Face Up to Outsourcing

By Eric Lundquist  |  Posted 2003-04-28

Face Up to Outsourcing

Im thinking about outsourcing my homes IT operations. I figure if big players such as Procter & Gamble and J.P. Morgan Chase are outsourcing their businesses to Hewlett-Packard and IBM, respectively, they must be on to something. No more will I have to try to figure out if it is the fan or the BIOS that is the root cause of my sons ever- overheating Toshiba laptop, or how to build security into my Linksys wireless network, or why I am too lazy to upgrade the one Windows Millennium system that constantly crashes. From now on, Ill call either Carly Fiorina or Sam Palmisano when my printer runs out of ink.

Of course Im not really going to outsource anything. You see, I have the offbeat belief that vendors should build products that dont require constant care and feeding. I have never considered outsourcing my toaster or television. Apparently, not everyone feels that way. There is a continuing push to IT outsourcing as major providers stumble over one another to announce the next big deal.

The lackluster economy, the need to manage costs and the need to focus on businesses core competencies are the most visible drivers of outsourcing, according to Richard Horton, general manager of global strategic outsourcing for IBM Global Services. To the list of usual suspects, Horton adds one surprise, given the large number of IT layoffs over the past year. "There is a real scarcity of certain skills and resources in the marketplace," Horton said. He lists high-end Linux knowledge, enterprise software development capabilities and knowledge of specific business operations as skills now in short supply.

OK, so the guy in charge of outsourcing thinks outsourcing is needed, but what about the people who have to decide whether or not to outsource? IT execs tell me their biggest concern is not outsourcing itself but the amount and the method.

"Outsourcing is never as good as it sounds. Its as if [the vendors] take the all-or-nothing approach. Why dont they phase in the deal so they can better validate their assumptions? The key is to understand what your [outsourcing] needs are and to manage the relationship," said Gary Bronson, IT enterprise operations manager at Washington Group International and an eWEEK Corporate Partner, in an e-mail message. While much of the spam in my in-box is about millions of dollars in hidden funds or some new wonder drug, Garys in-box is cluttered with companies offering "outsourcing help" using business buzzwords that contain as little valuable information as my hidden-funds messages.

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Garys comments are gentlemanly compared with comments I received from some upper-level IT managers who requested that their views not be attributed. That testimony from the front lines of outsourcing contends that IT employees who are transferred from a customer to a provider too often end up getting screwed. Staffs are often cut back to maintain the outsourcers profit margins; training evaporates because hours spent training are not billable, the managers say. As the outsourcing deal progresses over time, the customers realize they have less and less control over the IT infrastructure upon which their business strategies must run.

"Outsourcing doesnt cure headaches, it just changes them. You go from managing those activities internally to managing the outsourcer, which is often more difficult, since you cant just change outsourcers at will," said one IT manager.

Nonetheless, outsourcing is a reality. The pairing of IBMs technology and research operations with the business process expertise of PricewaterhouseCoopers makes a combination that is, IBMs Horton contended, "almost unbeatable." The IBM push to on-demand computing and utility computing, where a business pays only for the computing resources it requires, plays further to the strength of the outsourcing model, Horton says.

Im not going to outsource my homes IT operations, even though the system needs an overhaul and the IT manager—me—is untrainable. But the rush of headlines and stories about big outsourcing deals means that you will have to get a handle on the outsourcing business if you havent already. If you pretend it will not be an issue for your company, you will be passed by in the discussion. If you get ahead of the wave, you can design a plan that includes outsourcing as part of your IT infrastructure rather than as a replacement for it.

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