What's the best way to decide on outsourcing a function?
5 August 09
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We recently published piece in McKinsey on Business Technology around the business value of IT infrastructure, and we got back some very good feedback through our Facebook that I think offers some good perspectives on how practitioners are thinking about the role of IT in general and infrastructure specifically.

One interesting theme was the strong connection folks made between "commodity" IT functions and outsourcing.  We would  view the question slightly differently.  The issue is not whether an IT function can be delivered by vendors in the marketplace, i.e., a "commodity".  The decisions to retain or outsource a function must be made on the basis of requirements for resources - skills, timing of deployment, variability in demand, etc. - that are increasingly independent of the strategic nature of the function.  We would suggest four questions in considering sourcing strategies:

1. From which areas  is the business looking to derive value from IT-enablement?
2. What capabilities are required to deliver that value?
3. What are the expectations for IT in creating those capabilities? 
4. In meeting those expectations, how can resources be procured in a way that meets our cost, timing, and skills requirements?

These questions, of course  are  not unique to IT infrastructure.  But they are meant to provide a lens that gets beyond  framing the issue as  "commodity vs. strategic."  Companies will increasingly find themselves looking to third parties to deliver even strategic capabilities. Conversely, firms may have optimized their own operations to the extent that they outperform even specialized IT vendors. It is a more nuanced set of questions that, if carefully considered and answered, can deliver significantly more value than the "your mess for less" paradigm to sourcing.

 

This site is published by the Business Technology Office of McKinsey & Company. It offers perspectives and points of view on topical business technology issues of interest to executives. Opinions are those of the authors and are not drawn from confidential client information.

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