A Profitable Alternative To Offshoring

Workforce Outsource Services, a nonprofit IT services organization, fills the hiring needs of several big and small companies with recruits from America's inner-city.

Also See:
Langer Report: IT Perspectives From Columbia Prof. Arthur Langer
CIOs Having Hard Time Finding Skilled IT Workers

By Elizabeth S. Bennett

Last year, Medco Health Solutions' CIO Mark Halloran saw the future and it wasn't pretty. The numbers told him that in the next 10 to 15 years, roughly 20% of Medco's technology staff would be retiring. Halloran had to determine who would replace those 300 or so baby boomers and their 1,500 years of collective experience when they walked out the door.

Halloran originally saw three options: Replace Medco's legacy IBM computing platforms, obviating the need for certain skills like Cobol programming; start training a new workforce, knowing full well how hard (and expensive) it is to find good IT talent; or go with an offshore partner that would have to be trained in the complex workings of Medco's existing business systems.

But then the CIO for the $44 billion pharmacy benefit management company came across a fourth option.

Medco decided to partner with a non-profit organization called Workforce Outsource Services (WOS), which hires, trains and certifies technically minded adults from low-income neighborhoods in New York and New Jersey. Medco, based in Franklin Lakes, N.J., would not only be setting itself up with a more diverse workforce and a long-term investment in neighboring communities, but it found that the partnership would make sense from an operations and financial standpoint.

Not only will WOS offer a previously untapped source of workers to fill his looming hiring gap, but Halloran also estimates that Medco will see a return on its staffing investment in just over a year, based on the wage variance to domestic consultants and the dollars it will save during the internship period.

Filling The Gaps

Several factors, not just an aging workforce, are contributing to impending staffing shortfalls in the information technology sector: Between 2006 and 2016, 854,000 additional IT professionals will be need in the workforce, an increase of about 24 percent, according to the U.S. Bureau of Labor Statistics. Compounding the demand is that American students are less interested in receiving technology degrees than they were in the past. Enrollment in undergraduate degree programs in computer sciences has dropped 50 percent in the last five years, according to an annual survey of universities with Ph.D.-granting programs conducted by The Computing Research Association.

But what those numbers don't take into account are the bright young people who might be interested in an IT career, but, because of financial or social factors, don't get a college education.

WOS, founded in 2005, identifies bright and driven young people in their late teens and 20s through public schools, community colleges and other social organizations in New York and New Jersey's inner-cities. It invites them to participate in an intensive 16-month training and certification program at either Columbia University or Rutgers University, at the end of which they receive a certificate in Web development.

During and after their technology immersion, WOS participants are placed in organizations like Medco, Thirteen/WNET, Prudential and The Museum of Modern Art, first on a part-time basis. All workers in the program are closely supervised by either a senior WOS employee onsite or a qualified in-house manager. They also have ongoing support from a network of mentors engaged with or employed by the program.

"WOS gives students from disadvantaged areas an inside track to the corporate environment," says Halloran.

He became acquainted with the program when he was serving as a mentor to students in Columbia University's Master of Science program in executive technology management.

And it didn't take long for Halloran to see that the program made good business sense. He knew the program could give Medco a feed of eager, young workers at a reasonable cost.

Here's how it worked at Medco.

Last December, Medco made a $250,000 donation to WOS. That money was used to sponsor 25 students in a technology training program at Rutgers University. As a non-profit organization, WOS is not able to make contractual arrangements with donors. However, Halloran had a series of conversations with WOS chairman and founder Art Langer—who's also associate director for instructor and curricular development of IT Programs at Columbia University's School of Continuing Education—about Medco's staffing needs and the role that WOS might play, should some of those 25 students excel in the program. While WOS is under no obligation to Medco or other partners, it consulted with them regarding their IT employment needs and, in the case of Medco, developed a plan to place eight young people in junior-level technology positions beginning in July.

Medco is billed a daily rate for each contract worker, but at a price that is, by several accounts, significantly less than the roughly $380 day rate of an information analyst or programmer with an offshore Indian firm.

And because WOS—not Medco—will pay its workers during their initial six months of part-time work as part of their training, the financial advantage increases, according to Halloran.

While all WOS workers are certified in Web development, some have additional skills and experience in areas like information systems design, help desk support and quality assurance testing, Halloran intends to train those who start at Medco in the Cobol and Enterprise Generation Language (EGL) programming languages, data modeling, desktop support and, possibly, quality assurance. "We're going to assess their skills and strengths to see where the best fit is," says Halloran.

