Magazine Article | November 1, 2003

Elvis Has Left The Building: Is IT Next?

Business analysts envision IT functions heading for the exit doors on their way to being outsourced. But, to get your money's worth, make some stay for an encore.

Integrated Solutions, November 2003
Tom von Gunden

With all of the hand-wringing going on these days about outsourcing IT to "offshore" providers, you'd swear the U.S. landscape is composed entirely of rapidly eroding beachfront property. Granted, Fortune 500 companies have IT needs looming at tremendous breadth and scale. For them, the proposition of outsourcing some IT functions, whether the providers are offshore or not, is no doubt financially and logistically compelling. So, given their global presence, the largest U.S. corporations have at least a foot, if not an entire leg, fully submerged in salt water. But, at the $53 million wheat processing plant in Valley City, ND, or the $87 million tool-and-die manufacturing facility in Dayton, OH, employees stepping outside on their lunch breaks don't regularly discover cruise ships bearing down on them.

Nonetheless, back inside the building, there are likely to be multiple IT needs bearing down on the small staff charged with addressing them. Sure, the small- to medium-sized company may not need to book several passages on the IT Love Boat. Nonetheless, one or two key business operations may threaten the organization's ability to manage IT solely with in-house resources.

Centralized Resources Save On Outsourcing
A commonly posited piece of advice about outsourcing goes something like this: "Focus on your core competencies and consider outsourcing the rest." But, unless the organization is an actual technology firm, it's unlikely any part of IT could be considered one of the company's core competencies. So, outsource all of it? Hardly. Many aspects of IT, while not exactly the company's core competency, are core competencies - or could be - for even a small internal IT staff. Ethernet networking may already be one. Managing client/server applications is probably another.

Perhaps a better, more specific rule of thumb than "focus on core competencies" is to monitor parallel growth in IT hardware and the number of people required to run/manage it. If there's a person positioned at nearly every machine in an environment with a lot of machines, it could be more cost-effective to outsource the function requiring all of those bodies and boxes. To keep up with document imaging needs, for instance, a company may be frequently adding scanning stations. An investment in more equipment often means an investment in additional labor to operate it.

But, some hardware-heavy environments may not require anything like a person per machine. Think, for example, of the disk arrays and tape libraries in a centralized data center. With increasingly sophisticated software management tools, often packaged with the hardware, even a junior IT admin or two could feasibly manage all of a small enterprise's storage resources. And, with hardware prices generally dropping, the TCO for keeping that IT function in-house isn't likely to rise to levels that have C-level execs heading for the beach and beyond.

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