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Insourcing for IT organizations

Most IT organizations are structured to becomes a monopoly within the firm and like monopolies are wont to do, they start taking their position for granted. They become large, expensive and slow in response to their customers i.e. the business. Arguably, this hurts the firm’s competitiveness in a big way.

David Rasmussen in Cutter advisor argues that IT organizations should be competing for providing the services like any other firms within a competitive environment . They also need to make the mind shift from speaking techno geek to business speak. He challenges the IT executives to define their value add in terms of EPS to earn the right of being the preferred supplier.

I agree wholeheartedly with this philosophy. What’s not mentioned in the article though is how to break the barriers to entry that IT creates. Often, the business rely upon IT to also make decisions about sourcing from other vendors. This is akin to asking your wife to select a girfriend for you (okay bad metaphor – but you get the point). Other times, the IT still remains in the equation through the backdoor of security and hardware provisioning. IT sometimes also create virtual organizations who act as conduit between business and the external service provider, creating communication barriers.

Business, ultimately, are left no better than where they started from. The competitive environment has to be equal for all participants, for the customer to be better off. What is needed is an ombudsman who can arbitrate on such matters and protect the customer’s rights to earn their value.


2 Responses

  1. You are absolutely right – sluggish, in-house, IT monopolies do indeed hurt company competitiveness. And so does indifferent, uncooperative, outsourced IT operations. IT is what companies use to implement their business strategies. That means they need to deploy and use IT efficiently and also effectively if they are going to succeed in the hyper competitive global economy.

    In-house IT groups need to find real alliance partners to whom they can outsource much of the day-to-day operating of existing systems. The most value to the business comes when in-house IT focuses on strategic alignment with the business and the development of new systems to enable that alignment.

  2. […] Undoubtedly she needs IT support. Here comes more inefficiency. Whilst a similar technology may be used by another part of the business, it does not entirely meet her requirements. So a new product is built. Throw in outsourcing and inefficiencies are abound. It is not in the interests of the vendor to strive for simplicity. (Read PG’s excellent analysis of the problem with outsourcing IT). […]

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