Outsourcing will bite in 2004

Sending jobs offshore will generate even more angst next year
Written by ZDNet Staff, Contributor
As I have previously observed, 2004 won't be much different from 2003 in terms of the trends that dominate the technology landscape. In this column, I offer my outlook on offshore outsourcing, on-demand computing, Web services and the impact of Wi-Fi in the coming year.

Offshore outsourcing has generated the most angst among IT workers and a rift with management. Next year the rift will be even more pronounced as enterprises continue to look for lower cost IT services. I predict that the relentless focus on lowering costs through offshore outsourcing will come back to haunt companies in 2004.

For solving short-term issues or dealing with a specific development project or customer service application, the outsourcing route is a no-brainer, given the outsourcing partner can meet predefined goals for the relationship. But too many companies chasing cost savings will outsource functions that are better managed internally. The result will be small and big disasters -- outsourcing gone wrong. The obvious way to avoid disaster is to test, benchmark, and monitor the outsourcing partner's performance.

However, the hidden and more serious problem comes from outsourcing functions that are better managed internally. The business and technical knowledge that exists within a company is a huge, vital and often proprietary asset. Asking an outsourcing partner to replicate the knowledge in the heads of key internal staff or to guide key projects that are cross-enterprise and vital to competitive positioning can be categorised as a potential disaster.

In addition, the cost-savings promises of offshore outsourcing can be inflated. A programmer that is 25 percent the cost of a US-based one has value if the code produced isn't full of bugs and the project stays on schedule. Before you sign that next offshore or onshore outsourcing contract, be sure to read the Meta Group's Dean Davison's "Top 10 Risks of Offshore Outsourcing." The article might save you from making an ill-advised decision in the name of cost reduction.

On demand & SOA
This year has been a defining year for on-demand, utility computing, adaptive infrastructure -- or whatever you want to call it. According to Mark Linesch, Hewlett-Packard's vice president of adaptive enterprise programs, the concept is about "establishing a tighter, more dynamic link between the business and its IT infrastructure."

Now that's a noble goal. Every vendor and consultant talks about aligning technology and business, with business taking the driver's seat. But bridging the gap between the business and IT sides is more of cultural than a technological issue. Currently, the tools for bridging the gap are inadequate. A business person's vision is not easily translated, or programmed, into machine language today. On-demand computing isn't going to fix that problem, but it can lower the cost to deliver and maintain an IT solution.

In 2004, on demand and its brethren will continue to dominate the high-level conversations about strategic directions for IT and business. On demand can be pay-as-you-go pricing (utility computing) or a comprehensive blueprint for automating the data centre. Whatever form it takes, the concepts will continue to evolve in 2004 with new products and initiatives to bring new levels of efficiency through a wide variety of technologies.

During the coming year, I predict, the term "automation" will become more important than utility, on demand or any other moniker that purports to addresses the most significant concerns of enterprises. Underlying the initiatives from Sun, IBM, Microsoft, SAP, Oracle, HP and other vendors is end-to-end services that automate tasks. A computer is far more error-free and efficient than humans for performing repetitive tasks (as long as the program logic is correct). 2004 will be another year of laying the foundations for automation, providing an infrastructure to support automated configuration, patch management, provisioning and perimeter security. Similarly, you can expect progress in systems that are self-managing and healing.

Given the tangle of legacy systems and the complexity of most IT shops, progress in 2004 and beyond will be incremental without a major bulldozing effort. Given the long road ahead to automating IT, the New Year is a good time to develop an enterprise-wide strategic plan if you haven't already.

Intimately related to automating IT is the emergence of Web services and service-oriented architectures (SOA). The benefit comes in the integrating of loosely coupled components into composite applications, resulting in more flexibility and, hopefully, improved total cost of ownership.

Over the next few years, the majority of business applications will be service-oriented. Based on that prediction, enterprises will be left behind the curve unless they drink the SOA Kool-Aid.

Wi-Fi and Wireless LANs
This year has been a great proving ground for Wi-Fi and the entire spectrum of wireless technologies. Between Intel's massive Centrino marketing campaign, hot spots, rogue Wi-Fi networks and home networks, wireless has fully entered the consciousness of IT professionals and tech savvy consumers. In 2004, the vast majority of notebooks will come with built-in Wi-Fi connectivity. Some of the nagging problems surrounding Wi-Fi, such as security, will be overcome as new standards, such as 802.11i for security, are approved in the coming months. Faster Wi-Fi-802.11a and 802.11g will become prevalent as the current slower standard 802.11b fades away in 2004, without much cost escalation.

Taking advantage of faster speeds, WLANs will also begin to carry more voice traffic as voice-over-IP adoption starts to ramp up in 2004. Mixing voice and data could cause some hiccups in performance, but VoIP will be one of the important areas to consider for both cost savings and improved productivity.

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