Outsourcing: Has the pendulum swung too far?

We're all under pressure to move 'faster, quicker, better'. But this is only achievable if you've got your fundamentals in place.

To gain the full benefits of cloud migration, the fundamentals of good architecture, design and governance to enable cost control and change management must first be in place.

That might sound straightforward, but I've recently seen examples of insurers and brokers embarking upon ambitious change programs, only to discover that they threw the baby out with the bathwater years ago.

To understand why you need to understand the model of outsourcing that we all came to embrace in the late 1990s and 2000s.

​For most of the 20th century, companies owned, managed and directly controlled all of their assets. As the world became more globalised, access to cheap labour and goods encouraged the outsourcing of perceived 'non-core' activities, everything from business processes, customer call centres, and latterly, IT services.​

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The outsourcing trend

Where did it lead? Today, the vast majority of corporates have embraced a third-party model for mission-critical services including managed IT services, SaaS and cyber security. In fact, the IT outsourcing sector contributed $361 billion to the IT services market in 2021, a figure that is set to rise to $587 billion by 2027.

​That's not to say that IT outsourcing or offshoring is a 'bad thing'. It has allowed insurers and brokers to become more agile, to scale up, overhaul legacy systems quickly and relatively easily, reduce costs and gain access to talent that might otherwise have been unavailable. 

​But has the pendulum swung too far? This is a question I find myself asking when tasked with helping companies that have lost so much internal expertise and knowledge over the years that they don't what their starting point is, let alone their end point.

​These are organisations which have hollowed out their own engineering capabilities, especially if outsourcing to an offshore partner.

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​Two-in-the-box model

​To effectively outsource, companies need to adopt a 'two-in-the-box' model, where they maintain governance over their third party and invest the time and rigour to maintain documents internally.

​If change isn't governed and managed correctly there will inevitably be a degradation in the core documentation of the organisation. You've lost your knowledge, you don't govern your change and it all degrades to the point where you have a fundamental piece of work to do to bring it back up to standard.

​It feels to me as though there's a ticking time bomb in the IT sector where we've thrown too much of it over the fence. Not all of our attention is on 'two-in-the-box' model and we're now being asked to go 'faster, quicker, better' and we can't. So have we reached a tipping point?

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Hand on heart, how confident are you?

​For any successful cloud migration, you need to go back to the fundamentals of delivery - understand the risk issues and dependencies - whether around architectural design and/or the interdependencies of applications and how they relate to each other - for the whole program.

​For that, what you need is good reference architectures and service owners who understand their applications. 

​When those fundamentals are in place, migrating and making changes becomes easy. But when it is missing, you have to start from scratch. 

​Based on this experience, I would advise all the CIOs and CTOs out there to ask what level of confidence they have that their service owners truly understand their architecture and underlying services, to the extent that you can take advantage of moving towards the cloud without falling at the first hurdle.