Outsourcing breaks out everywhere

A big part of management's concern about IT has been cost and delivery, and those genuine concerns have forced IT to fight for capital at the same time as organisations are facing eroded profit margins and -- for many -- a shortage of capital. Where IT expenditure is too high it won't survive; but will be cut back or outsourced.

In many organisations in Australia IT is still regarded as some sort of an add-on, whereas in most successful businesses it is recognised as a core functionality without which the company could not transact and grow at all.

Outsourcing can and does offer definite advantages -- but only if it is done correctly. Outsourcing can also be fraught with danger for the unwary executive or corporate council. Simply stated, it can be the "make or break" decision as applied to the information systems and technology functions within companies.

Converting IT from overhead to revenue generator is a two step process. First, in order to concentrate on the "business of the business" IT must free resources through a combination of appropriate outsourcing and automation of routine tasks. Secondly, IT must acquire products and tools that either directly or through creative facilitation allow IT to assist in revenue generation.

"Hold your fear in one hand and your courage in the other. Fear alone is not a reason to avoid something" Anon Vendors such as Unisys' e-@ction Managed Network Services now deliver a comprehensive suite of remote management services providing fault, performance and configuration management functions designed to optimise a computing environment's overall operation. Let's face facts: keeping an organisation's network and system operating at peak performance today is an overwhelming task and it's getting harder every day.

Survival of the fittest

A sceptic today might ask why some companies still cling to less effective ways of running their IT operations? Doesn't the very survival of the corporate IT department indicate that it meets some kind of evolutionary fitness test?

A cynic might reply that most decisions about outsourcing are made by IT executives themselves, who have a vested interest in preserving and expanding their own organisational empires. Some IT organisations have been known to seek outsourcing proposals largely to demonstrate the superiority of their in-house capability.

But if an observer doesn't carefully differentiate between the various functions that might be outsourced, then the analysis can be easily skewed to support any conclusion desired.

Cost savings, liquidity problems, merged companies and management's desire to focus on mainline business issues are commonly perceived as the main factors considered when reaching the decision to outsource information services.

Early this year in Sydney, Zia Quereshi, managing director of Business Catalyst International, commented that companies should consider outsourcing anything outside client consulting, business strategy, marketing and customer relationship functions to allow them to focus 100 per cent on their current business strengths.

"Company insiders are often captives of the entrenched culture and thus lack objectivity"General Colin Powell But with technology continually changing at warp speed, outsourcing is not just for the chief financial officer anymore. It also does not necessarily mean turning the lights out on IS. For seasoned IS executives who are motivated by corporate success, the concept of migrating internal business processes or functions is upending the game they knew and loved.

With many more types of outsourcing services available than ever before, you can now choose to outsource your network infrastructure, e-mail services, desktop systems, Web applications and hosted applications.

The outsourcing of electronic commerce is quickly gaining momentum and is becoming increasingly attractive as companies support more telecommuters and mobile workers.

Normally in IT marketplaces the amount of noise rises in direct relationship to the number of players -- in other words, the bigger the crowd involved the greater the degree of chaos and uncertainty! With the rise of outsourcing we are hearing the noise level increase still further. But several of the vendors need to "roll the dice" in this marketplace, which is filled with technological uncertainty, noise, digital distribution and the irrelevancy of user locations. If one wins the rewards, it should be extraordinary.

What's in a measure?

While the industry experts appear to disagree on exactly how many organisations have chosen to outsource part or all of their IT function, few would dispute the market is growing rapidly (20-to-30 per cent depending who you subscribe to). If we take the broadest possible definition of outsourcing to include the use of "third parties" for some or all of an organisation's IT activities, then virtually all companies have some outsourcing relationship.

But like the star athlete at the Olympics who made a sport look easy, causing an IT function to recede into the background takes lots of experience and hard work. Hiring a third party to provide a task doesn't mean abrogating all responsibility. However, instead of managing the activity, the focus now shifts to managing the vendor. This requires its own special skills in fields like negotiation, contract management, continual assessment and so on.

As we know in this business there's never a guarantee of a free lunch: partnerships and joint ventures require a lot of active involvement from both parties. If the investment of time, energy and attention are made, however, the rewards are likely to be gratifying.

Success starts with commitment, and everything else flows from that. Under the strain of exploding demands, corporate IT has been left with few options but to turn to outside providers.

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