Outsourcing should not be about cost cutting
I have just read this article on DOFonline about outsourcing. It argues that outsourcing is a great way to save on IT costs, but that is not what outsourcing is really about.
If you leave the outsourcing question to the IT department they will just look at the costs for the hardware and software and do some rate-of-return calculations. This article only looks at outsourcing from this perspective, but that is missing the main point.
Outsourcing of solutions gives many benefits and options that a traditional system run in-house cannot deliver. Looking into the future, you have to think about using software more like using a service than a product you have to buy.
By nature you buy services as and when you need them, and so it will be with IT systems and solutions in the future as well.
The concept is already well known but you often just don’t think of it that way.
The private free e-mail systems so many of us use or social networking platforms such as LinkedIn or Facebook are services delivered via the World Wide Web.
Reuters or Bloomberg terminals are also services available that you can buy. So are the dealing platforms such as FXAll.
Therefore why should you not also accept that your treasury, cash management, payment solution or treasury accounting system is offered as a service on the World Wide Web?
It makes many things much simpler. You generally don’t need to think about any IT support. These solutions are often already pre-configured with connections to other solutions e.g. for download of rates or connectivity to dealing platforms.
Making interfaces to other systems such as your ERP system or general ledger is no more difficult with a web based solution than other traditional systems.
Therefore leaving the decision about outsourcing to IT is wrong, as it is not just about calculating the rate of return of out sourcing, but about selecting the right services for the company.
March 5th, 2009 at 10:00 am
Agree.
A very common problem for organisations is to get the IT function to do what the business wants. This isn’t because they’re obstructive in any way, often there just isn’t effective communication between what the business needs and what IT can deliver.
As a consultancy, it’s a problem we meet a lot. In this context, outsourcing can be a very effective way of getting outside investment and innovation into an organisation, but only when what is actually needed is clearly understood.
For years organsiations have spent millions customising ERP systems to meet their needs. Whose needs? So often, when you start digging, the answer is ‘it’s always been done that way’. I’d suggest that many of the millions spent customising ERP systems have been wasted. If the business had known what the standard product did, they would probably have been perfectly happy with it.
And it’s just as true wih outsourcing. It’s a great answer, if you know the real question you’re asking.
Mike McCormac
Procertis Ltd
April 1st, 2010 at 6:54 am
It seems like most people perceive outsourcing as the solution to cost cutting. And you’re right.. It’s not all that. Outsourcing could do a lot more than just that.