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A new IT super exec wizard is emerging to manage strategic outsourcing requirements, write Gerry Davis and Stuart Sadick.
A new breed of IT executive is emerging as the outsourcing industry continues to evolve. Variously called ‘head of strategic sourcing’ or ‘head of commercial strategy and sourcing’, they are executives with an outstanding strategic mindset and particularly strong relationship management skills. They have the ability to ensure that increasingly complex sourcing arrangements deliver on promised cost-savings and efficiency targets. They also have the change management skills and experiences necessary to lead subsequent business transformation.
This new ‘super exec’ is more strategic and commercial than the earlier procurement executive or IT department general manager who managed more straightforward relationships. There’s also a sense that possessing strong legal or purchasing expertise is no longer sufficient. These days, it takes a team approach to deliver benefits from the ever-collapsing supply chain.
While the much-heralded virtual corporation, where brand is all and most functions are handed off to specialist companies either in-house, outside or offshore has not yet emerged, we are seeing a splintering of capabilities as the various skills of corporations are systematised and componentised in the ruthless drive for ever-greater efficiencies and results.
So who are these sourcing magicians who are capable of managing the new complexities? Can all the necessary skills reside in one person?
EDS vice-president Phil Pryke says the new super executive needs more business than technical skills and a deep curiosity about “other people’s business”. Technology executives were once “all about technical wizardry” which was often fairly murky and mysterious, Pryke says. “But these days executives are less witches in suits and more polished, with an end-to-end view of the entire business and a keen focus on outcomes.”
“No longer can this executive go to the CEO and say that unless you do X you will get Y. This was a negative argument and a pretty unsatisfying place to be. We are now heading in the direction of clarity and standardisation. Enterprises with established systems are not going to be sustainable in a rapidly changing, competitive landscape.”
Commonwealth Bank chief information officer Bob McKinnon says the key requirement for a sourcing super exec is to be strategic and define the bigger picture. “They must be able to combine this quality with a strong commercial commonsense and experience base to understand the business and source solutions on a sound basis. They will need to be a good negotiator – firm but fair.”
McKinnon says these capabilities must be supported by strong interpersonal skills. “They must be able to build strong relationships based on trust and confidence, work transparently and communicate effectively with staff, customers and suppliers.”
At the Commonwealth Bank, the super exec, or executive general manager of commercial strategy, does not hold any delivery or service management functions. “Commercial imperatives can often get in the way of the day-to-day delivery functions,” McKinnon says. “So it obviously makes more sense to allow the delivery team to focus on the quality and business alignment of service delivery without needing to also deal with all the commercial aspects of the relationship.” His executives sit atop a large team dealing with all aspects of outsource relationships.
Over at Westpac, a team approach is also in evidence, with a strategy and research group working alongside sourcing, strategy and transactions management teams. That group is headed by strategic sourcing general manager Andrew Carriline, who reports directly to business and technology solutions group executive Michael Coomer. Carriline’s background is law, with strong negotiation skills thrown in. He was lead negotiator for major Westpac outsource deals and his current approach is to seed his team with a mix of law firm partners, international bankers and accountants in order to attract a more flexible crew.
Everest’s Richard Zabow, who often gets called in to assist when the outsourcing ‘marriage’ has broken down, says the rigidity of early deals led to an adversarial relationship. In the new world relationships and deals are more collaborative and outcome-driven.
In Singapore, DBS group head of technology and operations Steve Ingram, agrees that the role calls for a blend of negotiation, strategic, and partnership skills. “This blend of skills is rarely found in a traditional IT person,” Ingram says. “We recognise that for sourcing relationships to transcend the merely transactional, a true partnership needs to develop between customer and supplier. This can only happen where there is an atmosphere of mutual trust and respect, with a focus on outcomes.
“Development of such a partnership between sourcing executive and supplier is made unnecessarily complicated if the sourcing executive also deals with delivery. At DBS we have created separate delivery management and sourcing functions. The latter comprises a mixed team of paralegals, finance people, skilled negotiators and procurement specialists.”
Organisations looking to recruit an outsourcing super exec are faced with a significant challenge. There are very few truly expert outsourcing executives available for hire. Even in the more sophisticated market of North America well qualified candidates are scarce. In the emergent outsourcing markets of Asia and Europe they are almost non-existent.
According to TPI HR outsourcing partner Don Hamill, the issue is as true in HR outsourcing as it is in IT or business process outsourcing. “There is a leadership void in these new types of organisations, which is being driven by market demand. Many companies are struggling with new and different skill demands in these emerging roles, how to set up the right governance structure and how to work most effectively with their new partners – the service providers. Companies are struggling with how to manage service delivery in retained organisations, following the implementation of outsourcing agreements.
“Often they defer to the project executive who happened to lead the initial outsourcing initiative, which presumes that the person who is technically strong in a functional area would be good in the outsourcing executive leadership role requiring broader skills and experience. This frequently is not successful unless the technical expert possesses key skills including change management, relationship management, and the ability to deal with variability and risk.”
Hamill’s point is that greater creativity needs to be applied to the problem. Companies have to clearly identify their strategic imperatives and then organise to support them. For example, in a situation where a whole-of-business IT outsource is to be transitioned to a multi-partner sourcing program – involving selective insourcing, off shoring, infrastructure and business process outsourcing – it may be best to create two positions: service delivery and service development.
Such an approach provides focus on the quite different tasks of managing service delivery via existing sourcing arrangements and the creation and transition to new sourcing arrangements. The former role is fairly common and will be easier to recruit, thus allowing clearer recognition of the quite different skills required in the latter role. Once this happens, a careful assessment can be made of the competencies of candidates from vendor/corporate environments with regards to deal shaping, purchasing, legal, service delivery or consulting backgrounds.
The new outsourcing super exec is ideally a blend of skilled negotiator, salesperson and strategist.
Gerry Davis is a Senior Partner and leads Heidrick & Struggles’ CIO and Business and Professional Services Practice in Asia Pacific. He is based in the firm’s Sydney office, and his clients include both large multinational corporations and start-up businesses. www.heidrick.com
Stuart Sadick is a Managing Partner and an active member of the firm’s Business and Professional Services and Leadership Consulting Practice. In his twenty-year career in executive search, and as head of the firm’s Boston office, he has led senior level searches across most industries and functions.
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URL: http://www.austlii.edu.au/au/journals/MonashBusRw/2005/16.html