Outsourcing has been an ever increasing trend for many years now, and accelerating with the new, evolved term for it, “the CLOUD”. OK so there is a lot of new capabilities in cloud computing over traditional outsourcing, but that does not fundamentally alter the functional activity of outsourcing. 

This outsoucing trend has been accompanied by an increasing number of INsourcing efforts; where outsourcing has proven, in some instance, to be a poor choice. Companies are discovering that their decision process may have been flawed, and some of the longer term implications of outsourcing were not considered in the decision process, tying the hands of the company in being able to effectively leverage new technological capabilities. 

So how do we pick what should stay and what should go?

Let’s step back and look at a framework for making those decisions that may prove useful.

In any IT effort, there is a product life cycle. In that cycle there are 2 major blocks; non-recurring and recurring activity. 

In non-recurring activity, there are 3 major steps; Plan, Design, and Implement. In recurring activity, there are 2; operate and maintain. 

Laying these out as the columns in a matrix, from left to right:

Using this basic model, outsourcing would start at the far right side with maintain, as the first aspect you would outsource. As you move more to the left, you give up more control over the result, and of your future where the components being outsourced are concerned. 

What companies are discovering is that commodity IT services, can have levels 1-5 all outsourced, with little impact, whereas key systems that provide competitive advantage and market differentiation, or technologies that are subject to high velocity change, should have far fewer - or even none - of the level 1-5 steps outsourced. Understanding the business value of the systems in question, is key to this decision process, and this simple frameworks helps with understanding the impacts. 

If you are outsourcing something in the middle - say implementation - it is not truly an outsourcing effort, but a service delivery function that is being outsourced, most often as a project based non-recurring activity.