Anna Frazzetto's Blog

Digital Innovations and Technology Solutions

The Insourcing Movement--What It Means

Late this month, a great outsourcing article from Bill Fowler of Compass America came out on CIO.com (CIO Magazine's Web site). Called "Is Insourcing the Next Outsourcing," this piece offers some valuable marketplace insights as to why so many businesses are considering repatriating IT services that they currently offshore. Why the insourcing push?

Fowler writes, "The key factor driving the consideration of insourcing has been the failure of outsourcing to achieve the consistent, long-term and significant cost savings clients anticipated. Compass analyses of large outsourcing contracts show, on average, a cost reduction of 15 percent over the first 18 months of the agreement. However, because of growing demand for services, and the "back-end loaded" nature of many outsourcing contracts, the client's costs are often--by the end of the term--30 percent higher than those of a well-managed internal operation."

What insourcing or (even better in my opinion) on-site outsourcing offers businesses is visibility and supervision. As any business leader will tell you, the more a service provider feels and sees your presence, the more resolutely they work to fulfill their responsibilities and make you (the client) happy.

As business and technology continue to intertwine themselves more deeply, the line between business and IT initiatives blurs. I believe that as technology continues to change and innovate how we do business, more business leaders will be eager to "see" how IT-business projects and services are managed. Both insourcing and on-site outsourcing allow for rigorous, cost-effective management. However, on-site outsourcing ensures that valuable full-time employees are also able to spend their time on core business functions rather than commodity IT services.

Like Fowler, I am eager to see how outsourcing evolves over the next 18 months and the more than $90 billion in outsourcing contracts worldwide come up for renewal. My bet is outsourcing will stay strong, but more and more of it will be in the form of on-site outsourcing.