IT strategy – The canny approach to smartsourcing

A couple of years ago, outsourcing was in danger of being consigned to that sad heap of discredited early ’90s IT fads, along with Case, artificial intelligence and the paperless office – all concepts that had promised much but delivered little.

The proponents of outsourcing, though, have proved more resilient than others. Bouncing back nobly from many well-documented outsourcing disasters and a backwash of cynicism, they have reinvented their golden egg time and again, now settling on a brand new definition – smartsourcing.

Smartsourcing officially covers a far wider brief than its predecessor.

In the old days corporate customers were presented with an apparently stark choice – put their IT systems into the hands of a third party, thus saving on the overhead of running them inhouse, or retain their own data centres and with them – so some believed – their competitive edge.

Of course, life is rarely that simple, and most of the “whole hog” deals of the early ’90s failed to live up to expectations. This was because outsourcers, almost without exception, failed to understand the business drivers of their clients.

The next phase was to go for selective outsourcing – farming out labour intensive but non-business critical activities such as running the payroll package or maintaining old software, but keeping cutting edge developments in-house.

For the consultancies, this was not ideal at all – too often customers would palm off an ageing legacy mainframe system while they developed a new replacement, and after a few years would no longer require the service at all.

So enter smartsourcing. This entails getting a consultancy to assess a company’s procurement and IT needs, and make recommendations on what to outsource, where to buy, what sort of contracts to sign with suppliers and so on.

So is this a genuinely useful service for companies stranded in the quagmire of IT procurement and outsourcing, or is it an invention of IT suppliers and services providers?

As with most areas, it depends on the approach and reputation of the consultancy and, even more, on the canniness of the customer. Even more critically than in outsourcing, the services provider needs to intimately understand the business of the customer. So blueprints and methodologies, promising to set out the perfect combination of in-house skills and third party services, have no value unless they are applied carefully to your particular business. As always, there will be companies offering a supposed quick fix, which may be fine for a smaller company with simple needs, but not for anything more complex. After all, if that is all you get, why didn’t you do it yourself?

Smartsourcing is a slick word for something that sensible companies have been doing ever since IT became more complex than a single, water-cooled machine running the payroll. In the public sector it has become a fine art – procuring to get the best value from multiple sources, with massively complex contracts. But private firms must beware the downside – creating a bureaucracy around sourcing that is more unwieldy than running the IT department entirely in-house.

Like the law, there is a danger that smartsourcing will reap rewards only for the smartsourcers themselves.

All this is not to dismiss the new breed of service, but to urge consultancies to take a common sense approach, and to urge clients to understand their own business needs and the art of smartsourcing thoroughly, before they call in the partners.

This will ensure that smartsourcing takes its place alongside software contracting and disaster recovery as a genuinely useful offering from the IT consultants, rather than one that failed to deliver after overselling on one side and naivety on the other.

Caroline Gabriel is a group editor in VNU’s IT portfolio.

Related reading

HMRC banknotes