform businesses and the processes that drive them, but often fails to do so. Quocirca’s mission is to help organisations improve their success rate in process enablement through better levels of understanding and the adoption of the correct technologies at the correct time. Quocirca has a pro-active primary research programme, regularly surveying users, purchasers and resellers of ITC products and services on emerging, evolving and maturing technologies. Over time, Quocirca has built a picture of long term investment trends, providing invaluable information for the whole of the ITC community. Quocirca works with global and local providers of ITC products and services to help them deliver on the promise that ITC holds for business. Quocirca’s clients include Oracle, Microsoft, IBM, O2, T-Mobile, HP, Xerox, EMC, Symantec and Cisco, along with other large and medium sized vendors, service providers and more specialist firms. Details of Quocirca’s work and the services it offers can be found at http://www.quocirca.com