Can Businesses Have IT All?

Over recent years, we have seen a number of trends among large corporations trying to get clarity on their real IT costs and squeeze efficiency from their resources. It is interesting to compare some of the approaches, and how they restrict the value that can be gained.

Some companies tried to ringfence their IT by creating a management services company, forcing financial rigour on the supply of services. Great idea? or was it? Clearly there were some benefits from the  transparency on what was being purchased (at least in theory), but there were also management overheads and investments needed to gain this rigour; it is unclear whether or not these were ever compensated for in efficiency savings. The IT department ringfenced from the parent looked good on paper but they were still a restricted pool of resources with fixed overheads and with limited economies of scale compared to a large scale outsourcing provider. Worse, rarely were free market disciplines and pricing applied to the offshoot company to force price efficiency. The same issues applied to captive offshore ventures, where a subsidiary in a far-flung cheap labour destination was created to lever the price differential but this was an offshoot from the parent and not an offshore outsource partner. Again, the restricted scale and the lack of internal versus external competition both restricted the benefits enormously.

Why do I mention all this? We have seen a lot of activity and discussion on blogs on Private Cloud. In my view the challenges of Private Cloud versus real cloud, are akin to offshoring in the free market versus captive offshoring, or outsourcing versus creating an internal IT management services subsidiary. None are wrong, each have their risks and rewards…but…before restricting yourself to a private or captive solution think about why you are doing it in the first place. Are the reasons for staying with a captive solution for sound privacy, security and compliance reasons or are they just fears? Are you only after transparency, or do you want efficiency as well? Ultimately unless you take the full step to the wider market, you will never really reap the benefits, because you will not be able to leverage the scale of the marketplace as a whole.

As always, there are no right answers, but sound judgement and risk analysis can find a way through the maze of decisions.