I worked on a study for an agency looking into outsourcing
software development and operations. The
CIO wanted examples of where outsourcing was being done and whether it was achieving
the organizations technical and cost goals.
We enlisted the help of Professor Mary Lacity: http://www.umsl.edu/~lacitym/vita.htm of the University
of Missouri-St. Louis who is widely known for her teaching, data collection and 18
books and countless journal articles on outsourcing. She has been collecting global data on
outsourcing for many years, and has tracked deals through their life cycles.
At the time of our study the idea of outsourcing had taken hold
in the IT industry. Australia’s Inland
Revenue Service (their IRS), Dow Chemical, Kodak, and other large organizations
were attempting to focus their own staff on direct mission functions and
jettison the IT work to (presumably) more productive and cost effective
contractors.
While there is a vast body of work which I do not want to
misrepresent, it’s fair to say that contractor vs inhouse skills isn’t as much of an issue as is the ability of
the organization to craft and execute contracts that meet their REAL and
evolving needs at predictable, perhaps lower costs. It turns out that many organization’s
employees actually do things as a part of what they perceive as their JOB that
the official organization charts and job descriptions do not document. So, it is problematic for an organization to
specify “exactly” the duties, functions, procedures, and tasks to be performed
under contract, at a price, with performance criteria. It is also difficult to specify future needs
and to specify, measure and enforce cost and productivity characteristics.
Unless perfectly specified, the work performed by a contracted
source will either: a) not meet the organization’s ACTUAL requirements, or b)
will (and should) cost more than originally priced. On the other hand, to achieve an “exact”
specification and contracting documents acceptable to both parties take a very,
very long calendar time (multiple years) and thousands of hours for both parties in
lawyers, accountants, business and IT managers to arrive at an acceptable set
of contractually binding documents.
The real world experience has yielded very mixed results. Lacity’s books and papers chronicle these
results and are mandatory reading for those contemplating outsourcing. The myth that outsourcing is a silver bullet
is partially due to the fact that most who have attempted it, and failed, do
not discuss or publicize those failures, leaving the positive impressions that
were left from the big media deal announcements (even Time Magazine covers). Lacity has published data and analyses showing
the true story.
In the Federal IT environment, requirements are continually
evolving (including new legislation); contracting process is proscribed; deals
must be done in public; and there are more antagonists than protagonists.
Outsourcing federal IT functions is probably a fool’s errand if the goal is to
save dollars and achieve higher overall productivity.
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