Outsourcing & Boeing
One at the same time a western world economic trend that some blame for the beginning of the end for western cultural dominance and a pragmatic choice by an IT manager to get some help because his budget won’t support another staff member. It must be the widest challenge being faced today within our customer base.
People as smart as ex Intel CEO Andy Grove have been scathing at the wholesale outsourcing of the American manufacturing base. I have a lot of time for someone like Andy Grove. Aside from being immensely successful in our industry he is also a young man who fled an eastern block nation in 1956 and lived through a manufacturing company startup that became one of the biggest companies in the world. In my book he has some life experiences that give him a good view of what is happening in our industry.
In this article from Bloomberg, Grove talks about the outsourcing of television manufacturing from the US so that no TV’s are made there anymore. That failure was hailed as economic success by economists, but Grove has this to say “I disagree. Not only did we lose an untold number of jobs, we broke the chain of experience that is so important in technological evolution. As happened with batteries, abandoning today’s “commodity” manufacturing can lock you out of tomorrow’s emerging industry.”
Sydney Morning Herald picked up a story about the Boeing Dreamliner and it’s rocky development. Apart from being an interesting read, it’s relevant because integral to the story are the choices Boeing made to outsource development and manufacture on a scale never seen before in the industry. Employees of Boeing point at the resulting three year delay and constant problems with it’s chain of 50+ sub component suppliers and say “I told you so”. Echoing Grove’s point, engineers level the criticism that knowledge is a key ingredient in the development of a new plane and suggest Boeing is bankrupting their future options in manufacture.
Whilst many IT departments are nothing as complex as an airplane I can’t help but see some parallels.
The best quote from the Boeing article, which shows some clear thinking says; “One of the things you don’t want to outsource is your core competencies. It’s the thing that gives your organisation your value added.” I would reframe that slightly to IT departments size. If your outsource extends to the core function of the IT department you are also outsourcing the opportunities to use, train and keep skills in place that underpin your value. Somewhere down the track that lack of value will result in being made redundant as management twig to the fact your own contribution adds no value and is therefore a commodity.
Talking around with business partners and those we value in our industry, we find a disturbing but common theme of outsourcing. It seems endemic and often quite without thought. In some places, the whole of IT is becoming a problem to be shipped off somewhere, or anywhere, else. How the people doing this expect to solve complex problems once their current skill sets expire I don’t know. What will be the impact of dysfunctional IT on organizations? I guess we’ll all have to get used to more delays from airlines, service outages from banks and billing errors from telcos.
It’s worth remembering, all an organisation needs to sign an outsource contract is an accountant.
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