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Originally Posted by OldDutch
I think there is a place for outsource, but has to be strategic. Working in the model for years now, I can confirm it isn’t more productive as in house in every case, but neither is in house more productive than offshore in every case.
From what I have seen is outsource is done mainly by executives to appease their boss or the share holders. Lower OpEx. You can’t win that one in a public company.
I think we just need to accept it isn’t going away and deal with it. Source the areas that are dead simple to start, give the provider room to earn more. Have a second provider for healthy Competition. That is key, as soon as the provider signs for years they begin roll off of top talent. Last lock in named talent, don’t do outcome based. You top performers have to stay, if not you get a D list cheap person.
I can write a book on doing this. Seen a lot over the years. I think a hybrid model is the way to balance cost and output. There is always room for top talent in house in IT but there is less space. Those in house that stay need to be watching outsource closely. You need them to know what motivates them and play the game. It actually can work, not ideally but is what it is.
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There are outsourcing that makes sense, for example, Longview, Greycon, etc. for general IT, MSPs for specific service, vendor ProfServ departments for even more specialized work. However, you aren't outsourcing to those companies to save you money on the hourly rate. You are outsourcing to those companies because they specialize in finding the right talent, and getting higher quality service that you will end up saving you money as they will get the job done faster.
If you are looking at general IT and you just look at the general hourly rater, ya it looks good. India at $15/hour, internal at $30-75/hour, local IT vendor $75-150. But if help desk calls take more calls to solve, the resolution cost of each issue goes up.
I use India as an example as I've worked with the big shops there the most.
The issue I see with having multiple vendors in a company is you can cause confusion as to who is responsible for what. The cost of hiring business people to properly set up the divisions of labour and internal policies and training so your staff knows who to call and when adds up.
I'm not saying it isn't possible, I'm just saying it's expensive, and there are probably better and cheaper options. But you are right, companies do it because it is an easy sell to shareholders. They can say I just cut my hourly rate of IT by 1/2 or 1/3. Multiply that by current resolution time, and claim that you saved the company X, and no one will notice that you didn't actually save anything in the long run.
If I was a shareholder of a company that announced overseas outsourcing, I would wait for the good news bump then sell. I wouldn't trust the executives anymore.
If it is even good news, look at RBC, they tried to do overseas outsource and suffered a massive blowback in the media, then realized it was a bad idea anyway.