[LINK] IDC lukewarm on federal outsourcing overhaul

[Chirgwin, Richard]

Correct, Bernard, but it doesn't change the fact that "outsourcing is
cheaper" has been the sector's battle cry for a decade...

Outsourcing is - maybe - cheaper for a stable system with a slow rate of
change, and in such systems the cost savings are most easily identified.
Say, printing a cheque: the information on the cheque, the ledgers to which
the cheques are posted, the legislative requirements etc move slowly; so
it's an activity which can be outsourced; it's an activity which can be
costed accurately; and so it's an activity in which apples can be compared
with apples, so to speak.

Actually, I'd relate this to one of my other comments: if an activity is
well managed, then you know how much it costs, and you know why costs go up.
Of course, a well-managed activity is also one you don't need to outsource -
if you know what it costs and why, you can achieve your cost savings without
the big stick of a Fat Five consultancy. 

If, OTOH, the activity is badly-managed, you won't be able to do it cheaper
- but you're unlikely to have the management skill needed to ensure the
outsourcer does it cheaper.

So - good management saves more money than outsourcing. Which might suggest
that the reason the billions of savings didn't happen was because gov.au
computing was efficient and well-managed...

Richard

-----Original Message-----
From: Bernard Robertson-Dunn [mailto:brd@dynamite.com.au]
Sent: Wednesday, 17 January 2001 13:09
To: Link
Subject: Re: [LINK] IDC lukewarm on federal outsourcing overhaul


"Chirgwin, Richard" wrote:
> 
> >"How much you would save 12 months down the track is hard to
> > measure as IT costs go up so rapidly."
> 
> Oh well. I always knew Moore's law would run out of steam one day.
> I thought it would die when we got single-electron chip geometries;
> but in fact, Moore's law just died under the hand of an IDC analyst

The context for the original remark was:

> Overall, she felt the government's program had focused too heavily
> on cost savings, neglecting business strategy. Outsourcing was more
> feasible in the private sector as cost was not the top priority,
> unlike objectives such as competitive advantage and core skills and
> competencies, Beckman added. "How much you would save 12 months
> down the track is hard to measure as IT costs go up so rapidly."

If she means by "IT costs" the total amount that an enterprise spends
on IT, rather than the rate of a particular product or service, then I
would agree with her that identifying the savings is difficult.

In fact this is one of the complaints against Mr Fahey. He has been
claiming savings based upon a) ignorance of what it cost in the first
place, or to quote his own words ...

> Prior to the Initiative, most agencies did not fully understand the
> cost of providing their IT infrastructure. They did not measure the
> level of IT infrastructure services required or the levels of
> service achieved by them. And they had no way of verifying whether
> their IT infrastructure arrangements represented value for money
> for the Australian taxpayer.

b) moving targets.

BTW, as you well know, Moore's law refers to the density of
transistors on a silicon chip, not the cost of IT. The cost of IT
follows no known law.

-- 
The lot of critics is to be remembered by what they failed to
understand.
-- George Moore

Regards
brd

Bernard Robertson-Dunn
Canberra Australia
brd@dynamite.com.au