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GE Capital CIO: Outsourcing Went Too Far
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Laurianne
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Laurianne,
User Rank: Author
8/5/2014 | 11:59:12 AM
Insourcing and quality
"GE is getting better-quality code and higher throughput using staffers than it did with contract resources, he says. Fowler sees that in measures such as fewer tickets for rework on post-production code that GE-badged employees built." This echoes what Shane O'Neill just outlined in our related article: 4 Outsourcing Trends To Watch.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
8/5/2014 | 5:01:00 PM
Re: Insourcing and quality
I'd be curious to know whether there's a difference in results between outsourcing locations where communication is a challenge vs. locations where communcation is in the same language. Is it geography or language that improves results?
majenkins
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majenkins,
User Rank: Ninja
8/6/2014 | 11:31:00 AM
Re: Insourcing and quality
Laurianne, It not only echoes your other article but it echoes what some people were predicting before the outsourcing trend went crazy. I also think Thomas is correct that language probably has a lot to do with the quality.
DDURBIN1
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DDURBIN1,
User Rank: Ninja
8/6/2014 | 9:38:49 AM
Yo-Yo Management

The finance and banking industry was the first industry to start the outsourcing trend in the early 80's to HP, IBM and others followed by insourcing followed by outsourcing to EDS, Perot and others followed by insourcing followed by outsourcing to India, China and others....well you get the picture.  What is interesting about this yo-yoing between out and in sourcing is the exact same business drivers are used to justify both actions.  The next "new" CEO at GE will start the outsourcing again. This article can be used again, just replace the word insourcing with outsourcing and hiring with firing, presto you have a good article on how GE is outsourcing. 

majenkins
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majenkins,
User Rank: Ninja
8/6/2014 | 11:33:58 AM
Re: Yo-Yo Management
DDURBIN1, I agree 100% with you. And this issue is also seen in the merge/divest cycle. The same business drivers are used to justify both actions there as well.
DDURBIN1
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DDURBIN1,
User Rank: Ninja
8/6/2014 | 11:48:57 AM
Re: Yo-Yo Management
These same drivers to justify insourcing have also been used to justify outsourcing; better code, faster code, lower cost, faster turnaround, better expertise, better support, process improvement and the likes.   I  think this has more to do with human tendencies than actual facts.  The grass is always greener on the other side of the fence until you actually get on the other side of the fence then guess what? The grass is still greener on the other side of the fence even though you just came from there.  Don't know how else to explain it.
majenkins
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majenkins,
User Rank: Ninja
8/6/2014 | 11:59:09 AM
Re: Yo-Yo Management
Perhaps but my thought lately has been it is more about the stock price and stock options than anything else. "If we don't do something the Wall Street speculators won't push/keep our stock price up and our stock options won't be worth as much." Then they use the same old tired justifications for which ever direction they are going. Perhaps I am getting a little cynical in my old age as I approach retirement.
DDURBIN1
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DDURBIN1,
User Rank: Ninja
8/6/2014 | 12:13:40 PM
Re: Yo-Yo Management

I think you hit on a good point.  From an upper management perspective outsourcing has two benefits affecting the stock price.  First is the perceived cost savings on paper.  I haven't seen an outsourcing proposal that didn't predict huge cost savings.  Second, senior management is perceived as "doing" something to benefit shareholders.   The plan is executed followed by the cost saving being a fraction of the proposed saving while business expertise is lost and benefit to business processes becomes less realized.  Hi-Ho it's time to insource again until the next new crew of senior management comes in and looks at the cost savings of outsourcing.

mkotowski2013@gmail.com
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mkotowski2013@gmail.com,
User Rank: Strategist
8/6/2014 | 12:36:58 PM
Having the right sources for the work to be done
Great article, and continued thread.  Every one chased the presumed savings in a herd mentality, and learned the hard way, that there is no one and lasting silver bullet.

Resourcing the organization with or with access to the talent to get the job done is what it's all about.  Strategy and innovation can and should be enhanced by your chosen partners, but it's YOUR business to run.

