11 steps to insourcing success

Thinking about insourcing currently outsourced IT work to cut costs or make good on a long-term strategic plan? Here’s how to do it right.

11 steps to insourcing success
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As organizations have scrambled to assess and adjust to the unfolding economic impact of the COVID-19 pandemic, IT leaders are taking a closer look at their sourcing strategies — in some cases, with an eye toward insourcing.

Repatriating previously farmed out work has increased in the recent past — particularly for IT services — for a number of reasons, says Vivek Bhatia, practice director at Everest Group. Among them: a desire for tighter integration and alignment with the business, greater cross-functional collaboration to improve speed to market or accelerate digital transformation, better control and governance of services, minimization of operational or regulatory risk, or increasing in-house capabilities for core or IP-intensive work.

Companies with severe liquidity challenges — retailers, airlines, and hotels, for example — have had to quickly reduce their cost structures and get expenses off the books. These firms are likely to continue to outsource (seeking discounts from providers) and sell their captive offshore delivery centers, says Steve Hall, partner in ISG’s Digital Advisory Services. On the other hand, transactional processing and call center needs — for example, in finserve and insurance — may be ripe for insourcing to address an extensive backlog of transactions as outsourcing providers themselves have shifted to remote work, raising regulatory, remote access, and capability issues, Hall says.

“In the mid-term, organizations will need to continue to reduce costs for core functions as they recover from the crisis and rethink their digital transformation,” Hall adds, which will accelerate movement to the public cloud and greater insourcing as clients collaborate with cloud providers to architect new solutions.

The current crisis has also exposed business continuity weaknesses. “Both enterprises and global business services organizations will now focus on greater integration with a sharper focus on risk and governance,” Bhatia says. “Going forward, this will be an additional consideration to insourcing.” Companies that have mature internal services organizations capable of greater resilience and flexibility may bring more work in-house in the near to long term, according to Bhatia.

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