Automate or outsource? The decision gets complicated

Outsourcing used to be so simple, right?
Written by Joe McKendrick, Contributing Writer

Which is better: automation or outsourcing? Automation has matured to the point where it may make it worthwhile to pull things back in house. Unless your outsourcer has mastered automation even better than you...

Those are the increasingly perplexing questions facing IT and business executives, with outsourcing reaches a crossroads, writes Michael Vizard in CIO Insight. He describes the paradox very succinctly:

ASIMO-photo from Honda News Release Site-cropped
Photo: Honda

"On the one hand, cloud computing has made it easier to not only outsource IT, but also entire business processes. On the other hand, the rise of IT automation may make the need to outsource IT completely unnecessary."

Not too long ago, the practice of outsourcing IT functions or business processes consisted of signing off on mega-deals, when entire pieces of the business were handed over to a third party provider which presumably had expertise in the given area. Now, however, cloud services for specific IT or business functions can be acquired with a credit card. So deals can be made at a granular level, essentially thousands of micro-outsouring deals made each day.

Of course, the same IT and business functions can also remain (or return to being run) in-house if they are automated, running at a fraction of former costs.

Just to add another twist, the third-party outsourcing firm could very effectively -- perhaps more effectively than their customers -- automate processes and functions, thus offering said services at a fraction of the cost. Plus, someone has to install and maintain all that automation in the first place. Plus, outsourcing firms are also consumers of cloud services themselves, and have likely developed efficient ways to leverage online services.

However, Vizard also observes that traditional outsourcing arrangements often are vexed by the management challenges involving overseeing teams across multiple geographies and time zones, making it "more trouble than it's worth." 

So... what's the best option?  There is no right answer, and organizations will continue to operate as agglomerations of mainly in-house people and resources, supplemented by clouds, partners and outsourcers.

Cloud can be looked upon as a form of "Agile" outsourcing -- it's close to the business, it happens in spurts, and it brings immediate satisfaction. With one-quarter to one-half of companies using public cloud service for core applications, it's fair to say that more companies are outsourcing than ever before. Companies that may have not considered outsourcing are embracing cloud services at some level. Cloud could actually even be looked ar as an automated form of outsourcing -- devoid of the need to manage remote teams.  So, the automation versus outsourcing argument gets even muddier.

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