By Andy McCue, 2 February 2006 15:40
NEWS
Insourcing will continue to emerge as a new trend this year as businesses seek to reverse bad outsourcing decisions and regain more control over their IT costs and operations, according to UK CIOs.
The last 12 months have seen some high-profile moves by companies to bring outsourced IT back in-house, including the likes of Sainsbury's, and 11 of silicon.com's CIO Jury IT user panel said they expect to see more businesses follow suit.
Ben Booth, European and UK CTO at pollsters Mori, said: "Organisations are becoming far more discerning, so some of the less optimal outsourcing deals are being brought back in-house. My hope would be that businesses are now beginning to look past the current fashion and discern what will give the best return. Depending on what is required this could be in-house, outsourced or indeed offshore."
Peter Dew, CIO at FTSE 100 industrial gases giant BOC, said a failure by some companies to develop a comprehensive sourcing strategy in the past has resulted in the high number of rushed decisions to pull previously outsourced operations back in-house.
He said: "We have a comprehensive sourcing strategy that addresses the needs for skills and capabilities, of both a strategic and 'commodity' nature and a well documented plan for how we will acquire, utilise and retire them - whether 'in-source', 'outsourced' 'on-shore' or 'offshore'. Without this we would be at the mercy of the latest consultant or management fad."
Frank Coyle, IT director at John Menzies Distribution, said a lot of outsourced contracts were ill-advised in the first place and only taken up because someone was trying to make a name for themselves or trying to get 'outsourcing' onto their CV.One IT chief who has done insourcing is Phil Young, head of IT operations at Amtrak Express Parcels. He cited control of costs and schedules of work as the driver for bringing all development and support work back in-house when he joined the company three years ago.
He said: "Yes, you can have service level agreements, change control and contracts, but insourcing gives me the flexibility to change direction very quickly, without a consensus being reached in some cases, and at a known risk. This approach has paid dividends I might add."
Stephen Hand, group IT director at Lloyds Registry, predicted those organisations that have outsourced high-end functions such as strategy, architecture and business relationship work will bring them back in-house.
Others pointed to the emergence of a "blended" sourcing strategy. Derek Gannon, operations director at Guardian Newspapers, said: "The reality is that it will be a combination of insourcing and outsourcing depending on the nature of the business problem/issue/objective."
But Christopher Linfoot, IT director at LDV Vans, said that the latest fad for in-sourcing is just a correction of the inappropriate use of outsourcing. "While outsourcing may not be appropriate in many circumstances, used well it will remain a valuable tool for many businesses," he said.
Today's CIO Jury was
Ben Booth, European and UK CTO, MoriChris Broad, head of IS&T, UKAEA
Paul Broome, IT director, 192.com
Frank Coyle, IT director, John Menzies Distribution
Peter Dew, CIO, BOC
Kirk Downey, CTO, Centrica
Derek Gannon, operations director, Guardian Newspapers
Stephen Hand, group IT director, Lloyds Register
Christopher Linfoot, IT director, LDV Vans
Jacques Rene, director of IT and projects, Airclaims
Peter Ryder, head of ICT, Preston City Council
Phil Young, head of IT operations, Amtrak Express Parcels
If you are a CIO, IT director or equivalent at a large or small company in the private or public sector and you want to be part of silicon.com's CIO Jury pool, or you know an IT chief who should be, then drop us a line at editorial@silicon.com
Comments
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1. Charles Smith
The real cost of the Outsourcing vogue will become apparent during the next few years. I've had to unwind a few outsourcing deals (created by other people) with poor contracts and the costs were very high. The outsource companies do this work to make a good profit margin! Initial low pricing on their part gives them a "short and curly" negotiation position further along the line when the client asks for changes or new facilities.
Those extra costs for ex-contract services, loss of negotiation position, upgrades and moves. The lack of skilled IT personnel in the locality and the cost of migration at contract termination to other suppliers. The original perpetrators of the deal will normally have moved on to other fields and will not take the can for the extra high costs.
2. Simon Allen
What goes around, comes around. I recall a conversation in NYC in 1989 about Outsourcing that was then ripping ahead. The VP in the Comms department of a Bank (for whom I worked in the UK) told me not to be too bothered about it.
"Don't worry, it's just a passing game and in ten years people will start bringing things back inside again. I've seen it all efore." She was right!