Outsourcing? Out-thinking!

So there has been a slow but steady trend to commoditise IT at all levels.  Witness the large number of organisations that view IT as “not their core business” and hence turf their entire IT over to some other nameless organisation.

This behavior simply baffles me.

It would appear to be sound thinking on the surface, but if you sit and ponder the question it becomes apparent that not all IT should be farmed out.  This is because it is difficult to determine to what degree “commoditisation” can be successfully applied.

Sure, getting in bed with a hardware supplier can bring cost, maintenance and standardization benefits as the products in question are generic.  One man’s workstation is very similar in form and function to another’s, irrespective of whom they work for.  However it is solely the generic nature of these devices that makes outsourcing here so attractive.

Flipping to the other end of the IT scale, we enter the murky realms of software.  Here the definition of generic becomes increasingly unclear.

Take the humble spreadsheet.  On the face of it, it is a merely calculator on steroids. But how many trading floors, accountancy departments, sales operations and management teams rely almost exclusively on this pumped-up abacus?  If through some sort of software magic spreadsheets were to vanish overnight, the business world would immediately and irreversibly grind to a halt.

How can this be?  Spreadsheets are a cheap and easy to use tool widely employed by, it would seem, everyone. It’s a commodity, right?

No. The devil is in the macros, templates, formulas and modules that have been painstakingly crafted over many years of hard graft to work just so.  The customization effort within this tool is what makes the resulting spreadsheet so invaluable.  The customization effort maps the business processes which by definition captures the trade secrets of the business.  This you should not and would not outsource.

So the same argument goes for internally developed applications within a large conglomerate.  Most large companies these days are in a position to write their own software because the cost of development is a fraction of what it was as little as 10 years ago.  But the fact remains that in-house applications are tools that contain trade secrets even once sensitive client data has been obfuscated away.

Notwithstanding the dubious arguments surrounding cost savings, outsourcing the development, maintenance and operations of homespun applications is like handing the keys of your liquor cabinet to a recidivist alcoholic.  You can expect that your IP will be spread all over your competitors systems before you can say “wow, breach of trust!”

Put simply, IT has become so pervasive as to become utterly intertwined into the fabric of all companies.  So when you outsource anything that is not truly generic, you are effectively giving bits of the company IP away for free to your competition.  Hmmm.

Excessive outsourcing can lead to you out-thinking yourself.  Bring specialists in (like Upton Consulting)  to help you develop and retain your trade secrets rather than throwing the baby out with the bathwater.