Social implications of making SOAs a reality

I have begun doing executive briefings at Microsoft.  10 months of employment and I now know enough about the MS offering to really begin engaging.  Generally what these briefings entail is discussing with C level executives  (CIO, CTO, Chief Architects) the state of Web services, the value it can bring to their businesses, expectation setting and timelines, potential roadblocks, and clear business reasons why they should be enabling their IT systems as SOAs in order to maintain their business agility.

There are numerous reasons why SOAs are critical to enable services that can easily be moved, replaced, augmented, etc.  Services bring the right level of abstraction to business functions and enable business women to critically analyze how their company runs.  They can make decisions on service consolidation and outsourcing to lower the bottom line and enable the organization to provide new services for new business opportunities more readily.

I have been sharing slide decks with a few colleagues, especially Scott Garvey , Felipe Cabrera, and Nigel Watling.  One of Nigel's comments to me was the exact comment that I made to Felipe when I stole one of his slides for my deck talking about the need for companies to build services that can easily integrate into existing and new critical business functions:

<Nigel> There are so many reasons why SOAs are beneficial, is it really necessary to point out that "Outsourcing WILL happen"? </Nigel>

In many audiences, this message is not well received and has clear social implications.  It is not a question of what technology is better, it is a question of whether or not you are trying to offer one individual's job to another.  Continual outsourcing will drive wages for many types of IT functions down in the U.S. until an IT cost/quality balance is reached in the Global economy.

Broadband enables service communication.  Insurance companies can now afford automating doctor's offices for claims processing.  The cost of a data entry person is more than the installation of the IT infrastructure to directly integrate the individual offices.  Telecommunications infrastructures with DSL and cable support are growing rapidly.  I don't know if this is true, but my friend told me in India there are more cable modems than cars.

The ubiquitous nature of broadband and the maturation of Web services technology makes the potential of IT outsourcing even more a reality.  Recently the CIO section of TechRepublic referenced various articles on the social impact of outsourcing.  These articles resulted in some pretty awesome discussion.  When I think about services, I think about how one can build a service that is really satisfying a business problem.  Keep in mind, that there will always be a quality versus cost metric to calculate.

In Outsourcing Backlash: Globalization in the Knowledge Economy by Dion Wiggins and Dianne Morello, I found myself re-reading the statement they made about the need for companies to have "locals" in their IT departments that have a "deep understanding of local markets and mindsets".  I believe this to be true.  Outsourcing can only be successful when the function being outsourced is not a core component of a company' s business value or their corresponding business partner adds more value then the business itself can add because of the partner's domain expertise.  Other corporations look at IT as a competitive differentiator and feel that the IP associated with their IT is too invaluable to outsource because it is their competitive edge.  I see this frequently in the German and Swiss IT banking communities.

The question remains, "Which pieces of a company's value chain should be outsourced?"  There are numerous services that make a lot a sense to outsource, e.g. retail companies outsource their payment processing systems, all types of companies outsource their mass marketing and data warehousing, financial and insurance companies outsource data cleansing, the list goes on.

In an excellent article, Lift and Shift: Moving the Back Office to India[1] by Rafiq Dossani and Martin Kenney, they discuss trends and types of outsourcing within the IT value chain in India .  This article discusses drivers behind outsourcing to India , stats on outsourcing growth in India , the impact of telecommunications improvement and reforms being made in the Indian Venture capital markets.  I would love to see stats on the number of IT folks that have recently migrated back to India as a by-product of the .bomb and the implication of these folks pushing for higher wages based on their skill set and quality of living expectations.  Trends like this in India, China , and other areas where IT outsourcing is predominately being done and whose outsourcing markets are rapidly increasing will give us an idea on how long it will take until a balance is reached with the cost of IT abroad will be.

What I find interesting is that MS is very much a high touch, face to face type company.  Business is done in large amounts via both IMS, SMS and email; however, meeting rooms are very hard to come by.  MS is very aggressive about new employees relocating to Redmond so that they can be the most productive by interacting with the numerous groups face to face.  In addition, there is an even balance which includes much outsourcing.  Don't outsource core competencies and competitive advantage.  MS is not known for making good food, so we do outsource our cafeteria.  But we do not often outsource our development.

There are numerous reasons why outsourcing can and will fail.  There are also numerous reasons why outsourcing can and will be successful.  Poor risk analysis, lack of understanding of cultural differences, poor management, etc. can all contribute to failure.  The key is to understand what components of the value chain must stay core to a company's business process.

If you outsource everything that is of value to your customers, your business will die and you will become a commodity.  Companies need to think how they can get more value out of the IT departments that they have in place, which components are not core to the business, what services to consolidate to better leverage their economies of scale, and how services can enable additional business value.

Now I put my marketing hat on....

Ask yourself, "How can you lower your cost of development and create new business opportunities for my company?"  .NET has proven time and time again that it can lower IT development costs radically and improve time to market.  Numerous applications are being built because the cost associated with implementing the new business functions is so low with .NET.  In many cases, it is critically important to have employees that understand your business functions.  The way to get the right cost/quality balance without outsourcing is to invest in the right tools that enable your developers to be more productive and reduce overall maintenance costs.

GotDotNet?

Am I drinking the MS koolaid or what?