Outsourcing IT jobs is like the Honda Element: Either you get it, or you don’t

Local governments that outsource their information technology (IT) operations should consider switching back to in-house employees. Coming from a long-time proponent of outsourcing, these words might sound like heresy. For certain CUPE national reps this suggestion might come as a cool breeze on

a sweltering August day. Outsourcing in local government is a little like Modern Jazz, Artistic Expressionism or the Honda Element: you either get it or you don’t.

The organizations that have an affinity for outsourcing are probably already doing it. Some have been outsourcing their IT for upwards to 10 years. The local governments that aren’t outsourcing probably aren’t doing it because they simply don’t have the corporate culture required to support it. For these organizations it will likely require some irresistible external force to change their thinking. In local government this implies a change in political climate and/or a change in the senior management.

Organizations that have implemented and become successful with outsourcing their IT have likely by now become a little complacent. One of the nice things about having outsourced an entire IT operation is that you no longer have to listen to suggestions about how we might save money by outsourcing. Further, you never hear anyone (other than union reps) suggest that you investigate switching back to the use of employees. Most organizations that use outsourcing tend to consider an outsourced function to be a completed project and thus they tend to focus their attentions on the feasibility of outsourcing other functions.

Outsource contracts should, however, be periodically re-evaluated. In fact, it’s probably reasonable to suggest that the advisability of continuing to outsource should be re-evaluated every time the contract comes up for renewal. Reasons for outsourcing vary from one local government to the next. The most common assumption is that cost savings are the primary objective. This is sometimes true, but it is rare that outsourcing will appear to result in a cost savings upon initial evaluation. The more experienced users of outsourcing have found that the greatest advantage of outsourcing is the surety of obtaining usable results for the money spent. Savvy outsource contract negotiators seek to obtain clauses that tie payments to the delivery of certain results or penalties to failure to achieve results.

Many disadvantages

Whatever the reason for outsourcing, it is important to keep in mind that those reasons are likely to change over time. This is why the mature users of outsourced resources go through the process of re-evaluating the business case for outsourcing on a periodic basis. The disadvantages of outsourcing are many. Outsource contractors tend to have much higher employee turnover than local government. The contractor’s employees always seem to leave just as they reach their peak productivity. The contractor’s employees also tend to have less interest in long-term solutions and community values. The advantages of outsourcing include greater certainty of value received for money spent, provided that such guarantees can be successfully negotiated. It also provides the ability to easily respond to changes in labour requirements or to obtain labour resources with specific skills when the market is such that union scale is insufficient to compete with the private sector. For smaller local governments, outsourcing can also provide greater access to an inventory of specialized skills that might otherwise be unavailable if they couldn’t justify establishing a full-time position. Any organization considering or currently using outsourcing will likely perceive all of these advantages and disadvantages and perhaps many more as well. The only way to determine if outsourcing makes sense in the future is to write them all down and do a detailed and honest cost comparison. In the end, the answer will be obvious, but it’s as likely to be due to the non-financial considerations as the financial ones. In Chilliwack’s case, a recent evaluation demonstrated that outsourcing saves us about $40,000 per year. This amount would not likely be enough to convince us to outsource if we did not already believe in the value of the non-financial benefits.

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Jim Love, Chief Content Officer, IT World Canada

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