Most large businesses I have come across at some point come to wonder how better to manage their IT operations. IT consumes a lot of money, but often does not seem to be doing what you want, almost wilfully. You ask for something to be done, and three weeks later nothing at all seems to have happened. Surely they are all just incompetent. Outsourcing has been around a long time as a solution to this problem of feeling a lack of control.
Outsourcing sounds like it should make sense. ICHA (or whoever) do lots of IT and must know how to do it better than we do. They are specialists where we are amateurs. They must have lots of highly skilled experts who can be called on to deal with the tricky technical stuff only when required. It all sounds so efficient. And now they even have technical experts and support centres in India and China, where costs are so much lower. How could it fail to be both more effective and less costly than our current operations?
And yet. When you start talking costs, they always seem remarkably close to your current costs. And service levels always sound more as though they are trying to avoid things rather than commit to them. TUPE means of course that you simply can’t release your staff (who were so incompetent, remember?) and use ICHA’s. And the shared data centres you were going to use instead of paying for your own, well, it would cost millions to make the move and actually the services are going to be run from your own data centre after all. In the end it seems as though your own people and facilities are going to be sold back to you at a premium, but managed by someone else. So the pitch comes down to this: "Don’t worry your pretty little head about this IT stuff. Just tell us what you want and we will manage it for you". Core business is the key word. By the time you have got this far down the track, it would be really embarrassing to go back to the Board and say, "It doesn’t add up, I must have misunderstood what IT is about", so it goes ahead anyway.
Here’s why Outsourcing in this way doesn’t work.
Most of IT Operations is simply deploying vendors’ kit. It may be in large quantities, it may be very expensive, but it is still just kit. Most kit from most vendors is at the upper bounds of complexity and capability. As a random example, RSA SecurID can provide strong authentication for five plumbers, or for 100,000 staff spread around international offices. It works the same way. To implement this stuff effectively you need to be fairly expert. But then day to day it requires little more than following the book for how you add users, change settings or whatever. Mostly it just works. And when it doesn’t you really need the expert to fix it.
Now the problem is that it does not make sense for IT Operations to hire experts. You only set it up once, and change it rarely. But you administer it every day. So you tend to hire the administrators, and then try to get by on that. Systems are put together by people who are not experts, and so they don’t get done or they fail. I don’t mean to say that the people in IT Operations are not very capable. You may have a small group of people who are indeed expert in some things. Its just that they can’t possibly have the variety and depth of experience of people who do this all the time. Is it enough? Well, perhaps, but probably not.
And then when you go to the market for outside help, the transaction costs are high. It takes time to brief people and for them to understand what you are trying to do, and that time one way or another must be covered in their costs. It also looks like real money. £50,000 to do a project is a lot of cash to justify, with business cases and cost benefits analysis. Fred not achieving anything very much in a year is much harder to see.
Outsourcing does not solve this.
The outsourcer is going to sell you back your own staff and kit. Yes, there may be some changes in the way some things are done, and you may have a few redundancies. But fundamentally you have the same faulty systems being run by the same people. When you would think you would have access to experts to solve problems or make things work better, they don’t seem to be available. Why is that? Well, an expert in something like Active Directory can be charged out at high rates to client implementation projects. He is not going to be assigned to your problem just because you’d like it. If he is assigned to a chargeable project to help you, he won’t know any more about you than any other new supplier.