In transforming your IT workforce, modeling its to-be composition is a necessary and smart first step, but it represents only the tip of the iceberg. Here’s how to pressure-test your model against the realities of execution.
This article was originally published on CIO.com by Michael Bertha, Partner at Metis Strategy and Ishan Prakash, Manager at Metis Strategy
In today’s ever-expanding digital landscape, in which many IT teams operate across geographies, it’s no secret that your ability to leverage technology to its fullest depends crucially on your workforce composition: on how your resources are allocated across various sourcing models, namely, FTEs, onshore, nearshore and offshore. As technology becomes ever more important to strategy, IT leaders are reconsidering their workforce compositions. Where they once optimized predominantly for cost, they’re now weighing that one variable more carefully against many others, including productivity, digital maturity, and the development of longstanding capabilities.
And though modeling the composition of a to-be workforce is a necessary and smart first step, it represents only the tip of the iceberg. In other words, it’s unrealistic to redeploy a role as part of a different sourcing model and expect instant productivity gains. Countless variables must be considered: skillset alignment and maturity, time zone differences, and ways of working (both within a team and across the organization), and so on.
Acknowledging these challenges and complexities, how can one pressure-test their spreadsheet exercise against the realities of execution? Drawing from our collaborations with several Fortune 500 clients on this topic, we suggest an archetype-based approach, one that, when executed well, will allow you to charge ahead with implementing your to-be workforce composition, and with the confidence that it reflects the needs of your organization.
By shifting the composition of your workforce, you are bound to affect certain functions, capabilities, or products. Begin by understanding those entities’ remit and ways of working. Are they developing novel products and services? Configuring a package solution? What key technologies are they using? What skills will enable operations in the new model? Are they working in agile? If so, what flavor do they employ?
As an example, consider the case of a global retail client. In assessing the demand profile of the team that oversees their fulfillment capability, the client examined their inventory management solution, a niche one, and determined that, even though the company might benefit by bringing the solution’s support team nearshore, the right skills would be hard to find in the short run.
Cataloging the answers to these questions provides a fact base that allows you to understand what capabilities, roles, and skills will be needed to support demand. And perhaps equally important, it allows you to understand which of those capabilities are fungible across sourcing models, and which are, at least in the short run, tied to specific locations or vendors.
After constructing a demand profile for each function, look across those profiles. Reconcile and rationalize them. And make sure the various types of demand will be supported by creating a master set of archetypes.
What’s an archetype? In this context, archetypes encompass the roles, responsibilities, and geographies that constitute a specific capability and that are required to support a certain type of demand.
As an example, consider the archetypical teams found at one of our global retail clients. For one, they have an infrastructure delivery team archetype, which consists of a nearshore engineering delivery manager, a scrum team, and both a nearshore and offshore delivery team (i.e., developers), the latter supplementing the former with overnight or follow-the-sun support. They also have single or multi-capability delivery teams that work on, among other things, innovation and product development, and operations and maintenance. As you can imagine, the archetype after which these teams are modeled varies based on the demand profiles they are constructed to satisfy. While every organization is different, we often challenge our clients to limit themselves to six archetypes.
By undertaking this exercise, you not only confirm that your teams are structured such that they can both support demand and satisfy the objectives of the workforce shift; you create a vehicle for scale and standardization in what is likely to be a multi-vendor, multi-geography workforce.
Having established a master set of archetypes, it’s crucial to apply them to each function’s to-be workforce composition. Doing so will reveal discrepancies between those archetypes needed to satisfy demand and those targeted for the to-be workforce compositions, which may have been painted with broad strokes in a top-down exercise that gave little consideration to execution.
By applying the archetypes to your to-be model, you will quickly see where your current workforce easily ports into the new model, and where there are gaps that must be closed through some combination of reskilling, recruiting, and partner sourcing. The time it takes to execute these tactics will inform the speed and sequencing of implementation.
Here you can also take stock of the various ways of working practiced by the different capabilities or functions. If those capabilities and functions work similarly then perhaps it will suffice, as responsibilities change in the new model, to simply recalibrate planning and execution processes. If they work quite differently, however, then a major change will likely complicate both their work and the effort to shift the workforce composition. The discrepancy may indeed merit a broader reset as you move toward the to-be model. It is also at this point that more attention tends to be given to an organization’s horizontal capabilities. One such capability that often surfaces is Knowledge Management: how do we ensure that in changing or relocating a resource, we don’t lose critical institutional knowledge?
By the end of this exercise, you will have effectively pressure-tested your to-be model. You will have uncovered a clear set of gaps that, when accounted for in your roadmap, will help you avoid surprises as you move towards the to-be workforce model. You will also have created a set of archetypes that transcend the seams of your workforce ecosystem and bring harmony and scale to your multi-vendor, multi-geography workforce.
If your organization is anything like those of our clients,’ you will have realized that a shift in global workforce composition, what may initially feel like a lift and shift of resources, is akin to engineering a skyscraper: structural integrity, precision, and attention to detail are paramount to ensuring that the building can withstand any pressures and function according to the needs of its occupiers and stakeholders.
Zurich North America COO Barry Perkins shares how tech chiefs can repatriate skills and hone digital prowess by rethinking the onshore, nearshore, and offshore composition of their global workforce.
