Outsourcing Declines, Are IT Jobs Coming Back?

IT leaders and CIOs are reexamining their outsourcing mix and bringing some—but not all—IT back in-house

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For example, when crafting Textron's new distribution system for its E-Z-GO golf carts, developers and analysts worked side-by-side in Augusta, Ga., to create processes for streamlining the loading of carts for shipping.

The goal is to bring as much of the core work as possible back inside the walls of Textron, whether those buildings are in Bangalore, India, or Fort Worth, Texas. "Our default in the past was to outsource. Now it's 180 degrees in the other direction," says Cantrell. "Whenever possible, we want to do the work with our captive teams. We want to get to a place where we're pretty much self-supporting."

But don't call it an insourcing effort. "This hasn't been a concerted decision to bring [a set percentage of work] back in," Cantrell explains. "But as we did our outsourcing, we found certain things weren't working the way we wanted them to. So as an issue pops up, we do root-cause analysis and make a decision."

Higher-Touch Outsourcing

"One of the mistakes people make is they think outsourcing will require less oversight and active management," says Dick, the former Western Union CIO. "It doesn't."

That's a truth the company learned the hard way, having fully outsourced IT fifteen years ago. "They outsourced it all to one vendor, and the mistake they made was that they outsourced a lot of the intellectual property," Dick says. "The business had the belief that we had so many IT problems, why not just source it somewhere else. We had to rehire and rebuild that intellectual property."

At Toyota Financial Services, Priest is getting more involved in how his service providers staff his account. "We're competing for a supply of very specific talent," he says. "I care less about the number of heads than the skill set."

That's a revolution in attitude. "In the past you'd say, 'I want these services at these service levels at this price,' and let the supplier deal with how they achieve the results," Priest says. "Part of the reason for outsourcing was so that you wouldn't have to deal with talent management."

Today, Priest collaborates with his suppliers on who gets deployed on his accounts and how to retain talent. His managers spend time with the new team during its first few days to evaluate its makeup, and they keep the offshore partners well informed about the project pipeline so the best workers don't roll off to another client. "You can't wash your hands of the [HR] challenges," Priest says.

The only trouble with this new normal when it comes to sourcing strategy is that there is no normal anymore: No 80-20 goal to shoot for, no indisputable definitions of "commodity" and "core competency." The mix of offshoring and onshoring and outsourcing and insourcing will vary by industry, company, even individual CIO and IT organization.

But that's a good thing, say IT leaders and outsourcing industry watchers. It means that sourcing decisions are being made based on real business needs and outcomes rather than in service of mindlessly chasing a ratio or labor arbitrage target.

"There really aren't any standard practices or benchmarks for these kinds of [sourcing] decisions anymore," says Priest. "You have to do what is right for the business."

Stephanie Overby is a freelance writer based in Massachusetts.

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Copyright © 2012 IDG Communications, Inc.

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