(Just found this draft from a couple of years go ... can't think why I didn't post it)
- the original IT outsource deals were driven by customers who thought that it was non-core, that they wouldn't be able to develop or retain the skills that they needed and that there was an opportunity to lower costs by having experts do it. That all started late 80s and early 90s. Most big companies and governments have had their IT managed by outsiders for probably 20 years now; most small companies and local authorities have retained everything in house.
-similarly,big projects were pushed to outsiders because of a need to transfer the risk. Costs were supposedly fixed, scope was fixed and the problem given to someone else. Name any recent IT project to see the fallacy of that effort. The expected risk transfer certainly didn't happen.
- so everyone who tried it has been burned to some degree and now there are new questions about what is right and, finally, new answers
- any company starting from scratch today would own no hardware. In fact, desktops are the new company car; it used to be that you got one when you joined a company. Now you won't, you'll have your own, it will meet some key security standards and you'll get to work. Even in government.
- any company starting from scratch today would have no servers in house. Why would they need them? They rent them from amazon or google or rackspace. They know that even the busiest servers are only 10% busy so why pay 100% of the cost. Servers in the office have been replaced by the equivalent of zipcar/streetcar. Someone owns them, maintains them, replaces them so that you don't have to. All you need to know is that when you want them, they're right there.
- Any company starting from scratch today will do its best to own no software. Payroll is payroll, accounts is accounts, intranets are called Facebook or google circles, email is practically free etc
- any individual is used to doing their own it integration. Email is from google, calendar is from apple, billing is from freshbooks, friends are in Facebook, files are in Dropbox, phone is on windows 7 etc.
So the question then is if all that is true for a company starting from scratch, when does it become true for an existing company with a big legacy estate?
Over the next 2-4 years, every company and government entity will move its easy stuff to shared facilities - email, intranet, payroll, development, test etc will all go shared. Suddenly the outsource company is making no money. If they charge too much, the customer will look for a cheaper deal.
The big it companies can't afford to go to their customers and say "you know that email service that we charge you £1,000/head/year for? Well, we have an idea and we'll only charge you £1/head/year for it". Their corporate process won't allow it, their annual bonus won't allow it, their shareholders won't allow it. So the only people who will offer that are people who can afford to make the shift. Some big companies will make the shift because they know that they have to - because if they don't, they'll die. Most will be too dumb.
From 4+ years what we have come to think of as complex, heavy duty back end apps will move to commodity apps in a shared facility. Government only needs one place to pay money to people and one to receive it. They only need one place that figures out how to buy paperclips.
The outsourcers, if they are smart, will recognise that it outsourcing was always a bad idea. What should have been outsourced was business processes - people doing routine work. Routine work can be got rid of through efficiency, through automation, through moving services online etc.