Outsourcing
OSI Model
This is the 101 of computing and can be remembered with the phrase "Please do not throw sausage pizza away"
Evolution of Outsourcing
Outsourcing has always been for 95% of all companies
mandatory at the lower part of the OSI model with few but all the
largest companies owning their own physical network, however in the
last 10 years this has accelerated to all levels across the whole IT
landscape being outsourced. This is on the basis that IT is no
longer core to the business than facilities management, power or
legal services. The other key driver to outsourcing has been cost
where companies e.g. BAA (2010) have seen considerable cost saving
to outsourcing the entire OSI model. With the increasing complexity
of IT even medium size companies cannot afford to retain the
separate skills needed in all these layers. An example is SAP in
itself can support a team of 10-15 professionals with its core
modules. Therefore is basic economies of scale that these skills are
centralised and service a range of companies rather than in
individual IT department.
There are exceptions to this trend but they are beginning to be much
rarer, this is when the rate of change in a business results in a
competitve advantage of investing in an inhouse IT function. This
highlights the relationship between change, processes and IT. Some
comapnies may have evolved with poor internal processes and
therefore retain an a reactive IT department in-house as these
would be prohibitive to outsource with a commercial agreement that
pre-suposes some degree of internal processes.
Even though outsourcing is very mature, global procurement deals
with companies as large as HP, IBM, BT Global Services and Tata are
still difficult, this is because the legal structures do not extend
across national boundries and these companies are often structured
on a country model that makes these contacts difficult to implement.
A global communication deal spanning Europe and America with small
sites in Asia and Australia took over 15 months to close which leads
to a considerable opportunity costs of striking a local deal in a
highly competitive near commodity based market.
Companies like CSC, Dimesion Data and Axon are facing an
unparalleled demand for their services, this trend is likely to be
present in the next 2-3 years.
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