40 years ago, Fred Brooks told us in his book The Mythical Man-Month why full outsourcing couldn’t work. Since outsourcing was rare and difficult back then, nobody took note. Today, advances in communications and technology make outsourcing much easier. That doesn’t mean it will work.
The reason is that IT work is not uniform. There are some easy tasks (rapidly getting automated) and some hard tasks that take expertise and judgment. And most organizations are outsourcing their work to regions where IT professionals haven’t had the time yet to develop expertise and judgment.
In a mature IT market, a wide range of skills exists, from basic to very advanced. As you need more advanced skills, the cost goes up, because there are fewer IT professionals with the requisite number of years of learning and experience.
In a new IT market, you can get basic competency cheaper. But because most IT professionals in these markets are relatively inexperienced, advanced skills are very rare, very expensive, and might not even exist.
The outsourcing fallacy is to think that you can move an entire, complex IT operation offshore. You can save money on moving simple tasks to regions with lots of competent but inexperienced IT people. But advanced skills won’t be available. So unless you can very cleanly separate simple tasks from advanced tasks, the communication overhead necessary to ensure that the right people get the right task will eat up any saving.
Think you can save money by outsourcing? Maybe you can. But many IT organizations have found they couldn’t. Get in touch if you need help figuring out the right level of outsourcing for your tasks and your organization.