It’s amazing how many IT managers, let alone CFO’s CEO’s boards of directors believe that IT can be outsourced to save costs. From my experience this stems from a number of causes.

1) Management does not know what value IT provides as integral part of the business.

2) Management does not know what IT does.

3) Management does not know how much work IT does, or how.

4) Consultants, trying to sell something, have managed to convince management that outsourcing saves money. Either as a matter of personnel costs, or general operating costs.

This almost always results in reduced productivity in the IT department, staff churn and the loss of the best staff, a loss of, or a general lack of new documentation as to IT processes, software, development and maintenance.

And while addressing the issues, even the mere mention of outsourcing will result in degraded IT performance. And no amount of talk from management will result in a placation of the fear. Restoration of trust will be slow and painful, and in some cases will result in management looking further into outsourcing.

The problem lies in understanding, information and truth. IT will have to become involved in promoting their value to the business. Educating management as to the need for IT costs, and how they can promote to the bottom line of the business.

From the management perspective outsourcing looks good, document what IT does, and negotiate a cheaper deal to provide all the necessary services. The problem is as above, management does not know what IT does, or at least not everything, and as a matter of course they will omit the intrinsic value that loyal and innovative IT staff can, and do (unless demotivated by outsourcing rumors).

Consultants invariably manage to convince people that all IT processes and functions can be documented and mapped. This reason in fact, is the ‘why’ in why outsourcing does not reduce costs. Besides the costs that the consultant will charge for ‘complete documentation’ which isn’t complete. The outsourcing firm will contract for ‘complete documentation’ which does not provide complete services, or unsatisfactory ones, and then charge for additional ‘services’ not in the original contract, but should have been included in the consultants ‘complete documentation package’ and weren’t.

IT, and a dedicated staff provide more that simple ‘processes’ that can be documented or identified. The intrinsic value of good staff is never documented. This isn’t unusual as in most businesses HR has been substituted for people management skills. Staff are more or less just cogs, just wheels in a machine. The last thing a consultant will do is document staff qualities. You just can’t qualify, or replace good staff.