EDS Review of The IT Value Stack - Part 1

Charlie Bess, who writes for the EDS Next Big Thing Blog, reviewed The IT Value Stack. Charlie raised some good points, which I'll address here and in the next three posts.

First, Charlie writes:

I was reviewing The IT Value Stack the other day and in the process exchanged a few emails with Ade McCormack the author.

Although he does a great job describing the issues of value generation within IT the way it is structured today. There were some differences of perspective that I have to bring out:

1. Ade's discussion of outsourcing appears to be fairly harsh. He does not understand the real value of outsourcing. It is not about replacing workers, but about diversifying risk and contracting for efficiency. His whole premise seems to be that an in house team is always the right answer. I'd say that is a high risk proposition. As the industry moves into a more assembly based value creation approach rather than a hand crafted one, the need to have experts (for a short duration) in high value segments should increase. Outsourcers had better be able to apply those resources seamlessly and more effectively than any in house team could ever do. The changes in the IT industry will demand this ability to tap into a more diversified resource pool.

My response to this:

I take the point about risk diversification, and agree, particularly where the in-house function has become lethargic and fails to operate as a keen supplier. The other extreme of course is that outsourcing all your IT to one organisation is perhaps the biggest risk. Again in-house is not the right answer where the IT department is beyond salvaging. My message is that they need to buck up if they are to compete with more commercially oriented suppliers like EDS, which is my view, an perhaps not good reading from an outsourcing perspective.

In my experience outsourcing as a model has gone in and out of fashion as it will continue to do so. I quite like the utility model some players are adopting, particularly for hygiene services. But in my opinion most buyers of outsourced services are looking at cost first. For many they see IT in much the same way as stationery, "where can I get it cheapest', hence India coming strongly into the frame, and hence the western outsourcers getting into India.

The big question for users of IT services, is whether IT is their core business or not. I would argue that core business for Citigroup and American Airlines IS and brand management. And if that is the case should they be handling that to a third party? Maybe yes is the answer. I agree however that slowly but surely IT is moving from craft to assembly. As that happens the likes of EDS can offer a number of things, not least economies of scale. But the slowness of the evolution of IT is making assembly line something of a romantic notion but for the most basic of applications. If that were not true then every IT project would be a success, which is far from the case.