Strategic CIO // IT Strategy
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9/19/2013
01:04 PM
Scott Staples
Scott Staples
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Outsourcing Vs. Insourcing: You Need Both

Reshored IT services are on the rise, but your company might be best served by "rightsourcing" -- using a combination of insourcing and outsourcing based on your needs.

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The decision by General Motors to bring 10,000 IT jobs back to the U.S. over the next three to five years has been well chronicled. GM is definitely the biggest mover in the emerging insourcing or reshoring trend. We have also seen major U.S. companies including GE, Starbucks and Caterpillar announce the reshoring of manufacturing, services and IT jobs. Others will follow as the "Made in America" trend gains momentum.

Why is this happening now? Is this being driven by the H-1B visa issue? Cost increases overseas? Patriotism?

Yes, some of these factors are driving this trend, but the biggest reason for the emergence of insourcing or reshoring is that for the delivery of some IT services, it just makes sense.

Trends tend to be cyclical and are spurred by changes in market conditions. The rise of reshoring is being fueled by certain changes in IT such as a bigger domestic talent pool outside tier-one cities, the use of videoconferencing to make distributed teams highly productive, and the overall maturation of the outsourcing market. GM might be aggressive in its reshoring approach, but its move will likely motivate other companies to look at their own outsourcing.

[ Time to question old hiring assumptions? Read H-1B Workers Not Best Or Brightest, Study Says. ]

Outsourcing strategies should be directly tied to business strategies, and as market factors change, so should outsourcing strategies. Common drivers of an outsourcing strategy include: cost, time to market, talent availability, customer support needs, global expansion and organizational readiness. Changing market factors such as increased offshore pricing, new delivery models (e.g. agile) and the rise of mid-size and specialty service providers all make it a good time for companies to adjust their own sourcing models. But that's easier said than done.

When it comes to sourcing models, there are many terms to digest: insourcing, reshoring, outsourcing, offshoring, onshoring, nearshoring, captives and so on. All are familiar in the IT industry but the most important term to consider is "rightsourcing," which sometimes gets omitted from sourcing strategies.

Rightsourcing implies the use of common sense to determine where certain services should be delivered. The right location of tasks and services is driven by quality, cost and availability of talent. Rightsourcing is directly tied to business goals and should be unique to each company -- meaning there is no cookie-cutter approach to determining what sourcing model will work best for your company. Insourcing might work for some tasks and outsourcing for others.

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felixlgriffin
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felixlgriffin,
User Rank: Strategist
11/30/2013 | 2:17:36 PM
Re: Outsourcing Vs. Insourcing: You Need Both
Great article.. Outsourcing Vs. Insourcing tends to be a political and media driven issue, but it is an issue at the heart of every American Business and Government opperation. How do you stay true to the "Red-White and Blue" and deliver quality services and products that are cost efficient? That is the challenge of American Businesses and Government Operations today.

I agree.. a balance of Outsourcing things that will cut cost and project overruns with Insourcing things that lead to effectiveness, would have helped us avoid the CGI Group nightmare known as the Obamacare Website. #dysfunctional

I'd rather see a project of $90Million (US) send $18 Million (20%) overseas than to have a $90 million project (cost to build the ObamaCare website, Healthcare.gov) with overruns up to $112 million, and could exceed $196 million by the time the website is fully operational and functioning properly [as was promised back in October].

I may not be as smart as some other people on this earth, but if I have the chance to save 80%, I think I would do it and put the rest into the American economy. To me, that makes sense..

 

That should be a case-study for 2014.
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