The benefits of benchmarking

Any time a business decides to turn away from a major outsourcing deal to bring its IT systems back in-house, critics will proclaim the beginning of the end for the outsourcing model.

They need to take the opportunity to have their say, since in recent years the incidence of 'in-sourcing' has been limited. Cable & Wireless and JP Morgan received widespread coverage, but you would struggle to find many other examples.

So it is significant that insurance giant Prudential is considering taking back control of its IT when its current outsourcing contract ends next year.

But the Pru's plan is not a warning for the viability of outsourcing. It can be controversial and unsettling for staff, but globalised, network-enabled businesses will increasingly look to external specialists to run certain functions, and IT will always be one of the first for consideration.

The real lesson from this example is the use of benchmarking to test the value of the service provided to the company.

Business leaders have used benchmarking for some time, to compare the performance of a firm against competitors or similar-sized organisations in other sectors. IT has played a vital role in that process, through software such as business intelligence, to deliver management tools for tracking performance against key objectives.

But how often does IT subject itself to the same objective measurement?

The risk in outsourcing is that companies sign up to long-term deals based on criteria that are relevant at the start of a contract but which can become outdated. Regular benchmarking of performance and value helps to ensure that IT is meeting the changing needs of the organisation.

Prudential may decide that in-sourcing is right for its business. If so, this would not be a death-knell for outsourcing, but a positive example to IT directors of the benefits of benchmarking as a tool for good technology management.