The Outsourcing Continuum, Part VI: Making the Decision

Outsourcing is a business decision that weighs the strategic plans for the company against the resources required to accomplish those goals. Determining the appropriate resource allotment for any particular goal involves considering both tangible and intangible costs to achieve the goal. For example, if your goal is to increase market share in a particular market segment, then you may commit more resources to the development of product enhancements that appeal to that market segment―as well as, increasing the marketing and sales resources that target that market.

In this case, you may have your internal staff direct the efforts of outside organizations to print and distribute new sales literature. You might also have an outside engineering firm work on the product enhancement under the direction of your product development management team. In each of these cases, you have a tangible cost for getting a particular piece of work accomplished. You also have an intangible cost related to the quality and timeliness of getting the job done. Of course, you can do all the work internally, but unless you have the right people with the right skills, your product quality and time to market may suffer. The intangible cost would be a missed market window.

The same kind of logic applies to outsourcing your IT infrastructure. Are you going to commit your IT resources to building and maintaining servers and networks or do you want them working on things that help the company meet its strategic goals? The answer to that question obviously has to do with why you are in business. Most companies are not in the business of providing IT infrastructure support. IT is simply a means to an end. So, why not consider letting someone else do the work of supporting your networks and focus your IT staff on business process enhancement and managing the outsourced work.

Questions you should ask when making the outsourcing decision:

  • What is IT doing today in support of the corporate business strategy?

  • Does the IT organization provide good business value or is it just keeping the lights on?

  • What does IT cost today?

  • Will outsourcing save money or provide more value for the dollars spent?

Business Strategy

Here the goal is to move toward an environment where infrastructure is supported by outside service experts while maintaining the business critical elements in-house. If, for example, you are deploying a new custom software application that will do great things for the business there are several elements of the project that might be outsourced. You might contract to have some of the programming done by outside vendors, while maintaining project management control in-house. You could have the servers that the application runs on managed by an outside firm. You might even think about building the entire application on a platform such as the ones provided by, Google, or Amazon.

The point is that your technology strategy should be focused on providing business value rather than infrastructure management.

Developing a strategy that puts critical elements of technology in the hands of others is a little scary. That kind of strategy requires that your IT team develop a new set of management skills to ensure you find and manage the right partners. The technology team will have to gain more insight into the company’s business processes and strategy, a greater understanding of the service levels needed, and a better way to perform vendor due diligence investigations.

The IT team is no longer strictly in charge of technology, but rather of ensuring that everyone in the company can get their job done. The competitive edge is not in the technology but the application of the technology in innovative, cost-effective ways.

IT Value vs. Cost

Making the switch to concentrating on the “Information” in Information Technology will be challenging for many of today’s IT managers. They have always worried about the speeds and feeds and less about how the equipment under their control provides good value. Infrastructure management is necessary but not sufficient to provide business users and managers with the information they need to make critical business decisions each and every day.