Can outsourcing stave-off recession?

CW360.com asked experts from three different sectors of the IT industry for their views on whether outsourcing should be used...

CW360.com asked experts from three different sectors of the IT industry for their views on whether outsourcing should be used during a recession to deliver value, and if so, how.

In chilly economic climates companies tend to return to the option of outsourcing as a method of delivering cost savings. Organisations with competent in-house teams may look at outsourcing as a way of slimming down. Conversely, organisations that have been burnt by outsourcing in the past may be struggling to build in-house skills while under renewed pressure to deliver cost savings.

Aiden Lawes, chairman of the IT Services Management Forum:

"There has definitely been a shift [during recession] in how managers look at IT projects. We are now seeing less of a desire to buy the next-greatest-thing and instead a focus on how companies can use IT to bring gains quickly."

Lawes believes that there are benefits in having a mix of both in-house and outsourced elements for a project. "One of my members who has a mix of projects boasted that he regularly changed outsourcers - to 'keep them on their toes'. This seems like a problem because obviously there has been a breakdown in communication between both parties."

Lawes cautions, however, that IT managers have often failed to learn the skills needed to manage the interface between an in-house IT department and an outsourced project. Unless companies invest in these skillsets, outsourcing a project is likely to be less successful, he warns.

"I am absolutely sure that many major IT projects will be put on hold as companies downsize but they still need to retain the core skills that will be needed when these projects re-start or have to be modified for different circumstances," adds Lawes.

Lawes believes that companies can strike a mix between in and out of house IT solutions, providing managers follow good practice and keep a productive relationship with any service provider.

Phillip Ermiya, contract IT manager with Blue-Toc:

"We have looked at outsourcing IT in the past but it doesn't give us much flexibility which is increasingly important, especially in the current climate."

Outsourcing can reduce costs on paper and allow the company to expand quickly during the good times, Ermiya concedes. But he points out that it very difficult to shrink services or get out of contracts that don't fit the businesses' needs.

"The last major project we did was to set up a warehousing system across three large sites and an administration office." Ermiya continues: "We chose to do it in-house, which was probably a wise decision as over the course of the project we needed to scale down some of our requirements due to a bit of a slump in our market - I don't think that we could have done that with an outsourcer, who would typically want a three-year commitment from us."

Ermiya is not opposed to outsourcing simple IT: "I would consider moving, say our e-mail servers, into a managed environment, providing I had cast iron guarantees on uptimes and that it saved us money... but for a company of our size, I wouldn't want to relinquish control of anything mission-critical."

One upside of the financial downturn is that the chronic shortage of staff has eased. Furthermore, staff are more likely to stay with an employer who gives them both security and a job with challenges and the chance to learn new skills. "I'm not saying that we would never outsource but I don't think that this is the right time to do anything too drastic... we'll just have to see," he adds.

Charles Bonfante, network support analyst with managed services company Computer Science Corporation:

"Essentially we bring economies of scale and expertise that few companies can match and in a scenario like this one... many companies look towards us because we can guarantee a level of service and a deployment timescale which removes the uncertainty out of IT solutions."

Although CSC's customers include giants such as General Motors and BAE, Bonfante accepts that not all situations are right for managed services. "Managed services or outsourcing works best when a client has a clear idea of what it wants to achieve, we don't just take over an IT department... we provide a service based on what the client needs us to do for them."

Bonfante believes that few IT projects are unique and the valuable experience managed services companies pick up from one project will benefit the next.

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