Outsourcing, nearshoring, offshoring—these buzzwords get thrown around as if they are the silver bullet to IT cost reduction and efficiency.
But here’s the harsh truth: If your IT is a key asset or a differentiator, sending it far away from your headquarters is a strategic disaster.
Would you offshore your product strategy? No? Then why would you offshore the very technology that runs your core business? Banking, insurance, or any industry where technology is an essential competitive advantage needs IT close to home, embedded within the business, and deeply aligned with strategic objectives. If it’s far away—whether by geography or corporate structure—it will never be more than a cost center, and that’s a race to the bottom.
If, however, you’re talking about non-differentiating IT—commodity services, back-office systems, or standard support—then, by all means, find the most cost-effective way to get it done. But let’s be clear: outsourcing should be a conscious, strategic choice, not an automatic reflex to cut costs.
And yet, outsourcing is only one piece of the puzzle. The other is how you manage your workforce.
If you keep IT in-house, filling critical roles with external consultants instead of internal employees creates the same risks.
Too many companies play the headcount game, setting KPIs to limit full-time employees while hiring an army of external consultants at a premium. The irony? This ‘savings’ approach ends up costing more while ensuring that the company never retains critical knowledge in-house.
If a capability is strategic, it needs to be built and maintained internally. Otherwise, your company becomes dependent on an endless rotation of consultants who, conveniently, never transfer their expertise before moving on to their next contract. It’s a cash burn wrapped in a short-term illusion of flexibility.
Yes, external expertise has its place—think temporary spikes in workload, specialized knowledge, or transformation initiatives. But outsourcing your core competencies to third parties is like renting your brain: eventually, you’ll forget how to think.
In a nutshell:
> If IT is your competitive advantage, keep it close. Offshoring core technology is a strategic failure.
> Only outsource what is non-differentiating. Everything else belongs in-house.
> Managing by headcount KPIs while overspending on externals is financial nonsense.
> Build internal knowledge for long-term success, don’t rent it short-term at a premium.