Offshoring your IT function can sometimes lead to unexpected results, not that this is much of a problem for the finance department as they like to see the cost benefits roll in. In reality the only benefit that they are interested in is a reduction in cost, which they will achieve with immediate effect. What there is, is no possible way of achieving long term savings, this is because you will actually have to pay more as soon as you vary the contract.
By way of an example of this, I’ll tell you about a company that I worked for up until around a year ago. They had their own fully fledged IT UK division of some 450 people, that was the complete unit and it comprised, design, development, testing, support and all the myriad of other functions that IT requires. Seen as an easy target as part of the cost cutting, the whole UK division was outsourced. They had all but completed the closure of the UK data centres and the relocation of applications to a central European data centre, on time and within budget.
The outsourcing was arranged and the new support base was put in place, the finance department was ecstatic about the savings. However it would seem that this state of ecstasy was quite short lived, this was actually due to several factors. The first of these was that the agreement didn’t actually cover some admittedly trivial things, for example the mandatory twice a year disaster rehearsal and backups were omitted. This obviously ate into the original saving in a significant manner, but things just continue to get worse from what I hear. All the equipment shipped to the central European data centre actually belongs to the parent company, now the business wants to relocate the equipment back to it’s outsource company in the UK – so there is now a requirement to purchase new equipment.
So all in all the savings haven’t been as significant as first thought, although the parent company has managed to shed 450 UK jobs – it seems that it’s very difficult to shed staff in this particular European country. The UK part of the business has lost 450 from it’s head count, all the experience of the applications, the people, and has handed over control of all it’s systems and applications to an outside company. I would be prepared to bet that the cost will double over the next five years, possibly sooner if there are regulatory changes required on these systems (yes they are regulated).
The company that I left just three months ago had brought in specialists to help them with a cost reduction exercise, there were several hundred people working on the project – me included. I was told by several people that the job would never complete, but I discounted their opinion as there had actually been several successful test runs. I should have been more observant, but that’s quite hard to do when you are one of three techies reporting to ten management. And as predicted the job was cancelled at the last minute, because of the possibility of bad press – well so I was told.
I could actually go on at length about both of the above, but one more interesting example comes to mind. As some people will know I’m hunting for a new position, I haven’t been too ernest in my pursuit of a new job – but today I’ve been told that subject to confirmation I’ll be joining a new team a week on Monday. This in truth is quite ironic, I was working here in 2001 when the whole IT division of the company was outsourced – this company was a significant player with almost 200,000 employees. Now it would seem that they have regenerated their IT department, not from the remnants of the old one no – this a new and growing function within the company – so what do you think of that then.