Outsourcing IT – good or bad for retailers?

March 15, 2009


Do retailers know how to manage knowledge workers? 3/13/09


By Bill Bittner, President, BWH Consulting

I’ve followed the headlines recently as various retail organizations announced outsourcing or layoffs of information technology (IT) and industrial engineering (IE) workers and I’ve asked myself whether these layoffs make sense or whether companies are being short-sighted.

These knowledge workers (KWs) have several unique characteristics that retail management must appreciate when they make decisions that affect them. First, they often have unique knowledge of company resources that cannot be replaced by another technician or knowledge worker, for example, something as critical as the way a retailer’s critical replenishment application works.

Second, KWs have enormous leverage in their impact on the organization. Changing a replenishment algorithm or improving a forecasting estimate can have a ripple effect on all the various operating units of the company. Spending an extra hour to design a better check stand or to simplify a sign-in procedure can impact thousands of co-workers.

The challenge is that it is often difficult to measure the quality of results coming from knowledge workers. Who’s to say “there are no better ways to do this”? Of course, that is one of the challenges with managing KWs as “paralysis through analysis” can lead to rejecting the good in search for the perfect. But KWs are also the most flexible members of your organization because they can adapt to new roles and learn the requirements of different positions quickly.

Knowledge Workers often have different motivation than their hourly counterparts. They tend to have a strong sense of ownership in the solutions they design, so while salary is necessary, simple praise or recognition for extra work are often enough of a reward. Educational opportunities and attendance to conferences can be as important as salary increases. Knowledge workers need to understand how their efforts impact the rest of the organization. This sense of contribution is often a reward in itself.

Discussion questions:  Do you think the total impact on “corporate knowledge” caused by outsourcing or replacing in-house knowledge workers is understood? Do you believe retailers fully appreciate the contribution of KWs? Do you think most KWs would accept a reduction in salary to preserve theirs or a co-worker’s job?

My post: 

As a long time retail operations executive, I have seen both sides of this:  outsourced and in-sourced IT groups.  My own experience shows that the key individuals to keep in-house are the IT leadership and then just a few technicians.  The IT leaders are among the keepers of institutional knowledge and the partners to operational management to discover opportunities, define the organizational goals, and apply technology to amplify potential and to solve business problems.  The few techs on-site ensure the senior managers don’t go crazy when they can’t figure out how to access their documents.  For the heavy lifting of project management, system design and maintenance, data integration, etc., outsourcing is the effective way to go.

I do not think most retail managers appreciate their IT folks – but only due to lack of knowledge.  That is why it is key to have strong IT leadership sitting at the leaders’ table to match the IT tools to the real business challenges, and report back on the ROI and efficiencies enabled by the technology employed.

Whether or not a KW would accept a reduction in salary to preserve their or a co-worker’s job is irrelevant.  This is always a bad idea.  If a reduction in force is necessary, it is far better to make the cuts quickly, articulate a strong future vision, and move on.  The remaining team will be better equipped to move forward positively than if they are constantly reminded of the RIF by a reduced salary.

Mike Osorio, your Dare to be Contagious! TM strategist


What do you think?  Please post your comments and add to the discussion!

Go to the full discussion at RetailWire.com:


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