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IT Outsourcing Is On The Decline, But Not For Software Vendors

Your business is to develop, sell, integrate and support specialized application software for your clients. Which means they are outsourcing work to you rather than doing it in-house. This is good business for them because you can do these tasks better than they can, and at a lower cost. It is good business for you making the transaction a “win win”.

The practice of outsourcing is beneficial to you for the same reasons it is good for your clients.

For outsourcing to be effective the task selection must meets certain criteria. The following example provides a sketch of how some criteria can be measured in determining which tasks are better outsourced and which tasks are better kept in-house.

Some time ago I had a team of IT developers working for a major US bank headquartered in Texas. The bank was in growth mode, acquiring other banks and merging them into the parent bank. There was more work than my staff could get done yet we did not want to add to staff for what appeared to be short term needs. To solve the workload problem I routinely outsourced work to contractors.

The work I assigned to contractors was maintenance work, conversion tasks and merging data files. I chose those tasks because they were short term in nature and not likely to be repeated. The new development work, including software implementation (but not data conversion), I assigned to permanent staff. I wanted the experience gained from that work kept in-house.

This process paid off handsomely. Turnover among contractors was a non-issue. As our needs changed I was free to seek specialty skills from other contractors for short term assignments while my staff kept the long term work which allowed us to retain the knowledge of those core systems in-house.

The end results were stable systems supported by people who had in-depth experience with the systems, the data and our customers (bank departments who used the systems).

Now then, why is outsourcing on the decline?

IT managers determined that innovation and development occur best when tightly aligned with company strategy. The best way to accomplish this tight alignment is to have the IT staff in-house. Thereby large IT staff outsourcing is on the decline.

Nevertheless, innovation and development do not include data migration tasks. Outsourcing is not going away. Managers responsible for IT, particularly Software Vendors, will not outsource their innovation and development teams…

They WILL outsource data conversion related tasks.

Relieving the IT team of tasks that bear no relevance on strategy, innovation or development,

will serve to increase their effectiveness.

Data migration related tasks should be outsourced. Let me state several specific reasons why.

· Your clients hire you for software development, integration and support for their business specific software applications

· Data migration work is a distraction from these mission critical tasks

· It does not contribute to the company strategy

· It is unpredictable and mostly not repeatable

· Development programmers do not like data conversion work and are not particularly good at it

· Legacy source systems are many and varied, and are constantly changing

· Often source systems are seen only once or infrequently

· Other vendors are reluctant to assist a competitor in extracting data

· Workload peaks and valleys make it difficult to maintain efficient staffing levels

· Timing is mostly wrong-when a migration is needed the in-house programming staff is needed for development and implementation assignments.

When faced with data conversion related tasks including data archiving, choose to hire a reputable outsourcing team.