Browse > Home / Outsource Blogs / Is IT-outsourcing starting to hurt the business?

Is IT-outsourcing starting to hurt the business?

October 7, 2009

IT-organizations are now more than ever pressured to cut their cost. This is among others due to the perception of many business managers that IT is a cost centre which adds limited value. And activities with a limited perceived value are those which get the highest cost reduction targets.

In reality does IT add a lot of value, but the typical IT organization is not able to sell that message. It starts with the subjects IT talks about with the business. In 9 out of 10 cases is IT uses to automate manual activities resulting in a cheaper and faster business process. So using IT using to reduce cost.

The IT organization increases this perception by organization itself into functional silo’s in an attempt to increase internal efficiency. So all network engineers in one department and all application developers in another. To improve standardization and efficiency even further are best practices and models like Cobit (IT governance), BiSL (information management), ASL (development), CMMi (development), ITIL (operations) and ISO20000 (operations) implemented to standardize processes and control.

This ‘horizontal’ design allows for maximum efficiency from an internal IT perspective. This design is also reflected within the typical sourcing strategy: the network infrastructure or application development is being outsourced, again to optimize the IT budget.

connectingSilos Is IT-outsourcing starting to hurt the business?
The actual demand from the business however cuts vertically through the horizontal IT ‘ stacks’ and process models. One can however seriously doubt whether the actual business demand will survive a collision with all the standard process models and best practices. I have seen change management procedures which have 15 control and decision making steps. Nothing moves anymore within such organizations and IT people are keeping each other busy with procedures and templates. In the mean while is the business getting more and more frustrated with the IT.

By the continuing increase of standardization, among other driven by outsourcing, get the real demands of the business forgotten, damaging the perception of IT as a value center. In many cases do the business managers trying to sell the product in the front office (KPIs: flexibility, time-to-market) the same IT service as the business manager running the back office (KPIs: low cost, high volume). The result is a vicious cycle of business managers getting unhappier with the IT services delivered, leading to even more pressure to cut cost.

I expect myself that the whole trend of standardization might be at the top of its cycle and that business units will soon start demanding more tailor made IT services again. Either the centralized/shared IT organization starts to break down some of its walls are the decentralized business units will start building their own IT organization again to compensate the mismatch between demand and supply.

This also means that IT organizations have to rethink their current sourcing practices as outsourcing per horizontal stack limits the ability to align its value chain to the business value chain.

Share and Enjoy:
  • LinkedIn
  • TwitThis

Related posts:

  1. IT outsourcing with business value in mind
  2. Sustainable outsourcing is more than just green
  3. Can Indian Outsource biggies survive and thrive in global recession?
  4. Does outsourcing really add value to companies?
  5. Can President Obama alter offshore outsourcing for US companies?


Written by François Zielemans · Filed Under Outsource Blogs 

Comments

3 Responses to “Is IT-outsourcing starting to hurt the business?”

  1. (outsourceblog) 's status on Thursday, 08-Oct-09 02:25:37 UTC - Identi.ca on October 7th, 2009 9:25 pm

    [...] Is IT-outsourcing starting to hurt the business? http://outsourceportfolio.com/itoutsourcing-starting-hurt-business/ [...]

  2. Beem on October 14th, 2009 5:59 am

    When companies start looking into their overall business value chain, they can find the integration touch-points between processes and systems, which will help them to identify the issues. This should be a starting point to see if a process is their core or if it is a work that can be outsourced. This decision should be the starting point for their outsource efforts.

  3. white911 on October 23rd, 2009 3:25 am

    Never do business
    What they do, is they tell you all the time the project is taking longer. And at the end they do not give you the product you payed for. It was a project of around 6 weeks, now it took 6 months, and what I got was still very badly.

    When your at Odesk, and using the services of Sunsoftwares, change it as soon you can, because you will not receive what you payed for.

Got something to say?