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Originally Posted by Krovikan
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.
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Maybe us IT geeks should setup a thread on this topic. Maybe in the Tech Talk section.
Anyways, I won't argue your points. They are standard IT management view on Outsourcing and some of the points I agree with.
What I will say is the view that always prevails is the shareholder view. CEO gets paid based on share performance. Lower OpEx equals (in general) better share performance. Who reports to the CEO...the CFO. Generally IT is as easy a lower OpEx argument as you are going to get.
Why? Speaking from experience most companies don't value the work IT does. IT in many cases actually does a fairly bad job at being a true partner in most organizations. IT folks love to hire business partner staff, and claim they are at the table, but in actuality they are not. They are too busy infighting, and have trouble executing and showing value back, let alone being an organizational leader.
The view at the top is: "these guys can keep doing what they are doing (whatever they do besides keep Outlook running and failing on projects!?!), and we will be fine. Besides IT is a cost center not a revenue generator."
This view is especially prevalent in O&G. We will call the IT guys when we figure out our business plan. I have seen it countless times.
That right there is prime outsourcing target. A group that costs money and shows little value. No one is going to fight at the big table over that.
I know the sum is less productivity in most cases, but that is a metric for the CIO. The CEO metric is shareholder value. If you have a CIO that has you in a true partner position (which is as amazing as rare) then you have a shot to balance, otherwise you are not going to win in a public company.