A bold headline, isn't it? If you define stupid as an act or behaviour lacking sense, then there needs to be a bit of context around this statement and justification to "Why outsource?" "Outsourcing is Stupid" via CIOUpdate suggests why would anyone want to outsource IT when defects increase 35-to-40%? For us old software engineering types, we were taught that defects found in the delivery phase of a project are 70-to-80% more costly to fix than those found in the specification and design phases. That, and outsource projects tend to see project management and controls expand 25-to-30% that is a more expensive exercise. The article goes on to state that the only effective reason to outsource IT is when a company cannot afford to do the work themselves. To summarize the article, It is cheaper and better when you can do the work at home, especially when modern tools automate so much.
If you look at large companies, in particular resource companies, you can see a connection between the commitment of management to outsource, and the growth of the project management office. With outsourcing, you tend to have management on both sides of engagement. It seems like a lot of duplicated effort, logistical disconnects, and sacrificed quality for software and service provision that is 900% more ineffective. These companies, like many large companies, have the resources to do the work themselves.
"When Outsourcing Goes Bad" from InformationWeek is a brilliant bit with more useful nuggets of information. Of a survey of about 420 companies, only half ranked their outsourcing endeavours as successful. One in six claimed their outsourcing was a disaster. It makes sense though. Many CIOs outsource for the wrong reason, and usually its not for increased efficiency (because how can you make that claim with all the evidence against it), but for that easy money reduction of operating cost. This article mentions when IT is outsourced, the event itself requires board level scrutiny and continual review. Many failures end up in costly litigations. When the horses are out of the gate, the further they run, the harder they are to round up.
So again, why is it that companies that can afford to do it right, still pick the wrong path? It can't be the core competency argument, because what large company would claim that their information systems do not present a material risk to their continuous operation? So it must be ignorance, or skill-full politic in the deferring of blame.
And this reflects so poorly on the IT industry in general. To reduce costs, you still need to go after the biggest spend that is your human capital. When you outsource, the outsource absolutely will go for the cheap, warm body on the bench. This continues to depress the job market and make IT an unattractive career. And this in turn also drives the lack of credentials and experience in IT.
It would be so much better if continuous improvement, process efficiency, and quality control were the focus of solution delivery. Execution excellence... how many companies have that sound bite in their mission or value statement?