Composing a workforce is like playing chess. When it’s done well, every choice is calculated, made mindfully of both its short- and long-run impacts, and of the delicate balance in which it must hold certain key variables — cost, productivity, digital maturity, and the potential to build capabilities that last.
In striking this balance, digital and technology leaders have long optimized for cost, but so rapidly is business evolving that many of them are reconsidering that approach. Among such leaders is Barry Perkins.
From 2011 to 2023, Perkins led technology in various senior-level roles for global property and casualty group Zurich Insurance. Then, in September 2023, he became COO of the company’s North American outfit (ZNA), revenues of which exceeded $22 billion that year. Atop his tech-related responsibilities, Perkins inherited responsibility for ZNA’s operational functions, such as premium audit and call-centers, and for thousands of global IT workers. Of the latter, 70% to 80% were supplied by strategic partners.
“In many cases,” explains Perkins, “we’ve become supplier-managers. And while that can be good from a cost standpoint, it’s become a limiting factor to increasing our digital maturity.”
As Perkins explains, an IT organization will constrain itself if it depends too heavily on suppliers. It will struggle to act autonomously, meet evolving priorities, and innovate. It might even suffer atrophy in critical functions such as recruiting and career development, as the employees overseeing those functions are taxed increasingly by the burden of managing suppliers.
So how do you forge a different path? Perkins advises IT leaders to adopt three principles to strike the right balance between cost, productivity, digital maturity, and the means to build long-term capabilities. These principles, Perkins contends, can catalyze digital transformation when prioritized across the enterprise.
First, says Perkins, IT leaders should “differentiate very carefully the areas for which you’re going to focus on maturing your digital capabilities, and what they mean to the organization.”
Having aligned on this, you can examine your workforce to ascertain whether your onshore, offshore, and nearshore operations are optimized for cost, productivity, and digital maturity, among other variables.
Before he became the COO of ZNA, Perkins served in Europe as Zurich’s COO of group technology and operations, and as head of the company’s business technology centers. In this latter capacity, he oversaw the company’s nearshore competency centers, which would later serve as a blueprint for the one he would proactively establish in Mexico after coming to ZNA. Aside from sharing time zones with America, this center would cost less than US-based resources and provide access to more diverse talent.
Perkins warns CIOs not to underestimate the effort and complexity of building a nearshore capability. It took his team “two years just to get the basics of the center and management set up with a core set of 80 to 100 people.” After laying the foundation, Perkins filled roles by drawing on both ZNA’s internal recruiting muscle, and on vendors through a model of build, operate, and transfer. Vendors provided resources with specialized or rare skills. Internal recruiting handled the rest.
Perkins explains that there’s a benefit to placing key functions such as developers and strategic decision-makers in similar time zones. Doing so enhances collaboration and cuts response times relative to an offshore outsourcing model in India, for example.
With a nearshore operation in place, as well as offshore and onshore ones, Perkins and his teams could pull from the full spectrum sourcing models. His team was ready to start moving chess pieces.
According to Perkins, one key to controlling your digital destiny is to bring your most strategic roles onshore. “You can reclaim autonomy over your key digital initiatives, build internal capabilities, and repatriate institutional knowledge all by reducing dependencies on suppliers.”
As for which roles should be upskilled and hired full-time, Perkins swears by the mnemonic “ABC”: artificial intelligence, big data, cybersecurity. Generally, he says, business stakeholders understand how important these capabilities are, and are thus more likely to invest what’s necessary to build them internally. “Given their importance in protecting as well as transforming the organization, these are not areas they would want to outsource,” Perkins says.
Transitioning individuals in house, however, typically raises labor costs, and as Perkins notes, that proposition will likely cause a few stakeholders to raise an eyebrow, despite their recognizing the strategic importance of digital operations.
“When your leadership has gotten accustomed to the highly outsourced workforce composition,” explains Perkins, “there are challenges in shifting the cost profile.” Therefore, he says, it’s imperative to have a strong business case and predefined criteria for shifting your resources. You’ll need them to justify such a move.
Finally, Perkins underscores the importance of including your peers in your workforce transformation journey. Whether you’re pitching for resources to be shifted to a nearshore captive, or for cloud to be more fully adopted, Perkins insists that the message should be delivered in business terminology, and that it should highlight the value proposition.
“Cost advantages, accelerating speed to market, and making better decisions will resonate with your peers,” he explains. “Reserve the three-letter technical acronyms for your IT colleagues.”
Equally if not more important to bring along on the journey is the IT workforce. The priority is to help “employees not just understand their responsibilities today but rather encourage them to actively participate in setting up a future roadmap,” Perkins says. By harmonizing mindset, skillset, and toolset, you’ll equip your employees to manage constantly evolving technology and innovation.
The thought of re-composing a workforce, uncomfortable as it can be, can paralyze even the most seasoned CIO. But given the pace of digital change, it can be even more detrimental to avoid the work and to push forward with a cost-above-all mindset.
Today, every company is a technology company, and thus, as Perkins suggests, you should get comfortable with being uncomfortable.
“Shifting your workforce composition is a major operational and cultural change,” says Perkins. “It’s not for the faint of heart, but it’s necessary if you want to position yourself for the future.”
