Make or Buy IT Solutions?

In today’s world of extreme competition IT has been acting as a game changer and is helping in creating success stories all over the world. But this success doesn’t come free of cost. Creating an IT enabled environment in a company may cost a fortune to it. Also the success of doing such a BPR activity inside an organization is not guaranteed. This leaves the companies with very few alternatives – Whether they should form an IT department and handle all the IT activated through it or whether they should outsource their IT activities to other companies which have been operating in the IT domain since ages.

Gone are those days when companies used to have an in-house IT team which used to work on developing systems which were unique in nature and helped them to drive their top line by automating their processes. High capital expenditure was a mandatory for such companies because they had to operate and maintain a large number of servers, software, hardware and human resource.

Today, we are witnessing a world of outsourcing – a world of specialization. We are living in a world where acute competition is eating into the revenues of companies. In order to minimize their operational costs companies have started to outsource the non essential activities to other companies which are having some expertise on the same. C. K. Prahalad’s theory of core competency also talks about it. It says a company should concentrate on the thing which it does best and should outsource the other activities. For eg most of the telecom majors of India like Airtel and Idea have outsourced their IT activities to IBM.

Companies today focus more on proper branding and marketing of their products. They rely heavily on three things –

1) Finding a gap in the market

2) Forming an impression of their product on the prospects mind

3) Ensuring that proper quality initiatives are taken up by the vendors which further leads to good quality products

So our mantra for various companies (especially SME’s) is that they should back their area of expertise by focussing its resources on it and should let go of the activities which do not add much value to its product.