Devil's Advocate: Conflicting messages

There is a bifurcation taking place within companies clamouring over conflicting ideas of best practice. The trend towards outsourcing on the one hand, the requirement to align IT with the business on the other. Martin Brampton stands at the crossroads and tries to make sense of this contradiction.

It is odd how the received wisdom often points in conflicting directions. Currently, outsourcing remains a preoccupation, as does talk about aligning IT with organisational goals. Yet the two concepts are awkward bedfellows.

The idea that internal IT groups are a thing of the past does at least seem to be fading. At one time, signing an outsourcing contract was seen as a way to get rid of these awkward IT people. Why worry about IT if you can get somebody else to do it for you at lower cost?

That approach fits very poorly with any notion that IT is central to an organisation. Apart from anything else, with only a small number of outsourcers capable of handling the really big contracts, the same issue arises as with accountancy. Mergers have driven the number of firms down to a level where it is often hard to find a major auditor who does not have a conflict of interest.

The same issue naturally arises with IT. How is a large outsourcing company going to provide an edge that is not available to competitors? Favouring one customer over another is not likely to be a successful long term strategy for any outsourcer. Nor does it seem likely that unique insights into the organisation are likely to come from consultants, whose greatest claim is to promote best practice and benchmarking, rather than true innovation.

Indeed it is hard to find examples of organisations that have derived sustained advantage from innovative IT, or even from innovative business processes. The champions at one moment seem to find themselves in backwaters very soon afterwards. Ironically, one company with a remarkably consistent record is IBM, which for obvious reasons does not outsource its IT.

Curiously, one of the popular areas for outsourcing has been the help desk. There is no doubt that it is a difficult but potentially rewarding task to run a good help desk. But the most interesting feature that emerges from successful help desk operations is that the team becomes a repository of valuable information about the organisation. It develops skills at solving a range of problems, not always IT related.

Inevitably, it is much harder to build that kind of rapport between an external operation that runs a help desk at minimum cost, subject only to keeping somewhere near to a service level. It would be rare for the service level to say much about the quality of the advice given. In fact, questions of quality are extremely difficult to handle in outsourcing contracts generally.

Renewal of large contracts raise severe problems. The incumbent has a considerable advantage, so much so that it may deter rivals from putting significant resources into competitive bids. Where an existing contract is deemed unsuccessful, there is often an irrational belief that finding a new supplier will solve all the problems.

In most cases, this is an illusion. While outsourcers vary, few are outright bad, and most can improve their performance quite radically given the right encouragement. Persistently poor outcomes strongly suggest that the contract is badly constructed, is being badly managed, or perhaps both. Simply replacing the contractor is unlikely to provide a solution.

But perhaps my biggest doubt is over the faith people seem to have in business process innovation. While there are always things that can be improved, many quests for advantage have turned into general disadvantages. So, the deposit takers' device of leaving investors in progressively poorer paying accounts made short term profits. In the long term, it has made most investors wary and quick to switch. The overall result is higher costs for everyone. What kind of progress is that?