Outsourcing ALL of your Information Technology

November 13, 2013 5:49 PM

How common is it to outsource almost an entire Information Technology department in a corporation? Can anyone provide some examples?

Today, Northeast Utilities outsourced almost their entire IT department to Infosys and Tata. Close to 75-80% of the IT staff appears to have been cut (here is the article).

While I'm familiar of outsourcing for specific IT functions, I cannot think of any other examples of a large company outsourcing IT on such a large scale. Does anyone have any examples they can share?

posted by smalls to Work & Money (16 answers total)

It's fairly common for large companies to outsource all of their data center operations - staff, hardware, the full monty - to managed service providers, such as AT&T, Verizon, IBM, HP and so on. I'm not sure it ever works out to be the savings the companies think it will provide, though. It turns out you need more project managers to ride herd over the provider. I think it's pretty common in the public sector as well, and utilities are quasi-public/private entities.
posted by jquinby at 6:05 PM on November 13, 2013

Best answer: I'm pretty sure the entire state of Virginia IT department is outsourced.
posted by COD at 6:21 PM on November 13, 2013

I used to work at IBM, and part of my job role was supporting the giant projects that resulted every time we had to move a big new outsourcing client's people and systems into our operations. We did an airline, a bank, a financial services company, etc.
posted by jacquilynne at 6:27 PM on November 13, 2013

Best answer: BBC outsourced its IT to Siemens in a 10-year £2bn deal back in 2004.
posted by PercussivePaul at 6:35 PM on November 13, 2013

I can't tell you the large corporation my husband works for (seriously massive) but I can tell you that every year the internal tech department gets smaller and smaller. Not-so-coincidentally, the quality of the tech department output (specifically programming, which is what my husband does) does not get better. Far from it.
posted by cooker girl at 6:37 PM on November 13, 2013 [3 favorites]

For more examples, Tata has a list of customer case studies published.
posted by jquinby at 6:39 PM on November 13, 2013

I worked for a big consultancy that helped corporations do exactly this. I wouldn't say it's common, but it certainly happens.
posted by 26.2 at 7:07 PM on November 13, 2013

Common. There is an industry report called the ISG Outsourcing Index (formerly the TPI Index) that tracks all of the larger outsourcing deals in the world that closed on a quarterly basis. They are tracking more than just ITO (Information Technology Outsourcing) deals, but to give you a rough order of magnitude, in 2013, more than 800 deals have closed with a contract value of more than $5M. Obviously not all of those are "all in" outsourcing deals. However, it is harder than you would think to successfully outsource just pieces of your IT operation. Things that have clear demarcation points, like mainframe or wide area network are easier to carve out, but lots of things tend to be wound up together in a ball, like your help desk function and desktop support. Large companies that have a predisposition to outsource have mostly already done so, with most of the activity taking place in the 90s through 2010 or so. These "mega deals" - deals with a total value of $1B or more - are becoming increasingly scarce and now all of those original contracts are coming up for renewal or have already come up. Sometimes companies take pieces back in house - this famously happened with GM - but mostly they are then doing separate smaller deals for the various "service towers" (again, think mainframe, helpdesk, midrange servers, desktops, etc.) with best of breed providers.
posted by kovacs at 7:13 PM on November 13, 2013

I work for a ginormous multinational advertising company and we outsource IT. They work out of our office but have different schedules, email and holidays but otherwise I don't notice it.
posted by sweetkid at 7:32 PM on November 13, 2013

I once worked as a developer for an SME whose leadership decided that the best way to save money was to outsource the IT / Operations department, except for one guy whose job was to look after the legacy systems. Five developers and a bunch of design staff were made redundant...

... then, six months later, when I was working at a truly hateful web dev firm, I got a call from the old company's CTO, who rehired me for an extra £5k a year. The company folded completely a year after that due to changes in the market, but the quality of software we were producing was much higher than the outsourced stuff.
posted by gmb at 11:40 PM on November 13, 2013

Best answer: You might also look at the difference between "outsourcing" and "offshoring". At my previous company, the IT department did both: they fired 90% of the IT personnel and hired a company in India to do the work (this is offshoring). But the other 10% who stayed were outsourced: they were fired by the company and immediately hired by HP. It was all done as part of a planned event; everyone knew in advance who was going to be let go and who was going to change employers. They still work in the same offices and they do the same-ish work, but their paycheck and benefits come from HP. The onshore team mostly works as the liaison to the usergroups and one layer of project management (the team in India has their own layer of project management, too).
posted by CathyG at 6:21 AM on November 14, 2013

More specifically, by IT you mean what ? The servers and networks, VPN stuff, web hosting/web pages (internal and external), software development (commercial or in-house) etc.

There's some overlap between those various bits and pieces, but each has a different cause for outsourcing and a different expected result.
posted by k5.user at 6:34 AM on November 14, 2013

This is actually super common in the contracting world. HP handles a lot of IT wholecloth for other companies. A company gets a contract, their IT needs swell from a few people with a laptop they grabbed from Office Max and an internet connection to needing servers, a hurricane rated data storage place, etc. It's much cheaper and easier to rent server space and help desk operations from a company set up to handle it all than try and set it up yourself, especially if you're having a massive expansion in a 6 week transition period.
posted by skittlekicks at 8:20 AM on November 14, 2013

Response by poster: Thanks, all. I was specifically interested in IT personnel for large companies. I think the suddenness of it at Northeast Utilities was most surprising to me, as I am more used to one or two departments being cut at a time.

Interestingly enough, at a staff meeting of my own today (fortune 50 company), we were told our in-house vs. contracted numbers for IT, which were about 75% on contract. So perhaps it's more common than I realized.
posted by smalls at 12:26 PM on November 14, 2013

COD: I'm pretty sure the entire state of Virginia IT department is outsourced.

Northrop Grumman is responsible for IT infrastructure (desktop computers through the data center). The state agencies still employ DBAs, programmers, BSAs, etc. for development work, which isn't centralized.
posted by bluesapphires at 6:18 PM on November 14, 2013

I was involved in the infamous CNA/CSC outsourcing deal back in the late 90s (as a sub of a sub), which at the time was considered a little unusual and I think the contract amount was some kind of record -- but in the face of an utter failure to meet agreed-upon-goals, particularly with regard to the Y2K conversion, it fell apart. A number of people I knew had to switch to CSC (with a less-impressive benefit/pension/etc. package) and then switch back, and I hope they weren't penalized too much in the long run.

But it has a long, long history -- IBM supplied not just its computer hardware but also the people to run it way, way back in the 1940s and 1950s, and Xerox began making inroads into in-house copy centers and thence to document management roles in the late 1980s.
posted by dhartung at 1:16 AM on November 15, 2013