Nearshore Americas

The CIO View: Outsourcing has a Bright Future, But So Does the Domestic IT Department

Is it possible that IT departments will thrive, while at the same time outsourcers will continue to play a vital role in supporting corporate IT services?

As the U.S. battles to emerge from a bruising economic climate and new resource-efficient solutions like cloud computing become more mainstream, a key, strategic question confronts countless CIOs: how much of the IT function should be outsourced and how much should stay in-house? Some CIOs have taken the boldest of all steps by outsourcing the entire IT function (as CIO Brent Hoag has done at Wisconsin-based Diversey), while the majority of CIOs look to balance in-house resources with a combination of onshore and offshore managed services providers.

Managing complex IT outsourced relationships, determining what is truly strategic and stays inside the corporate four walls and what gets outsourced has defined the path most CIOs have walked over the last several years. However, are we finally reaching a point where the path diverges and decision-makers must choose between one path or the other?

Reality Strikes

The proposition of all-or-nothing options does not really match the reality of the highly dynamic role of IT which needs to scale, shift, re-allocate and augment at any given moment. Clearly, the role of the outsourced service provider is here to stay. Listen for example to what Jeff Relkin, director of IT for Quadel says in this recent TechRepublic interview:

“As technology becomes ever more commoditized and as the availability of objects for application construction without traditional development continues to expand, the need for in-house IT resources will dwindle. The overall organization of IT will also change, along with the skill sets required. IT professionals will need to become more mainstream business resources than ever before, with more emphasis on contributing to revenue generation rather than expense reduction.”

Another IT leaders, Michael Foerst (CIO of Missouri Employers Mutual Insurance), has a different take:

“Yes, on average it will be smaller but not because it is all outsourced. IT departments will leverage the capabilities of the cloud in order to allow their internal resources to become more familiar with the business and deploy technology solutions that will help differentiate their organizations in the market.”

And, finally, Lance Taylor-Warren (CIO of H.A.W.C. Community Health Centers) points out that – at the end of the day – the IT role will have to continue to stay flexible:

“Cloud computing is just one of many options that a company has to look at moving forward. No one knows what the next big thing will be. IT departments may shrink in certain markets, but health care IT is on the cusp of a huge growth phase due to health care reform and the requirements being forced on the industry by the federal government. Outsourcing can’t address the hands-on need.”

Danger of Playing It Safe

Because the IT department’s role has become more intertwined with actual business outcomes, the requirement that IT “speaks” in business terms will inevitably increase. Therefore, I’m quite sure that IT leaders with business acumen are going to be looked as as extremely critical to the overall value delivered by the business. Those who possess these skill sets are probably the “safest” of all IT professionals, especially for those individuals whose background is entrenched in the vertical industry where the company operates.

Meanwhile, the outsourcing partner can “play it safe” and continue to deliver commodity IT services and probably have quite a steady source of business. But the savvier players, those that can peer more deeply into the strategic challenges of their clients and truly commit to answering the call to drive innovation, are going to be the group that really defines the next-generation of world-class managed services firms. You might call them an “elite corps” of outsourcers – characterized by extremely robust process discipline, matched with both strong people and technical skills.

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And that’s of course where the Nearshore players may step in, given their often strong cultural sophistication which – as we have talked about often at Nearshore Americas – gives these firms a critical advantage in digesting the true quandaries their clients end up in and devising solutions that can be properly explained and executed.

For Nearshore players keen to move into the elite level, the key qualification will be proven mastery in the vertical environments of your clients. Until that level of expertise is achieved, U.S. corporate clients will continue to source work to the farshore or decide that the in-house solution is the safest solution – but maybe not the most cost-effective.

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.

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