While various business and IT processes continue to be outsourced, several industry veterans present at the KickStart Asia 2007 forum in Bintan, Indonesia see a shift in the outsourcing trend, with the more strategic functions being brought back in-house.
“Five years ago, there was massive focus on the outsourcing of certain aspects of IT. Today, a lot of these are shifted in-house,” said Robert Knickman, managing director of web content and portal management software company Vignette Asia Pte. According to Knickman, application development is increasingly being brought back in-house because companies are finding that they are paying more for it by outsourcing.
“What we’re seeing that more of the strategic stuff are being brought back in-house,” said Alvin Ow, senior director and systems engineer at security solutions provider Symantec Asia Pacific and Japan, adding that this is partly because of the need to respond to business requirements faster and for more flexibility in making key business decisions.
For his part, Karl Verhulst, channel sales director for Asia South at CA , believes the whole wave of outsourcing is a reflection of the misunderstanding between business and IT, and how little business knows about the true value of IT. “I would say it was a lack of maturity on the business side. For them it’s like – somebody’s come up to me, I sign a piece of paper, I don’t have to hire people, I don’t have to strategise, I just sign a piece of paper and he’ll take care of all my troubles,” he said.
Today, however, companies are seeing that with bulk outsourcing there are, in fact, no cost savings; that’s why several outsourcing projects are being terminated and cut short. Verhulst said that although the lack of skills internally will be one of the good reasons to outsource, it should always be on a functional basis. “If you outsource your whole IT department, what you're doing in a sense is that you have your existing IT folks and you’re still paying them the same amount of money; how are you going to get cost savings if you’re dealing with the same cost structure but somebody else is managing it?” explains the CA official.
Verhulst further explains that this shifting back of strategic IT functions in-house could partly be because CEOs now understand that the CIO and the internal department have become a lot more mature and is already capable of addressing the needs of the business. At the same time, this shift also demonstrates a more mature realisation or recognition on the side of CEOs about the value of IT.
“IT has a big role in innovation and creating competitive advantage and an outsourcer is not tasked with competitive advantage. You can’t even put that in the contract. How are you going to measure it?” Verhulst said. “You can outsource specific functions to somebody who is much better at it but the overall IT strategy should be done in-house.”