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Jul 03, 2006

Outsourcing vs Insourcing

Having been on both sides of the outsource vs insource debate I have a few observations -

Outsourcing Pro's

* Internal IT can focus on big-picture strategic direction while the service provider handles the dull BAU (Business As Usual). So they have all the fun while the provider does all the donkey-work. In a mature partnership there would be a high degree of collaboration between both parties in terms of future direction inline with supporting business objectives.

* Using a leveraged team for services, an organisation no longer needs to pay to keep highly skilled specialists on staff (eg if you have a stable secure network you don't need a fulltime networking or security guru). Also the burden/risk of hiring people, training them and staff-retention is moved to the service provider (afterall they're contracted to maintain certain service levels regardless of staff turnover or resource levels).

* It may be apocryphal (its certainly a figure outsourcing companies tout) but first contact fix rates for fixable calls rises from around 30% to 70-80% under an outsourced service desk. So staff should experience significantly improved service levels for simple problems.

* Incident management and downtime becomes the service providers problem (although they obviously escalate the issues as required).

* Depending upon the particulars of the outsourcing arrangement normally onerous/tedious tasks such as asset tracking, management and auditing (hardware and software) becomes the service providers task.

* A service provider will follow a process laid down by the contract - this can be both good or bad depending upon how it is interpreted on an operational basis. Certainly from a BAU perspective it should mean that everyone will be dealt with in a consistant manner (VIP's are always the exception of course ;-) that can sometimes be difficult to do when people deal direct with internal IT.

* Maintenance windows are simpler to facilitate because the resource provider needs to ensure the work is completed out of hours (something that can be difficult to achieve with internal staff).

These points are particularly relevent if the organisations core business is not IT related (if you're in the IT field or software development then its usually better to stick with internal IT).

Outsourcing Con's -

* Outsourcing isn't cheap.

* The contract needs to be very very well written and the relationship between the provider and client needs to be very well managed - to strictly enforced and it becomes an 'us and them relationship' rather than a partnership and if the contract is to lax and quality of service starts to slip. This is a fairly fine balancing act and is listed as a con because its really tough to manage well.

* An organisations internal IT can become disconnected from the client community if services are outsourced.

* A service provider will usually do 'just enough' to keep the client happy. Until a certain level of trust and maturity is achieved its difficult to see significant improvements or innovations contributed back into the organisation. Then again for certain organisations this may not be an issue if the innovations and improvements are driven by their own internal IT or if you just need to keep baseline services operating normally (eg nothing flashy just keep systems working).

* Problems can often be hidden beneath the surface depending on the nature of the reporting and quality of esacalation/feedback - if a provider is responsible for system downtime but they're supporting a flawed application then all the faults may not be properly fedback to internal IT (if a fault occurs but no one is impacted as it is out of business hours will it still get flagged back to IT ?).

Insourcing Pro's

* Motivated staff have a vested interest in improving IT service delivery. There tends to be a greater level of information and innovation flow.

* Its easier to get a feel for the way an organisation works from the inside - its easier to provide value-added-services based upon this knowledge.

* Its easier to upskill and spread knowledge internally and maintain a team feel within the organisation - eg you have more incentive to grow and develope your staff rather than just hiring people to do a particular task.

Insourcing Con's

* Internal IT staff can become complacent and lackadaisical - this can lead to a negative perception of IT within the organisation. Often this can be a reflection on greater problems within an organisation (eg service/admin bloat in general).

* Internal IT can become self-serving - we need more staff and more gear because we need to implement new stuff (but does the organisation need it ?). IT exists to serve IT rather than the business objectives. Again this can lead to a negative perception of IT within the organisation.

* Internal IT can take awhile to switch culture from the 'I enjoy playing with new stuff' mentality to 'what does the business need'. Similarly Internal IT can become conservative and resistant to change.

* Turnover of staff in key positions can render the organisation crippled until someone else can be bought up to speed (particularly the case with specialists in the field of security, database, networking and development).

* Key staff can hold onto knowledge and not share information - you end up with islands of expertise - this excaberates the problems associated with staff turnover.

At the end of the day the decision to outsource is not one to take lightly and exactly what is outsourced boils down to your own business requirements - many organisations use a hybrid of internal IT complemented by contractors and consultants to assist in specialist areas.

Permalink | 2006.07.03-19:01.00

Header Graphic

Header graphic is a sunset over Pauanui beach. The Coromandel is a lovely place if you can avoid the Jafa's buying up property and plonking million dollar mansions in amongst the local bach's.

Permalink | 2006.07.03-09:40.00