October 30, 2011: Outsourcing has been an important part of business strategy for years and it still is. The main drivers behind outsourcing are cost reduction and reducing the technology infrastructure.
The outsourcing vendors enjoy economies of scale and expertise which helps them to deliver services at lower prices and higher quality. This helps companies to reduce cost while providing better services to customers.
In very few cases companies were worried about the increase in cost as a result of outsourcing. They could have done it in house at a lower cost, but they were content with service and the increased cost as it has increased their capacity for innovation.
Even though outsourcing provides companies with cost saving, there are few CIOs who are worried with the whole idea of outsourcing. It is often rare that CIOs come up with such comments about a component of business strategy. They have several issues to rise about outsourcing.
Firstly, when outsourcing plans are announced by the company, it starts to lose its best employees. Employees are worried about the uncertainty that will loom in the future as a result of outsourcing. The employees from the outsourcing vendors are not loyal to the company and they are not willing to go that extra mile for the company. This makes innovation in IT harder.
The second issue is that the success of IT has made the management believe that IT is burden and they need to get rid of it. Now for the CIOs it is no longer a source of opportunity, but a problem to be fixed.
The third problem is that, outsourcing will affect the health of the industry and the nation as a whole. The country from which the process is outsourced will face set backs in the future.
Even though outsourcing brings in cost reduction and high quality in the industry, the picture looks different and worrying when viewed from a larger perspective. Outsourcing is adopted by almost every industry, which will severely affect the skills and employment in a country.
In the United Kingdom, CIOs point out that outsourcing has contributed to increasing unemployment. CIOs are worried about the negative impact of their outsourcing on entry level jobs in the UK. Outsourcing IT services will spread a belief that IT is no longer important in UK as far as career is concerned.
Outsourcing will not be avoided, since all IT services cannot be performed inhouse. As a result more efficient and smarter hybrid approaches will become popular in the future. The IT department is also going to become smarter and smaller. The IT department with few but brilliant members will come up with innovative ideas in the future and the key to success lies with implementing such ideas.