IT Outsourcing – Strategic or Operational?


    This is something that I’ve been thinking about for a long time. Everybody (in all the blogs, magazines and guru speak) talk about how outsourcing (specifically IT) need to be viewed in a strategic perspective and not just a way to cut costs and reduce headcount. But then, why is everybody saying that their view on outsourcing is purely on the cost savings side? If outsourcing is meant to be strategic, why aren’t the implementor’s saying it? Especially the small and medium sized folks?

    Here’s what I think is going on. The first step in an outsourcing decision making process is a value chain analysis and identifying processes that are core versus non-core. Popular literature will tell you that all non-core processes are perfect candidates for outsourcing while core processes should be retained within the organization to maintain competitive advantage. In theory – agreed. Let’s take an example of an online travel company with customer service office all over the country. Its services are rendered primary through its website. Customer service centers handle customer support and otjher tasks that cannot be rendered online. The company has 2 unique software requirments. Its internal IT team only takes care of supporting the existing software infrastructure. Therefore, they decide to outsource these 2 app. development activities. Now, the purpose of these 2 applications are completely different. One is an onlien ticketing application. The other is an intranet that enables each customer service center to collaborate on different initiatives. Obviously, the online ticketing application is a strategic initiative that proposes to provide the company with a competitive advantage. The second initiative is aimed at increasing operational efficiencies. Not to undermine the importance improving operational efficiencies within an organization, but clearly, the first application deserves more attention and thought before jumping on to an outsourcing decision.

    What we have here is a perspective on outsourcing, depending upon what you outsource. If what you outsource is very operational in nature, and not of strategic importance to your organization, it is probably safe in looking at outsourcing from an operational perspective. If what you outsource is of strategic nature, then the process of outsourcing needs to be looked through the strategic lens.

    Just my thought based on what I have been observing in this industry


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