Outsourcing problems not avoided

TPOSANA's discussion on outsourcing tries to give guidelines about when (and when not) to do it. The worst possible situation is when the people signing the contract are ignorant of the issues needed to understand such a contract. The larger the contract, the more likely it is that this will happen.

Robert X. Cringely's new column on EDS and the Navy and Marine Corp Intranet (NMCI) contract shows that the problem can go both ways. EDS's contracting people were commissioned on getting the contract signed, and were disconnected from the people that would do the work. As a result, they signed an unprofitable contract:

[former EDS CEO Dick Brown] "was gobbling up contract after contract on the way to making EDS a $80 Billion company by the end of 2002. Remember that? Secure the contract. Worry about the details later. Now, it's later."

Sadly, this is hurting the U.S. Navy as well as EDS. Costly "shadow helpdesks" are being created to fill in the gaps that EDS creates. Tom experienced this kind of thing first-hand at a previous employer (oh wait, he ran such a shadow helpdesk!).

Worse yet, this dysfunctional contracting culture seems to be the rule, not the exception, for these large desktop workstation outsourcing contracts that were so popular years ago. It's hurting companies, it's hurting our governments, and now we learn that it's hurting companies like EDS.

Sources at Wal-Mart say something we should all heed:

And those sources were clear: there is no way Wal-Mart would entrust its IT services to an outside contractor or even to several outside contractors. Doing so would threaten the entire organization. If costs are out of control and services are inconsistent, that's something to be dealt with internally, not by hoping some outside organization is smarter or more disciplined. "We have suppliers, sure, but the ultimate responsibility always remains here in Bentonville," said my Ozark IT guy. "We centralize it, we control it, we know what we are buying and what we are doing with it. Anything less is just too much of a risk."

I wish we had said it so clearly and concisely in TPOSANA: If costs are out of control and services are inconsistent, that's something to be dealt with internally, not by hoping some outside organization is smarter or more disciplined. Read the full article here: http://www.pbs.org/cringely/pulpit/pulpit20040325.html

Posted by Tom Limoncelli

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