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Thought Leaders In Cloud Computing: Steven John, Strategic CIO Of Workday (Part 6)

Posted on Saturday, Aug 6th 2011

By Sramana Mitra and guest author Siddharth Garg

Sramana Mitra: OK. That covers some of the security and fault tolerance issues. Now, what about the organization? Especially since you are in the area of human capital management? Both from the perspective of a CIO hat plus that fact that you are serving a product that is a human capital management product, how has the IT organization changed with your extensive adoption of the cloud? And how are you seeing this in the larger community?

Steven John: Let me start off with two ideas. One of the things I preached, the mantra I have repeated again and again to my teams, was that if we are doing something that somebody else can do or do better than we can, then something that only we can do isn’t getting done. The idea was that we had more on our plate than we could get done with our resources. Anything we could shift to somebody else, especially the commodity things, freed us up to be focused on things only that we could do, and I would argue that those things that we can do are those things that require business specific knowledge. The picture I would draw for my team basically said there are three types of work that we do in IT, especially CIOs: There is operational work, there is transformational or development work, and there is strategic work. I used to say there were two things that drive you from being an operational CIO to being a strategic CIO; the first is business knowledge and the second is credibility. I now think there is a third; I now think that technology has finally reached a point with the cloud to free us up or liberate the CIOs’ IT departments from their operational and in some cases from their transformational or development work so that they can truly focus on being strategic partners of business.

I think there is going to be a huge shift in IT departments. It will vary from industry to industry, vary by the size of the company, but you will see a shift where IT will move more to being a business partner and less of a team that runs operations. It will still be accountable for those operations, but the responsibility of those operations will be outsourced to the cloud for the most part. The example I use to explain that is skunkworks or shadow IT. In my opinion, skunkworks and shadow IT happens because IT is not engaged enough with the business, so what I talk to my team about is that if we free ourselves up from data center work and a lot of the stuff that is just keeping-the-lights-on kind of work, if we free ourselves up from that, then we can focus on the business and spend time with the business We can have IT-facilitated innovation instead of skunkworks or shadow IT. We can help to drive innovation, we can help to drive growth, and we can increase revenue and be a real partner as opposed to spending all of our time in the data center.  Does that make sense?

SM: Yes, absolutely. One other question on that topic; you did make the comment that the cloud is a deeper form of outsourcing?

SJ: Yes.

SM: What is happening in your opinion to the outsourcing industry the way we have known it? Especially the IT industry and IT services industry that has developed in India and elsewhere and that caters to the CIO’s organization in different organizations? What do you think is the evolution, and will happen over this decade because of the cloud?

SJ: I think in a lot of ways outsourcing as we have known it has been a mixed bag. In some cases it has been successful, while in some cases it has been unsuccessful. There could be arguments about whether there really were significant cost savings as promised. I think that by going to a deeper form of outsourcing, where you are not just talking about bodies, you are talking about specific functions and capabilities and it’s much deeper and specific, there is much more opportunity for the true savings that we all hoped for from outsourcing.  I think it is outsourcing evolved where you are not just re-badging employees who are going to do the same thing but maybe less efficiently but at a lower cost. You are really driving down to partnering with specific experts who are able to drive down costs through large scale, economies of scale, and so on. I think it is the maturing of the outsourcing models. Does that make sense?

SM: Yes, actually I have written quite a lot about this topic. I don’t know if you have seen any of my work. I had a column in Forbes and I wrote this piece called The Coming Death of India Outsourcing, and I said that at some point the labor arbitrage equation doesn’t work anymore. The attrition rate and wage inflation is quite significant in those markets. Of course there are some people who say there is no wage in inflation, which is true in some segments of the market, but in the broad IT outsourcing industry I think there is tremendous inflation.

SJ: I agree! And you could see it just in the shift in of where people would outsource to. Because as the middle class grows in India and China, you see people shifting to other economies that aren’t as mature so that they can the lower cost. That is the way to preserve the cost savings that they had been promised. At some point that ends, so I agree with you completely.

This segment is part 6 in the series : Thought Leaders In Cloud Computing: Steven John, Strategic CIO Of Workday
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