Broadview CIO Takes a Dim View of Outsourcing, Yet Sees Positives in Nearshoring

By Clayton Browne

Chief Information Officer Ken Shulman of data services provider Broadview Networks doesn’t pull any punches in his analysis of outsourcing. He argues that outsourcing is overrated and that hidden costs are far too often overlooked.  Nearshore Americas sat with Shulman recently to get a better grip on how he’s arrived at this conclusion.

Broadview Networks was established in 1996, and only recently emerged from bankruptcy protection, as it resolved some financial structuring issues. Headquartered in Rye, New York, the firm  has evolved into a full-service telecom provider – delivering voice, data and Internet services to over 35,000 customers across the U.S.

NSAM: In a recent article, you stated: “Outsourcing is overrated, though we’ve leveraged it in certain areas with great success. If you read the trade press uncritically, you’d conclude that if you’re not outsourcing help desk, support, or development, you’re missing the boat. Frankly, it has its place and offers benefits, but there are hidden costs that are often overlooked.” Can you expand on this idea a little…what are the hidden costs, what kind of outsourcing has worked for you at Broadview Networks, and what kind of outsourcing do you see as most overrated?

Ken Shulman:I had conversations with a number of outsourcing providers about outsourcing our help desk services at Broadview Networks, and one promised 40% savings, another 70%, but none could give me any specifics about where these savings were actually going to come from. One example of hidden costs is the fact that our help desk personnel typically field questions about our proprietary software, not Microsoft Office or other industry-standard software, which means they need extensive training. Plus you have to develop detailed specs and procedures regarding your operations to provide to the outsourcer, which also takes time and money.

We have seen the auto industry, among others, bring production back to the U.S., and the rush to outsource at any cost is clearly waning. I believe this trend toward more focused outsourcing is likely to continue for at least a few years.

It’s pretty much the same story with outsourcing software development. Outsourcing software development can be advantageous in some circumstances, but you have the same issues and costs of training, and attrition of trained staff, as well as the expense of detailed documentation of your procedures and expected deliverables for the outsourcer.

NSAM: What do you think about nearshoring?  Has Broadview done any outsourcing with nearshore providers?

Ken Shulman:Yes, I believe that nearshoring can be of real value as it ameliorates some of the major issues associated with outsourcing. We actually have a software development team, Broadview employees, working in Ottawa, Ontario, and they are working on a couple of projects with a local Ottawa software development firm. They are essentially outsourced contract developers, but we have a unique situation in that this group of developers worked with us before on the early stages of this project, so they are already on the same page in terms of procedures and expectations.

NSAM: What do you think about the future of outsourcing in general? Do you see rapid growth towards specialized outsourcing or do you expect a significant retrenchment in the industry as  the Euro recession lingers on?

Ken Shulman:Outsourcing has its place and can be of benefit to many companies. However, like most industries, the outsourcing industry has its ebbs and flows, and I believe we are seeing the beginning of a pullback in outsourcing. We have seen the auto industry, among others, bring production back to the U.S., and the rush to outsource at any cost is clearly waning. I believe this trend toward more focused outsourcing is likely to continue for at least a few years.

NSAM: What do you think about agile outsourcing as a source of innovation for large enterprises with stagnant business models? Really possible on a large scale or more hype than reality?

Ken Shulman:If you define agile outsourcing as similar to agile development, then yes. Bottom up models such as agile software development allow you to focus on details and get them right, creating a flexible, responsive system to enable you to improve your processes. Traditional “waterfall” business models manage from the top down, making it difficult to implement changes to systems as decision-making must trickle down from above. But agile or not, you still have to make sure to account for all costs when considering outsourcing projects.

NSAM: You are both the CIO and CTO at Broadview Networks. Please elaborate on the difference between the two roles, and what are some of your specific duties while wearing each hat?

Ken Shulman: My having two titles is really a historical evolution. When I joined Broadview Networks as the CTO in December of 1999, we already had a CIO. As CTO I was responsible for technology, architecture and service design; I was even involved in issues like what kind of dial tone we were going to use in our phones. I took on the title of CIO in 2005, and at that point I took on responsibility for our IT systems, essentially our internal corporate infrastructure, billing, procurement and customer care systems, as well as networks.

NSAM: Please comment on the changing role of the 21^st century CIO. Other sources mention a trend toward increasing executive-level responsibilities and an expanded role in strategic decision-making for CIOs in medium and large enterprises…do you agree and how has this trend impacted your job?

Ken Shulman: Well, I came to the job as a CTO, so I have been involved at the C-level from the beginning here at Broadview Networks. Certainly CIOs have traditionally been less involved in strategic decision-making as they have been considered a part of operations and often report to the CFO, but there is a definite trend today in “tech-centric” industries for the CIO to be a C-level position. It’s really just natural for someone whose responsibilities are fundamental to the mission of the company to be involved in making strategic decisions and planning the future of the business.

NSAM: What is the most difficult part of your job?

Ken Shulman: The most difficult part of my job is finding the right people to do the right jobs.

NSAM: What is the most rewarding part of your job?

Ken Shulman:By the same token, the most rewarding part of my job is seeing these people succeed in their jobs and drive the business forward to more success. While I derive personal satisfaction from seeing our employees and company prosper, I also benefit personally from their success in that it allows me to focus my time and attention on other strategic-level issues.