Thursday, February 21, 2008

Why is it Easier to Outsource than to Change

A great solution provider will take the time to get to know the client and the clients’ needs. That means a great IT service provider will take the time to understand the principles and practices of business to understand the environment to which the client is operating. Large successful vendors understand this, and many of their Account Executives have earned MBA’s.

The result is that client organizations view great solution providers as being Value Centers that should be optimized. One would think that an internal IT department could take a couple a pages from the vendors’ playbook and become great solution providers as well. While this is an obviously powerful theory, it is a neglected practice.

Internal IT departments are viewed as Cost Centers, something to be minimized. Client management views their internal departments as consuming the critical resources and cash the business needs.

Since there is no use of Value-Based metrics, the IT management attempts to live up to the Cost-Based metrics that are used. This promotes a very one-sided practice of cutting headcount, reducing wages, cutting corners, etc, until the behavior creates a crisis. The effective value provided to the business unit is so minimal, that the perspective of a Cost Center is reinforced. At the point that the purpose of the IT department is no longer being fulfilled, or the cost far exceeds the benefit, the result is to outsources to a Value Center.

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