Some Thoughts on Outsourcing

I was discussing outsourcing with a friend the other day. I work in government IT, and outsourcing is used widely in government. He was discussing the tricky nature of being brought in as an independent vendor to the outsourcing vendor. What this brought up was something that is often overlooked in outsourcing deals, especially major ones. That is: any organisation that outsources a function (such as its IT) usually does so in the hope of saving money by shedding large amounts of staff. But, they usually don’t factor in that they will need additional staff with different skills to manage that outsourcer.

Outsourcing

So, if you outsource IT infrastructure operations, you will no longer need systems engineers, but you will now need vendor management staff, and you will need someone to check any information or proposals from that vendor. Not having those people will leave your organisation to the tender mercies of that vendor. If you don’t have some technical staff, who will assess the technical merits of any plans or proposals that the vendor puts forward? If you don’t have any vendor management staff, who will check that service levels are being met, who will manage remedies?

In particular I think it is crucial to keep some architects in-house when outsourcing, as these are the people who are needed to ensure that your outsourcer keeps your technology current and developing in the right direction, and they are vital when projects require work that spans across vendors or between vendors and any remaining internal resources.

In my experience, these additional functions and staff are often not considered or planned for when outsourcing. In particular they are usually not factored into the total cost of an outsourcing deal. I have experienced several outsourcing deals where the customer realised too late that they needed this kind of internal capability (usually after some expensive failures) only to find they’d just got rid of them. They then had to go through an expensive process of hiring (or worse, re-hiring people who had been made redundant) these people only to find that all of he projected cost savings were now eroded by this additional cost.

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