Views of IT outsourcing and broken TV connections from the house warming party

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IT outsourcing is big business but if you talk to IT workers you are left wondering how?

The IT outsourcing sector in the UK was worth £41.7bn in 2009, according to research from Oxford Economics. This was about 20% of the total UK business outsourcing sector which was worth £207bn. In total outsourcing accounted for 8% of UK GDP that year.

But if IT workers had anything to do with it the sector would not be that big. I was at a housewarming party yesterday (22nd May) and I met three IT professionals. They wern't drunk by the way and neither was I.

One of the IT professionals, who actually works for a service provider, said he doesn't understand why businesses outsource so much. He said he doesn't think an outsourced worker will ever give you the commitment of an insourced worker.

He said workers from suppliers will not go the extra mile for the client. He used an analogy of a broken TV to get his point across.

"OK, see that TV. The client asks me to put a new plug on it. So I do just that. Although I notice that the wire is faulty I just do what is requested. It is not in my interest to do it at the same time because that will be another job later. But if I was an in-house worker I would do both jobs in one go," he told me.

A survey recently carried out at the recent Infosecurity Europe event, by automation software maker Lieberman Software, found that not only were IT outsourcing contracts costing more than expected but  three quarters of those interviewed think that outsourced service providers were creating work unnecessarily.

Then there were two IT professionals from a major corporate at the party. They said they would not outsource any core business IT work. This also made me think of a meeting I recently had with Cognizant's global head of business consultancy. He said as a result of technology advances a lot of processes are no longer core and having a unique system is not necessarily a real advantage.

So outsourcing suppliers have to be able to demonstrate to their potential customers why certain elements of their business are not core. This is potentially where business consultancy arms within IT service providers could add value.

But back to the point of this post. How has IT outsourcing become so big despite clear doubts about its effectiveness.

1 Comment

Karl: "How has IT outsourcing become so big despite clear doubts about its effectiveness?"

For the same reasons that bundling debt into black-box derivatives became so big, just before the banking crash. People can make a lot of apparent profits short term by replacing experienced onshore staff with cheap but inexperienced offshore staff.

The fact that this is unsustainable in the long term does not bother anybody with any control over the process, because they are making lots of money in the short term.

Of course, by now a lot of the low-hanging fruit have been picked - the easy to outsource payroll systems and so on - so it's increasingly the harder and often more business-critical stuff that is left. SLAs are just paper: once the contract has been signed and the old staff fired, the customer is dependent on the outsourcer, regardless of performance etc.

Of course some businesses have started to recognise the disadvantages of handing control of their IT over to unreliable outsiders, and are trying to bring some functions back in-house. But by outsourcing/offshoring so much work in the past, they have already laid waste to the entire ecosystem that sustained the UK IT industry, so we are losing the skills that would give us any choice over whether/how we outsource, or who to.

It's like the evil offspring of the Walmart effect and the banking bubble: great, eh?

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This page contains a single entry by Karl Flinders published on May 23, 2011 11:18 AM.

Letting IT service providers get close can only benefit a business was the previous entry in this blog.

Could India's data protection law be remedy to lingering corporate doubts? is the next entry in this blog.

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