Outsourcing With Diversity

But Medco isn't alone in seeing the real benefits WOS offers.

Thirteen/WNET has already seen the payoff from its partnership with WOS, according to CIO Ken Devine. The New York City-based public broadcasting company has a different type of partnership with WOS. It outsources its help desk function entirely to WOS with six full-time contractors who configure and support 700 computers and electronic devices, lead software trainings and handle "in-person triage and handholding," as Devine puts it.

WOS founder Langer had been a long-time academic technology consultant to Thirteen and he observed the weaknesses in the programs that Thirteen and other organizations had experimented with. He applied those lessons when he created WOS. Thirteen became the first company to use WOS strictly as an outsourcer in late 2006, when it set about a reorganization to more fully integrate its IT and engineering departments. At the time, CIO Devine says, Thirteen determined that the help desk had to be retooled to provide better and more efficient service. Until then, the support staff had consisted mostly of interns from continuing education programs and local trade schools, but it was very challenging to find enough interns with the necessary skills, says Devine. "WOS solved the intern supply problems as well as the management issues," he explains.

Since Thirteen began using WOS, service has improved dramatically, according to Devine. Prior to WOS, the number of open help-desk tickets regularly ballooned to 300 or 400. After six months on the job, the WOS workers reduced that figure to 20, which remains the average today. It did so by resolving a number of "longstanding issues" that had overwhelmed the previous staff, all of whom eventually left the company through attrition.

Devine figures the organization has cut operating costs by 20 percent with a larger more efficient staff that costs less money. And it has saved significantly by not having to use IT recruiters for the last few years. It's also made his job easier. "In terms of day-to-day bumps in the road, there has never been an issue that escalated up to my level," he says.

Devine and his employer were early champions of WOS's mission. Thirteen tried different approaches to address the dearth of minorities and women in its tech department, including using Department of Labor money earmarked for targeted recruitment and training. "As a public media operation, it's our obligation to go the extra mile," says Devine. But none of the efforts led to long-term success. "The notion that we might have adequate resources to develop a training and placement program for women and minorities was not feasible," he says. "Thirteen was too encumbered by the intricacies of being a public television station."

Next: Keys To Success

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Keys To Success

Close and supportive supervision is the cornerstone of WOS, according to Wayne Howie, a WOS employee and manager of helpdesk services at Thirteen. Howie works closely with his staff to ensure they are developing their technical skills and personal interactions with the employees they support. "There's a constant back and forth with feedback," says Howie, who explains that he eases WOS workers into their roles and monitors them closely. "The idea is that they are set up to succeed."

For example, when Alex Caamaño joined Thirteen's helpdesk staff two years ago, he was just 18 and had had little exposure to a corporate setting.

During high school he had been transferred twice to different schools because of disciplinary problems and for fighting with other students. "I had a little bit of an anger issue when I was younger," Caamaño says.

But, it was clear that Caamaño was bright. And at his last school—Independence High School in Manhattan - was where Langer found him and seven other students in the last weeks of their senior year.

All entered the WOS program, but Caamaño says he was the only one to complete the program.

Still, entering the corporate world was a big transition. Caamaño suddenly found himself interacting with strangers in a business setting. "Alex never had that much exposure [to the corporate world]," Howie says, and was not used to talking to people outside his circle of family and friends. But Caamaño adapted. "The me of a year-and-a-half ago is a completely different person than now," he says. "I'm a lot more mature and have a better understanding of how the world works."

Today Caamaño's technical and interpersonal skills have him running the help desk when Howie is on vacation. Caamaño plans to enroll in college in the fall and, if he completes his degree, he'll be the first in his family to do so.

For CIO Devine, WOS's contribution goes well beyond help-desk support and toward tackling one of his most difficult challenges: recruiting minorities and women into the technical workforce. "We don't have to worry about that anymore," says Devine, whose staff now has gender, racial and ethnic diversity.

Thirteen continues to renew its annual outsourcing contract with WOS and Devine says that the helpdesk team has always met performance goals. Thirteen's business unit doesn't challenge the arrangement because everyone is happy with it, he says. "The relationship is now normalized as it would be with any vendor.

