Opinion: Anything you can do, an outsourcer can do better...

Why invest in a big in-house Oracle or SAP software implementation when there are so many mutually beneficial outsourcing options available?

That was the question put to me by Philip Keeler, director of operations and IT at fund managers Hermes. We were both attending an event hosted by outsourcing specialist Mindtree earlier this month.

“I mean – there are so many trends that make outsourcing a far more sensible option,” he continued, as he helped himself to a cucumber and cream cheese canapé. His company currently outsources half of its business applications.

In the course of our discussion he elaborated on four of these trends. First was the increasing speed of technological change. This issue was highlighted at the event by way of a rather unlikely analogy. Delegates heard how in the 1970s people used to change their refrigerator every 20 years, whereas by 2015 it will be every four years, with new models likely to be equipped with internet access and, in some cases, a video screen.

With enterprise IT evolving even faster than fridges, it is not surprising that many IT departments struggle to keep up, argued Keeler. Understandably, he added, many IT managers are beginning to question the sense of investing significant sums in a solution that may become outdated in just a year or so. “You’re infinitely better off procuring services from more flexible outsourcers,” he said.

Second, the technology required to succeed in the digital economy is becoming more complex, which in turn is making the task of finding IT professionals with the breadth of skills necessary to support this technology increasingly hard. Indeed, many CIOs are giving up the struggle to find full-time technology experts – who now tend to work for vendors, cloud providers or as freelancers – and are instead hiring business analysts and architects.

Third, trying to harness fast-changing and ever more complex technology takes a lot of capital investment, which is something that many firms are very reluctant to do given the current dire economic situation. 

And finally, explained Keeler, the outsourcing model is fully matured. The established providers are now widely trusted, he said, and this is reflected in the fact that a typical contract today can last for seven years or more, while in the early days of outsourcing it was three years. The modern outsourcing partnership is a symbiotic relationship, he added, with each side happy to share information and in some cases sell each other’s products.

And with that he passed me a canapé and explained that he was keen to get some media exposure for his ideas. There’s nothing quite like a mutually beneficial relationship.