Hot on the heels of yesterday's post about the growing traction of software-as-a-service in the enterprise (SaaS), I saw an Information Management post by Celent analyst Benjamin Moreland in which he urges insurers to consider using SaaS and business process outsourcing (BPO) to lower IT costs and gain efficiencies. This isn't exactly groundbreaking advice, but Moreland also makes what I think is an interesting point. Many IT organizations avoid evaluating SaaS and BPO because of a conviction-you might even call it a prejudice-that they can do a better job of delivering IT services internally.
Moreland uses a sports analogy, likening IT teams that resist evaluating SaaS and/or BPO vendors to "a baseball team that does nothing but practice and play games among themselves and believe that they have the best team around."
The problem is, says Moreland, many IT organizations do not measure their own performance. He writes:
Within most sports, the metrics to compare already exist. They do not exist within most IT development and support staff today. What is your current support level for your current applications? How much control do you really have over your applications and infrastructure? How secure is your data today? These are valid concerns stated by insurers today with respect to BPO and SaaS, but they should be the same questions insurers are asking of themselves.
Exactly. During a presentation about IT metrics at the recent Midmarket CIO Forum, Mark Tauschek, director of IT research for Info-Tech Research Group, said some organizations think they lack the time and money to develop and monitor metrics or simply don't need to do so because they believe the IT staff is doing a good job. Tauschek didn't say it, but my suspicion is that some IT organizations resist metrics because they worry their performance may not be up to snuff. Whether or not that's true, however, business units may become suspicious IT is hiding something if it balks at metrics.
Of course, calculating IT costs isn't always easy, often because of indirect costs associated with providing IT services that are not directly linked with those services but considered part of the overall costs of internal IT operations. One of the biggest costs of running an internal IT operation, contends Bernard Golden, CEO of consulting company HyperStatus, is senior management time wasted worrying about operational issues, time that could be spent on more strategic concerns.
Using outside resources, whether it's SaaS other variants of cloud computing or BPO, can free up valuable time. Does IT really want to do everything, soup-to-nuts, internally? That may not be possible in today's resources-constrained "do more with less" environment. And it's just not advisable when business units want an IT organization more focused on strategy than servers.
Honestly, the all-internal IT organization is a myth, considering that companies have used consultants, hosting companies, systems integrators and other third parties for years. But with all of the emerging options, IT organizations that maintain a provincial attitude risk being seen as an anachronism. As Moreland writes:
Those insurers that know how well they do IT today and can compare their own capabilities to potential vendors will be the ones that are able to make the smart choices with respect to what to outsource and what to keep in house. Those that do not will be the "lessons learned" stories over the next several years.