Why Sacrifice Control

Dec. 21, 2004

Ive never been a fan of outsourcing. I might be a control freak, but I know plenty of business people who find it hard to swallow the notion of relinquishing direct control--of not only the technology, but also the all-important connection between the business side and the information-systems activities. When you have another layer of management between you and the people out there doing the coding, developing the software, operating the data center, and shaping your companys technology, there can be problems. For one thing, many of the same people who bid on outsourcing deals--the IBMs, the Andersen Consultings, the CSCs, the EDSes, and the like--are the ones who do the massive business reengineering projects that are notorious for suffering "scope creep," a dread malaise that is always costly and sometimes fatal to IT efforts. Sure, its the customers fault for asking for changes and new wrinkles to the software midstream. But every business is constantly changing. Who can get through a five-year business-process-improvement project without seeing markets move, executives change, strategies bend and shift? In the case of outsourcing, there is an opposite risk. With a fixed-cost contract, where is the incentive for the outsourcer to add value as the customers business expands and changes, and suddenly needs something more, something bigger, something better? Of course, there are the presumed savings to be had from letting someone else worry about the costs, the upgrades, and the new technologies. Theres also the benefit of being able to off-load the migraines associated with trying to find people who speak odd computer-development languages like SAP AGs ABAP-4 with the proper German accent. One company I know did away with the CIO--both the incumbent and his position--once the outsourcing arrangement was in place and functioning. Certainly there is a fear in corporate America today of getting stuck with a technology that might become obsolete in three to five years. Thats why for so many years it was a no-brainer for companies to buy IBM--you couldnt get fired for buying from Big Blue. Todays pole position is held by Microsoft, along with its key business partners, Intel and SAP. Theres always safety in numbers. That fear is actually a deep-seated worry over technological bugaboos--changes unforeseen today but lurking just around tomorrows bend--that could render your systems unresponsive or leave you on a dead-end road. Nobody wants to invest in a Betamax. Outsourcing assuages some of those fears. For one thing, you have a presumably capable partner to depend on. For another, you have someone to blame if things go south. If only it were that simple, farming out the technology would be a no-brainer. Unfortunately, outsourcing brings its own set of worries--none of them trivial. Try renegotiating one of these 10-year deals to take advantage of declines in hardware or software prices. And just try to reassemble a capable IS staff once youve either: (a) transferred them to the outsourcer; (b) laid them off; (c) seen them leave both organizations in the transition; or (d) all of the above. Knowledge of the intricacies and complexities of your current systems can be invaluable when shifting from one technology platform to another. Yet another issue in the outsourcing mix is the question of how closely tied your business is to technology. If its truly critical, it may be smarter to keep it in-house, where you have greater control. Then again, if its only a support--not a key enabler--for the business processes, then technology might be something you can afford to farm out, the way many companies handle their payroll or benefits. The moral? If the lifeblood of your organization is at stake, keep control.

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