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The Woe of IT – Running out from under the Dark Clouds of Outsourcing

By Andrew White | June 09, 2010 | 0 Comments


The Woe of IT – The Dark Side of (Cloud) Outsourcing

I had a great day today with end users.  In fact days like this make it great fun to be an analyst.  The bad news is you get to learn a lot of stuff in a very short period of time; and such data points have to be reconciled to recent and more historical experience, data, and analysis.  I spotted a couple of interesting stories I wanted to share with you.

One user explained their terrible and current experiences with outsourcing aspects of IT and “cloud” offerings.  This user’s organization is in the middle of a major IT infrastructure outsourcing program with a large, reputable vendor.  The user had been maintaining 15+ or so data centers around the world supporting large global ERP installations and other business applications.  With one contract, and one SLA (over simplified, I know), the user had “handed over the keys of the data centers” to the vendor.  All well and good, you might think.

Problem: Some time later the business wishes to make changes to its business processes.  This means application architecture and information architecture have to change.  This results in a change in the configuration of the applications.   This is a pain because the IT, no longer in control of this stuff, has to go cap-in-hand to the 3rd party provider and schedule all manner of meetings to design requirements and get the vendor to re-configure the systems.  This is not a quick process and in fact, in this case, results in wholesale changes in the basic agreement between user and outsourcer, since original SLAs are not sufficient for this “new” requirement.  As if a business’s processes never changes!

Now IT, still in the throes of paying and standing up a huge decision, is realizing that major hindrances have been established.  Business is not happy with IT (again) and long term, unless resolved, IT’s ability to enable business performance will be hampered.

The Woe of IT – Got to Start Running, Now

Another user explained how really successful his roll-out of cloud based email.  This user’s organization has many thousands of users now live, on a global email solution, managed in the cloud.  IT is no longer bound and hamstrung managing what is basically a low tech, relatively simple, near commoditized service.  IT looks like a hero; business is happy since the service is run efficiently, and everyone is happy.  Well, almost.  Two issues stand out – one good, one bad.

The bad news is this: If the business ever wanted to “merge” or align business processes/data (and hence business applications that represent business processes) with data managed in their email systems (some vendors like Microsoft, Oracle and SAP do this between messaging/mail and business apps like ERP) then a new level of IT complexity has emerged.  The data models and integration mechanisms, let alone governance, would have to span to business models and landscapes, which are not under the control of one organization.  This is not a show-stopper – not everyone wants to merge email with ERP; but the barrier is there nonetheless.  The barrier is fictional but exists when and if the need to integrate processes and data from in-cloud to out-cloud.

Now the good news: This user has figured out something very interesting.  The outsourcing of Email was a great success because, as the user pointed out, there was no configuration to “email”.  It is a standard process, highly commoditized.  So outsourcing of “out of the box” functionality made perfect sense.

The previous story above – the dark side of (cloud) outsourcing – highlights the complexities when non-commoditized, or applications that need revisions and configuration changes, are outsourced.  The first example highlights a fallacy: outsourcing/cloud makes perfect sense when commoditized services (email, CPU processing power) are identified.  When processes, applications and/or data have to change, and possibly frequently, a whole new level of complexity emerges.  And this complexity can be significant – even to the point of eliminating any savings that justified the outsourcing in the first place!

Lastly, the real benefit to this second user scenario is that the CIO in this instance has recognized the value IT should be providing the business.  The old days were focused on email; the future is focused on innovation.  This CIO has removed legacy work from his IT stack (and team) and has freed himself, and his team, to now sit with the business and explore new ways to help the business compete and win in its chosen market.  IT can focus on innovation with the business, not managing the trash.  IT can help lay new tracks, and not worry about keeping the train on time (as much).

The conclusion?  With the pressure on IT, in many cases with a smaller staff to a year ago, there is a race being run.  Leaders/CIO’s need to identify commodity processes and services ASAP and outsource where possible, being careful not to readily outsource complex processes and services that may need to change dynamically in support of business change.  Winners of this race will do this first, and free up brain power and money to embed themselves in the business.  Losers will be stuck governing email.  Get running.

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