In the headlong rush to outsource IT infrastructure skills to the cloud or offshore to other countries with cheaper labour costs, we’ve witnessed a rapid decrease in these skills across Australia in recent years — and that’s not positive for businesses or IT professionals.
Although outsourcing can bring many benefits to a business, this rush has meant that many have overlooked the importance of maintaining in-house IT infrastructure skills.
It’s vitally important to retain some of those skills in order to maintain control and continually innovate, particularly within larger enterprises. Striking the right balance between outsourced and insourced IT skills is key.
Risk versus benefit
For the last decade, businesses have been trying to identify the most successful approach to cloud and hosting services. The ultimate goal has been to align resources and employee skills with the most value-added areas — such as delivering services or applications and business process improvement — rather than spending time managing IT infrastructure.
Over time, local IT infrastructure jobs have been increasingly outsourced to other countries, particularly by the financial services and telco sectors. As a result, these businesses suddenly had people all over the globe logging into their systems to keep them running.
This resulted in many businesses learning difficult lessons as they travelled along the hype curve. They found it was all very promising at the start – things were all very new and clean. But over time many outsourcers didn’t add as much value as anticipated. They didn’t keep the infrastructure current or upgraded and they often seemed more focused on managing customer expectations, changes and contracts.
Many Australian businesses soon realised that they were spending a lot of money and not getting much in return, but their hands were contractually tied.
They thought it was all going to be simple and that their overseas partners were going to strategically help them. But without the right in-house IT staff, many businesses had difficulty evaluating whether they were still receiving a good return on investment.
The lesson is that businesses need skilled in-house IT professionals to actually understand what this all means. When you hand off your infrastructure and process to an offshore entity, the risk is that your business:
- Loses those local IT skills and becomes wholly dependent on others.
- Suddenly faces geopolitical considerations such as data sovereignty, data privacy and so forth.
If we rely too much on outsourced IT staff – and don’t get me wrong, it’s good to do that in the right situations – what happens when those contracts suddenly stop? Or when there’s a natural disaster or sudden civil unrest wherever your outsourcer resides?
Striking the right balance
Smart business is all about striking a good balance between outsourced and insourced IT skills. Banks are a perfect example as they are strictly regulated, with rules governing what they can and can’t do offsite. So it’s extremely important to get the mix right.
The Commonwealth Bank and Macquarie Bank, for instance, retain highly skilled IT staff while successfully working with an ecosystem of partners. They don’t purely outsource, but when they do, it’s done with extreme care and diligence.
Both businesses have retained very smart engineering and business savvy teams that manage the two modes of operating. This approach to technology enables them to innovate by building their own systems, apps and approaches — while investing in their own people and the local economy.
From offshoring to onshoring
If my experience has taught me one thing, it’s that you can’t outsource care. As a friend of mine says, “The devil is in the detail.” I believe that keeping critical IT infrastructure skills within your own organisation is the best way to meet today’s business needs and deliver quality services, both internally and externally.
Consider what’s happened in the Australian manufacturing industry over the last decade, for example, where many high profile businesses offshored various manufacturing and distribution operations to survive. Suddenly there was a big change in the employable skills within our economy and we are now dependent on other countries to manufacture products for Australia.
Recently, however, we’re seeing a growing trend toward onshoring to bring back all or some of these components. This is largely due to factors such as quality control, flexibility, responsiveness, shipping time and costs, offshore risks to intellectual property and other factors.
While Australia may never experience the mass onshoring the US has experienced since emerging from a recession in mid-2009, it can be the right strategy for certain businesses, under certain circumstances.
Today, IT infrastructure is following a similar path. Many companies that initially rushed to move their IT infrastructure offshore, or their apps and workflow to the cloud, are now bringing them back as they realise it wasn’t the best approach for their particular needs.
Opening the door for innovation
If we want to continue to create, innovate and build wealth — rather than just extract it in a cheap cost play — we need to develop and retain expert IT skills within Australia to create the right ecosystem for growth. After all, it’s clear that businesses will need people with strong IT application, platform and infrastructure skills to do really well in the digital era.
If we don’t have the right IT professionals within Australia, businesses will end up having to buy whatever comes off the shelf — and simply hope for the best. By investing in people, your business will have the flexibility to make the best decisions for its particular circumstances. There’s no right or wrong approach—it’s all about striking the right balance and better defining your service levels.
Paddy McDermott is the director of Infrastructure Analytics for Asia Pacific Japan (APJ) at Brocade.