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.

Our industry seems to pit outsourcing vs. insourcing. That should not be the way, because most companies need both to get the right combination of best talent and most-cost-effective IT services. The best sourcing strategies treat outsourcing and insourcing as complementary, not competitive, and leverage onsite, onshore, offshore and nearshore options all in the same model. This is called a global services model and reshoring is an inevitable outcome of a global services strategy.

The outsourcing market is starting to mature and U.S. companies have realized that it makes more sense to undertake certain services locally. These services typically require more day-to-day -- or even hour-to-hour -- business interaction and communication. Here are some examples:

-Agile development.

-Application maintenance and support (AMS) -- for apps that require same- or near-time zone support or follow-the-sun support models.

-Business intelligence -- for reporting where business users want quick response times.

-Testing -- where more customer interaction is required.

-Mobility -- because rapid prototyping and heavy customer interaction are required.

-Application development -- for apps that require more business interaction or a follow-the-sun model.

Although providing these types of services locally comes at higher rates, the actual total-cost-of-ownership (TCO) can be attractive if you factor in higher productivity, fewer errors through better communication, and faster time to market. Conversely, traditional outsourcing and offshoring makes sense for application development and AMS if real-time or near-real-time customer interaction is not required.

One of the biggest enablers of the reshoring trend is the rise in talent availability in the market. Most of the large engineering schools in the U.S. are seeing rises in annual enrollment of around 10% for the past three or four years. This is extremely encouraging.

In 2012, my company, mid-tier Indian IT Services provider Mindtree, opened up a 400-seat U.S. Delivery Center (USDC) in Gainesville, Fla., in partnership with the College of Engineering at the University of Florida. The College of Engineering at UF has seen tremendous growth, with an active enrollment of over 8,000 students. This talent pool feeds the USDC and makes it a viable, cost-competitive player in the market.

Reshoring and insourcing are headline grabbers for politicians and the media, but the real driver of the made-in-America trend is a rightsourcing method that uses common sense, expediency and cost savings in sourcing strategies.

CIOs will need to leverage a global services model that uses both insourcing and outsourcing for certain tasks. This will inevitably lead to more of the right work being done onsite or in local delivery centers with competitive pricing and will benefit the entire IT industry, universities with strong engineering programs, graduates looking for jobs, and cities and states that support local delivery centers.

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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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Transformative CIOs Organize for Success
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