Continuing my first post, here are some more “rules” about IT we need to rethink.
“Rule” #3: Outsourcing
This rule states that government is not “good at” IT. Projects will be more successful and cheaper if we outsource them and just manage contracts. Proponents of this rule point out that government is not in the business of technology, and government shouldn’t try to do something when there are private companies that have devoted themselves to it.
The Reality: Smart Sourcing
The reality is, some things are cheaper and tend to be more successful when done in house, and other things work better when outsourced. Government agencies are large enterprises, just like Fortune 500 companies. Like those companies, agencies must understand the tradeoffs between bringing on a contractor to perform work and doing the work with in-house resources. The role of the CIO is to help the agency head navigate this decision process.
An interesting example is cloud computing. The theory of cloud computing states that by leveraging large-scale, Internet-based multi-tenant infrastructure, cloud customers can benefit from reduced costs and a built-in upgrade cycle. This can often be true, but it’s non-exclusive: cloud computing technology is available to organizations and companies that can be placed inside their data centers. In particular, server and storage virtualization make use of the same principles as “traditional” cloud computing, reducing costs for agencies by making better use of hardware resources. CIOs understand this, and when deciding on how to reduce the costs of operations it is imperative to look at all options, both internally and externally hosted. One size does not fit all.
The Lesson
When working to reduce the cost of IT, don’t assume that an outsourced option is always the cheapest or best alternative. Look at all the factors – to include long-term organizational development, security, complexity and business requirements as well as cost – in order to have the full picture, as you make critical sourcing decisions.
“Rule” #4: Expensive
This rule states that IT solutions necessarily cost a lot of money and take a lot of time to implement. Proponents of this rule say that this is why companies with bigger budgets have better IT systems. Furthermore, if a solution is not expensive then it must not be very good or must not scale well to large numbers of users.
The Reality: Cheap or Free
The reality is, IT solutions do not have to be expensive. Many technologies go through a process of commoditization, whereby the cost for a type of solution goes down as there is more demand and more sources of supply. Companies and government agencies often get locked into a mindset where they substitute cost for success (otherwise known as the “nobody every got fired for buying IBM” mentality). However, this is lazy thinking. You have to keep abreast of changes in the marketplace and be prepared to move when it’s better for the agency to do so. Otherwise you get stuck with the most expensive solution every time. This is exacerbated by the flip side of the commoditization curve: companies who developed products when a type of technology solution was new tend to play a defensive strategy later on in order to maintain their profit margins. They lock their customers in, making it difficult to defect to another product while at the same time raising their license fees. If you don’t actively and continuously evaluate established technologies you can get bled by rising operations costs.
On the scale question, it’s useful to point out that some of the most popular services in the world run on open source (and largely free) software: Google runs its servers on Linux, a free operating system; Facebook and Wikipedia make the software running their services freely available for others to use; and Second Life runs on MySQL, a free database system. If these companies can do it, can’t a government agency?
The Lesson
Don’t assume that only the most expensive solutions (often those with the slickest marketing materials) are the best. Take the time to understand fully your business requirements, and also to understand the underlying technologies behind a particular solution. It may be that open source components cleverly stitched together will work as well (or better) than a costly vendor product that seems to do everything as if by magic. Remember that a PowerPoint presentation is not the same as a working solution.
Next time I’ll write about order vs. chaos, and parity between government and the private sector.
Read Part One
Read Part Three