I have an IT structure that is currently heavily outsourced to managed services. We're a small but global firm, so I get a great deal of benefit from the economy of scale (i.e. 24x7 support) but at the cost of nimbleness and focus for new initiatives. As I start to evaluate my operating model, how have have assessed what elements to outsource and which elements to keep inhouse?
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Director of Project Managementa month ago
I can provide what i think is likely a fairly traditional response. As you note the advantages of 24X7 support I assume you place a lot of value on reliability, responsiveness and availability. This makes complete sense, particularly if you have trusted partners for your managed services. Where can you look to develop inhouse? R&D - new services and technologies that have not made it yet into your stable of customer or employee facing, bread & butter applications or services but do offer tremendous upside in CX or efficiency... and are likely more amenable to Agile development as you allude. Mobile apps? Portals? ML? Gen AI? More room to fail and they don't require 24X7X365 support (yet).
Another reason outsourcing can be attractive or necessary is if you are unable to attract the necessary skills and talent to insource. this is a tougher one but you may not know if its an issue unless you test the market and see if you have or can hire the skills you need.
Lastly, protect the crown jewels - the things that are closest to your competitive advantage. keep those systems and that data, close.
CISO in IT Servicesa month ago
We have the majority of our SOC/ASM/TI outsourced but we have a very strong lead - in a Director role - who manages that portfolio. You have to make sure integrations are done, data streams and ingestion points get what they need and that alerting is set up correctly. We are doing this in security and i woul dlike to do it more in IT Ops /Networking.CIO Strategic Advisor in Services (non-Government)a month ago
There are tradeoffs that should be considered between what makes sense to outsource and what to build internally. There are a few categories that I find help with this evaluation.1. Foundational: What is foundational and stable in your organization? Look for areas that make sense to build a center of excellence around.
2. Core to IP: What areas are core to your intellectual property and/or unique to your business. At times, this can mean areas that are differentiating for your business. This is an area to build organizational strength internally.
3. Variable: What areas fluctuate and/or come and go? These are good areas to leverage outsourcing and provide you with organizational flexibility.
4. General Purpose: What areas are general purpose and may not provide differentiation nor organizational strength. These are also good areas to outsource should you find economic advantages to do so and there are mature offerings externally.
5. Unique Disciplines: IT organizations are not able to do everything nor can they build expertise in every discipline. Understand what your capabilities are and and aren't. Be candid with yourself and look for partners to augment where needed to bring in that expertise.
In addition, consider the ratio of internal to outsourced headcount. You need to ensure you have a healthy balance between the two. You want to be careful that you're not overly outsourced nor overly constrained. Building (and rebuilding) institutional knowledge with external staff is expensive and provides limited to no value. Outsourcing can be powerful, but can be very expensive and risky too. Balance is key.
CISO/CPO & Adjunct Law Professor in Finance (non-banking)a month ago
I agree with Tim Crawford but I would add that short and long term costs should also be considered. At one point cloud services were marketed as easy to roll out and cheaper, but that is no longer the case across the board . Some firms are bringing cloud functionality back in house.
Using generative artificial intelligence as an example, if you are paying per token then there comes a point at which it becomes more cost-effective to run a small mono-task instance in house.
Based upon your question it appears that you have run this hybrid system for a period of time. Based upon the cost over time of these outsourced services you should be able to compare historical outsourced costs with the cost of in-house services for short-term cost evaluations. Long-term cost evaluations are more complicated because the value of organizational knowledge and stability is far more difficult to quantify. If the outsourced service costs are increasing at the pace of inflation then you can do a regression line to determine how much the outsourced services will cost you for a future point. If on the other hand the outsourced service prices spike like virtual machine pricing for some of Broadcom’s clients after the acquisition of VMware, then that is a much more difficult comparison to perform.
My view is that flexibility is good but longevity is better, so I lean toward in house talent. It is also easier to incenvize in house talent.
If so steps are:
List all your IT functions and services.
Score each function against and services according to various KPI / criteria (time to market, quality over speed, scalability or flexibility, competencies, costs, risks).
Identify which functions you can outsource or want or need keep in-house based on the scores.
Develop a transition plan for any changes to your current model.
Regularly review and adjust your operating model as business needs evolve.
If you need more, I can explode each but basicaly here you are.