Question: People are kidding themselves. It sounds so good-just pay a fixed, known amount to some vendor for your computer infrastructure, and all your problems go away. Everyone has the computers they need, the network never goes down, and you never have to endure another horrible meeting about network protocols, https, and the latest worm. You're off into information systems nirvana.... "Except it doesn't work that way. You trade one set of problems for another. Consider the outsourcing of computer infrastructure. What's the first thing the outsource vendor does? It hires all of the employees who were doing the work for you. Remember that lazy, incompetent network administrator that the company had-the one who never seemed to get anything done? Well, he's baaaaack, as an employee of your outsource company. Only this time he has an excuse, ‘Company policy won't allow me to do it that way.' "So the outsourcers get their first-level employees by hiring the ones you had. Of course, the outsourcer says it will provide management oversight, and if the employees don't work out, they'll be gone. What you're really outsourcing is middle-level management of the same IT personnel you had. But there's no way of knowing whether the managers they supply are any better than the ones you had. "Also, you think you had bureaucratic problems before? Every vendor has a set of forms, procedures, committees, reports, and other management ‘tools.' They will tell you that you have to do things according to the standard blueprint.
They have to say that because if they allowed every company to be different, they'd never be able to gain any leverage themselves, and they'd never be profitable. "So now you're paying a premium for the services of your former employees, who are now managed by strangers who are paid by the outsource vendor, who evaluates those managers on how well they follow the outsource vendor's profit-generating procedures. How quickly can they turn your operation into a clone of all their other clients? Do you really want to do that? "Suppose you figure all this out and decide to get out of it. Now what? How do you undo an outsource agreement? All the critical knowledge is in the minds of the outsource vendor's employees, who have no incentive to work for you. In fact, their employment contract probably prohibits it. So now you have to take an existing operation within your own company, hire employees to staff that function, and relearn everything you ought to have learned in the first place. "Gimme a break. Outsourcing is fool's gold, an expensive leap away from responsibility. It's like saying, ‘We can't figure out how to manage an important function in our company, so you do it!' You can't get away from IS problems by hiring someone else to manage them for you. At least you care about your bottom line.
1. Hiring an organization's existing IS staff is common practice when starting a new outsourcing arrangement. What are the advantages of this practice to the outsource vendor? What are the advantages to the organization?
2. Suppose you work for an outsource vendor. How do you respond to the charge that your managers care only about how they appear to their employer (the outsource vendor), not how they actually perform for the organization?
3. Consider the statement, "We can't figure out how to manage an important function in our company, so you do it!" Do you agree with the sentiment of this statement? If this is true, is it necessarily bad? Why or why not?
4. Explain how it is possible for an outsource vendor to achieve economies of scale that are not possible for the hiring organization. Does this phenomenon justify outsourcing? Why or why not?
5. In what ways is outsourcing IS infrastructure like outsourcing the company cafeteria? In what ways is it different? What general conclusions can you make about infrastructure outsourcing?
6. This guide assumes that the outsourcing agreement is for the organization's computing infrastructure. Outsourcing for software development, as PRIDE is doing, involves less direct involvement with the contractor. Explain how your answers to questions 2-5 would be different for software outsourcing.
7. How do your answers to questions 2-5 differ if the outsourcing agreement is just for PaaS resources?