There are about
nine “Billion Dollar Babies” companies that were expected to sign
billion-dollar outsourcing deals in 1994. Companies such as the Xerox
Corp., with a $4 billion plus outsourcing deal, McDonnell Douglas and
General Dynamics all joined the hype.
There
are definite advantages in outsourcing – but only in doing it right.
Outsourcing is a dangerous playground especially to the unwary
executive or corporate counsel. It is a “make or buy” decision applied
to your company’s information systems and technology functions. “Should
you hire your own systems staff, acquire your own facilities, develop
own systems, maintain owned hardware, develop documentation processes,
contract your own telecommunications network, etc.? Or should I leave
it all to outsourcing firms who have already achieved the so-called
economies of scale, attracting the best full-time systems professionals
and get the most processing power and developmental capabilities and
tools for the least per unit cost to do the job for me?”
Pros and Cons
The
promises outsourcing is very attractive due to the continued
cost-cutting measures employed by the companies, downsizing, reducing
software development backlog and re-engineering like the following:
improved service and performance;
expert resources and staffing;
shorter systems development cycles;
better management control;
elimination of personnel problems;
stabilized or reduced costs;
improved business focus;
possible "tax" advantages;
However, opposing realities and factors also put limitations and frustrate such anticipated gains:
nickel-and-dime syndrome ("I have to charge you extra for this, and this, and that");
contract termination problems;
inflexible contracts that limit your ability to accomplish your stated and changing business strategies and objectives;
loss of control over your key information resources;
ineffective
corporate or project management - they're no better than you in running
a business (i.e., fighting their/our bureaucracy, turnover, etc.);
loss
of in-house expertise (including the fact that while it only takes 3-6
months to dismantle your corporate data processing department, it takes
3-4 years to rebuild it);
conflict
of interest (when push comes to shove, they make a profit by serving
many customers and their own management - at times, possibly to your
detriment);
With
all these factors coming into play, it is very important to choose the
right outsourcing vendor and the relationship be managed correctly.