How WOS Got Started

While WOS officially took off in 2005, the genesis of the program goes back about eight years, according to Langer, who had participated in programs that provided corporate internships to those in New York's poorest communities. But, Langer says, the early programs he was involved with failed to address critical issues, like the fact that poor young people are under tremendous pressure to immediately earn a living, making it almost impossible for them to hold low-paying or no-paying internships. "The question was how to take people from inner-cities and transition them to the workplace for the long-term," says Langer, who found that neither corporations nor academic institutions on their own could build and sustain viable work programs for inner-city youth.

So Langer founded the non-profit WOS as an "incubator" that would help students get technical certification from marquee universities and create additional curriculum and mentor support to supplement the professional and developmental gaps facing young people. With this approach, Langer says it's possible to level the playing field between those with and without economic and social advantages.

Prior to starting the technical certification program , the students attend a six-week professional skill-building course that helps Langer and his colleagues determine a young person's likelihood of success in the corporate world. Attendance and completing homework assignments is critical during the pre-certification, as is the ability to read and write effectively. "If you take a reasonably intelligent person who is very poor and doesn't have the same chances as their better-off peers, success is very hard because of all the external challenges they face."

To offset the culture shock that may occur when placing new workers-few WOS employees have been exposed to the customs and insider language of the corporate setting-most WOS staffers start on the job as paid interns three days a week following the successful completion of the first semester. The less rigorous schedule exposes them to the business environment and practical experience, yet allows time to focus on the academic training, Langer says. "If they don't finish their education, what are we to do with them? The focus is to excel in their lives and to continue to develop and succeed."

Langer has also developed a mechanism to evaluate a student's development and determine their readiness to enter the workforce. The Workforce Maturity Arc is an evaluative tool designed to assess individual development in six areas of workplace literacy, including cognition, technology, business culture and self-esteem. During the certification program, WOS participants are required to meet with mentors and write regularly in journals. Those journal entries are a primary source for evaluating a worker's ability to balance work and personal life, Langer says, a critical professional skill.

Once on the job, WOS workers have abundant onsite support from qualified managers that are generally employed by WOS (Wayne Howie in Thirteen's case), as well as offsite mentors like Langer, who keep up with program participants and are intimately aware of their progress.

Next: Financial And Organizational Gains

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Financial And Organizational Gains

At Prudential, the Newark, N.J., insurance and financial services company, Brennon Marcano has been managing four WOS workers for the last two years, one of whom has been hired fulltime. Marcano, whose main responsibility is coordinating projects and communications between the business units and information systems teams, received a master's degree in technology management from Columbia University's executive degree program, which is where he met Art Langer and became integral to the program.

Brennon introduced WOS to Barbara Koster, Prudential's chief information officer, who loved the idea of WOS, according to Marcano, and Koster asked him to put together a business case for filling several positions with WOS contractors. He calculated that contracting and training a staff from WOS in a variety of technical skills, including programming and tech support, would be less expensive than pursuing other avenues like offshore outsourcing or full-time employees. When Marcano factored in a turnover rate that was far lower than the seven-month average he was seeing with offshore contractors, he found that WOS was the winner by every measure.

Based on Marcano's projections and Prudential's interest in creating opportunities for those living in Newark's poorest neighborhoods, the company decided to make an initial donation of $250,000 to sponsor 25 young people in the Rutgers certification program, with the understanding that five of them would eventually start work at Prudential. Marcano says his financial projections were accurate. Prudential saw a return on investment in a year and a half, compared to using equivalent domestic or offshore consultants or full-time employees. "WOS beats all options from a price perspective and from a quality perspective, they are comparable at their competency level," says Marcano. The key benchmark, he adds, is that managers frequently request to work with WOS workers. "It means they like the total package," Marcano says.

Prudential also likes the energy the WOS staff brings. As older Prudential workers start to retire, "they're a burst of youth in an aging population," says Marcano. And the experience has given hiring managers insight into how to better attract and retain younger talent. It's also given older, more experienced workers a chance to serve as mentors.

From a training perspective, the introduction of entry-level workers has been an eye-opener for Prudential. "We brought one WOS contractor into the mainframe group and realized we had to learn how to teach entry-level people how to do what we do," Marcano recalls. "It showed what a deficiency we had."

While each of the companies working with WOS—Medco, Thirteen, and Prudential—say the program is a success, the founder of the program, Art Langer, isn't satisfied. He's now looking at ways to expand the program. His goal, he says, is to establish the program in every state in the country.

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