Last month, Conscient Partners conducted in-depth interviews with six senior IT executives from large multinational enterprises, to get their thoughts and concerns on global sourcing. In each case, the enterprises, that were all leaders in adopting global services, seemed to be struggling to get the expected balance of offshore and onshore resources. In some cases, even after two years, they were less than half way through the expected transition.

The common causes they cited (naïve expectation setting, transition hiccups, lack of vendor capabilities or productivity, etc.) were valid, but couldn’t explain why — even after several attempts at personnel changes and closely managed transitions — the programs remained under-implemented. Since then, we’ve looked at several other cases where enterprises had anticipated significant global sourcing initiatives, but after years of trying, are still not fully deployed. Our conclusion is that most enterprises, when planning a large and strategic global sourcing imperative, fail to recognize that they need to tackle the initiative as an organizational design issue, rather than an outsourcing problem.

For example, a large U.S. insurance company, after two years of working with a leading service provider, needed to call in sourcing consultants to assess how to increase offshore leverage. Despite all the efforts, the report remains largely unused because the focus of the assessment was on what was “offshoreable”, instead of looking at how the company could make it work.

This brings us to the key point of this month’s discussion: Does an organization need to be designed for scale?

What is an Organization “Designed for Global Scale”

An organization designed for global scale (DFGS) is relevant only for relatively large global resource deployments (200+ Full-time Employees (FTE) for IT initiatives; 300+ FTEs for BPO initiatives) — hence the term Designed for Global Scale. It is an organization where the strategic intent of building a large globally deployed workforce is facilitated, not constrained, by organization design. It is an organization where all the internal structures, skills and processes are in place to effectively manage a global workforce, whether captive or outsourced.

It means, for instance, a breakdown of the “silo” structure to increase coordination in resource management across the organization. It means developing governance frameworks that coordinate decision-making across different strategic initiatives. It also means modifying management reporting capabilities to give C-level executives transparency into the initiative.

Six Characteristics of an Organization “Designed for Global Scale”

Strategy. The organization’s strategy (e.g., the IT strategy from a CIO’s perspective) is aligned with large scale global sourcing, and sponsored by a C-level executive. The sourcing objectives for which DFGS is required are, for example:

•			To reduce operating costs on an ongoing basis and continuing to develop scalability in the organization
•			To leverage the operating budget savings to offset investment spending
•			To create a platform for global growth or more effectively service a global customer base
•			To position the organization better against global competitors.

These objectives are mandated by the executive leadership, and must integrate with any other strategic initiatives within the organization.