'Bring IT back in-house and save millions'

Will Green is news editor of Supply Management
8 October 2013

IT outsourcing is falling from favour and millions of pounds can be saved by bringing the function back in-house, it has been claimed.

A breakfast debate on the principle of outsourcing IT was told the number of deals dropped during 2012 and luxury car maker Daimler saved €150 million (£127 million) by “insourcing” IT.

Philip Joss, director at 4C Associates, which organised the debate, said there was a 34 per cent year on year drop in ITO deals in the final quarter of 2012.

He cited surveys of CIOs that revealed disillusionment with IT outsourcing deals, with changing technology needs and fewer benefits than expected the most common complaints.

Joss said Daimler saved €150 million (£127 million) by bringing IT back in-house and General Motors was planning to insource 90 per cent of its IT over the next three to five years.

“There’s a very compelling case for keeping the IT function in-house,” he said. Just two buyers supported the principle of outsourcing IT following the debate.

Clive Rees, CPO at Ladbrokes, who was speaking in a personal capacity in support of outsourcing, said: “There continues to be a lot of spend on ITO. Simplistically, there are lots of people doing it so there must be something in it.”

He said the biggest barrier was firms’ fear of losing control of things such as data and accessibility. “All of it can be managed through good governance,” he said. “You have to govern how that relationship works in practice. If you do that you don’t lose control, in fact you have more control.”

Rees cited an example of poor SRM from his past career when a major bank outsourced IT to a large supplier in a 10-year deal, which ended in a legal wrangle. “Things weren’t going well,” he said. “We stopped paying them after a lot of banging on the table and threats.”

However, he said these problems could have been avoided with good governance on the part of the bank. “The fear of losing control is unjustified. There are experts in the field. You have to pick your partner carefully and you have to manage them,” he said.

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