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Outsourcing decision factors have grown more complicated as solutions, risks, and challenges have evolved. Mary Shacklett analyzes how this evolution is affecting the choices CIOs must now make.
Advances in technology have delivered sophisticated security, software, hardware, mobile, and data handling and management capabilities—all of which are being cemented into a hybrid cloud concept that combines on-premises computing with operations that enterprises now do in the cloud.
Few businesses can keep pace with the accelerated speed of new technical capabilities, but most want to—because all this new technology delivers competitive and operational advantages never before attainable. And this places the matter of what IT should outsource and where IT should develop internal talent right back on the CIO agenda—only the answers aren't the same as they were before.
Just how was outsourcing approached in the not so distant past?
In a nutshell, you outsourced projects when the work was substantial but mundane—and when you didn't want your staff consumed with it when you could outsource to an offshore firm that could do it for less or you were implementing a new technology but didn't have resident skills on staff so you had to outsource to an expert.
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These factors still play significant roles in outsourcing decisions. But more must now be added to the mix. Here are three of the biggest new challenges affecting CIOs' outsourcing strategies.
1: Vendors are moving to a single-source outsourcing relationship
In the past, companies could choose the specific services they wanted to outsource from a vendor. But now, to gain synergy between the services they offer and to provide greater productivity at less cost, vendors are presenting CIOs with packaged outsourcing agreements, in which the CIO/enterprise must agree to a collection of services they will outsource. As a result, the decision to outsource with a given vendor might push more IT services into an outsource mode with an outside vendor than the CIO really wants. The benefits of outsourcing a larger portion of IT are reduced costs and less strain on internal staff. The tradeoff is that you place all your eggs in one vendor basket, so there is heightened risk if things go badly with the vendor.
2: Some technologies are becoming too demanding and fraught with risk for IT alone to manage
Corporate security is a great example here. New and highly sophisticated security threats emerge every day—in some cases, to the point that the risks of a security breach or a system compromise is so great that the CIO believes it's necessary to outsource corporate security to a company that does nothing but specialize in security. For small and midsize organizations in particular, this concern is reaching an inflection point where many are s security-as-a-service outsourcing to a highly qualified vendor in an effort to reduce their security exposures.
3: Technology integration is overwhelming companies
System and technology integration is the hardest work in IT—and there simply isn't enough staff bandwidth to integrate all the diverse technologies that corporate IT departments are expected to implement. CIOs see this—so they're looking to outsourcers that can either provide integration consulting or do the integrations themselves.
Finding a balance
Outsourcing decisions today are more complex than they were in the past because of the speed at which new technologies hit the market every day. In the midst of this technology deluge, it is easier for CIOs to just decide to outsource. However, they must also weigh these outsourcing decisions against the need to continually invest in the human capital that their own companies possess. At some point, it's not economically or operationally wise to risk sacrificing your own talent investments or your intellectual property protections to sign with an outsourcer. For this reason, more companies are opting to in-source their mission-critical people assets as they consider new applications for outsourcing. There are no best practices that work equally well for every company. It's incumbent upon CIOs to make sound choices that balance the need to get things done quickly with the need to continually expand the company's internal talent and intellectual assets.