Latest outsourcing wave poses no new threat to IT vets

Last month, union workers in the IT department of the Bank of Ireland threatened to strike if the bank went through with a proposed IT outsourcing arrangement with HP. The Irish Bank Officers Association said that union workers were not properly consulted about the outsourcing deal, and expressed concerns that Irish jobs would be lost in the offshore outsourcing pact.

Following the strike threat, a major U.S. industry analyst firm issued a warning that U.S. companies should be wary of similar employee unrest and activism as they increasingly choose offshore outsourcing alternatives.

“[We believe] that business executives will downplay the potentially negative implications of outsourcing on employment, jobs and employee trust, especially when many companies choose IT offshore outsourcing,” the analyst firm said.

“North American and European companies that fail to acknowledge the impact on IT-related employment will be ripe for employee activism, community backlash and disruptive shareholder actions. Through 2004, fewer than 10% of executives will adequately anticipate the extent to which workforce unrest and employee activism will disrupt their operations.”

To this firm – and I’m not naming it here because I don’t want to be accused of slinging mud at a competitor – I respectfully respond: poppycock.

After decades of experience in one of the world’s most competitive and dynamic employment environments, enterprise IT professionals know the outsourcing score better than anyone. They know that jobs come and go like waves on the shore. They know that their companies are constantly looking for ways to cut costs, and that outsourcing is an option. They know that they must provide great value to their organizations, or risk being viewed as high overhead.

This high-pressure environment is not new to most IT professionals. The 1970s, 1980s and 1990s all produced periods of “outsourcing mania,” in which entire IT shops were handed over to third parties, and observers warned of the demise of the internal IT organization. Any IT professional who does not recognize the specter of outsourcing today is not only naïve, but ignorant of history.

Today’s IT organization struggles each day to prove that it can provide greater value than the outsourcing alternative. In fact, one of the primary reasons for the popularity of internal service-level management (SLM) is that it provides the means for an IT organization to benchmark its performance and value against the outsourcing alternative. SLM helps the internal IT organization to establish and fulfill user expectations at a consistent, measurable level, enabling it to compete with third parties to be the enterprise’s chief service provider.

Yet, as many times as their jobs have been threatened by external providers, IT professionals have virtually no history of strike or activism against the outsourcing providers. In fact, most IT organizations welcome both the assistance and the competition that outsourcing providers bring. All most IT professionals want is a level playing field, on which they can prove that while some IT functions can be outsourced, others can only be handled by internal staff.

The only difference between today’s outsourcing environment and those of the past is that today, the offshore alternative is becoming increasingly popular. The low cost of labor in other countries creates a different value proposition for some outsourcers, throwing a new wrinkle into the competition between internal and external IT services. When the economy struggles, there is a strong and understandable feeling that jobs should stay at home. This feeling is at the heart of the Irish workers’ strike threat.

This message of domestic concern is valid, and it should not be ignored. But for enterprise IT organizations, the key question remains unchanged: can an external provider do the job better, or more cost-effectively, than we can? If the answer is yes, it makes little difference where the outsourcer is based. Internal organizations will have to step up their technologies and practices to keep pace with their external competition.