All the best in "right" sourcing for the agility and advances you desire.
jagibbons
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jagibbons,
User Rank: Ninja
8/6/2014 | 4:41:02 PM
Re: Having the right sources for the work to be done
Excellent point about right-sourcing. No answer is the only single answer for the rest of the future of the company. Business environments change. Reactions happen, and then compensating reactions swing the other way. The outsource-to-insource ratio will be different for each company and will vary over the life of a single company. I can speak from experience in my medium-sized non-profit that outsourcing caused a number of issues over the past couple of years. We spent a year working to insource, which has worked out wonderfully. We're getting things done faster for less money. Is that only the solution that would have worked, no. However, it's the path we chose and it has been paying off.
mkotowski2013@gmail.com
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mkotowski2013@gmail.com,
User Rank: Strategist
8/6/2014 | 5:11:40 PM
Re: Having the right sources for the work to be done
Over the years I've worked with Global Procurement and Sourcing organizations in evolving their value proposition - in moving beyond just being perceived as "bean-counters" and into strategy and partnership with the business.  When 2007 came, the CFO pressures to save money tipped the scale (backward) in putting more emphasis by demand on efficiency, while sacrificing effectiveness in the process.  It's good to see it coming back to reality and sustainable/adaptive models instead of the all or nothing that we've suffered through long enough.
ChrisMurphy
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ChrisMurphy,
User Rank: Author
8/6/2014 | 7:16:16 PM
Re: Having the right sources for the work to be done
One point that shouldn't get lost -- this isn't only about sourcing. There are also some key "how work gets done" strategy changes that CIO Jim Fowler is driving at GE Capital, and other parts of GE are using as well. Co-locating teams, focusing on smaller teams, and the Agile tactics mark significant IT strategy shifts as well. 
mkotowski2013@gmail.com
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mkotowski2013@gmail.com,
User Rank: Strategist
8/6/2014 | 11:01:30 PM
Re: Having the right sources for the work to be done
You're absolutely right Chris - no one part of this stands alone.  When the enterprise acts as one instead of being devided along functional lines, that collaboration drives remarkable advances in the business.
jagibbons
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jagibbons,
User Rank: Ninja
8/7/2014 | 7:53:37 AM
Re: Having the right sources for the work to be done
All of those lean and agile practices definitely help with efficiency. Many of them, especially co-locating teams, is very complicating with a staffing model that is mostly outsourced. It can be done, but it isn't easy.
zaious
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zaious,
User Rank: Moderator
8/10/2014 | 11:45:02 PM
Re: Having the right sources for the work to be done
This is a bold move for the CIO and I hope it will benefit the company. However, there are people who will think 'this move is going to increase cost and it will mean less money for the shareholders!" It is not the money that is saved -all the time! Some things has to stay inside.
jagibbons
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jagibbons,
User Rank: Ninja
8/11/2014 | 8:35:31 AM
Re: Having the right sources for the work to be done
Shareholder value can be evaluated in the short-term or the long-term. This move is about long-term success and value. In the short-term, it will cost more. In the long-term, tbeir IT should be better positioned to drive value and efficiencies that the outsourced model so often fails to deliver.
donmumpico
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donmumpico,
User Rank: Apprentice
8/8/2014 | 8:48:33 AM
Nope - it's not IT's fault.
Quote: "It's IT's fault, he says, that business users are skeptical. IT has conditioned business users to the idea that they get just one shot at getting software right -- that they need to ask for everything they might possibly want during the initial spec."


Nope - it's not IT's fault.

It's the fault of

a) someone who wants time, scope and budget fixed before anyone has made any experience if that is really going to work. That's not usually IT.

b) someone who regards IT as a cost and not as a business value and therefore tries to save money instead of building up so that business needs can be met. That's not usually IT either.



jagibbons
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jagibbons,
User Rank: Ninja
8/11/2014 | 8:34:17 AM
Re: Nope - it's not IT's fault.
Excellent points that end up burning innocent IT staff in companies all the time. There are cases, though, where IT is not an innocent bystander. If IT is not actively looking to places and ways to deliver more business value, then, that organization's IT group needs some shaking up.


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