Outsourcing - better for who?

Yesterday the Westpac IT systems went down due to some air conditioning failures. Westpac were quick to point out that all of their hardware is managed by a third party (in this case IBM). From Westpacs point of view, they now have an opportunity to recover some of ther losses from IBM due to the service level agreements that they will have in place. However, I doubt any Westpac customers will have an opportunity to recover lost revenue or lost time or increased inconvenience.

It also brings into question exactly who benefits from these massive outsourcing deals that are done by larger enterprises. In my experience, they are highly competitive which means the organisations that win these contracts are operating on razor thin margins. The first thing they do is get rid of any "excess" staff. The next thing they do is make a risk assessment on the hardware that they "inherit" and see how long they can get away with not replacing anything. They then look at where they can possibly recover some costs by hitting the organisation, in this case Westpac, with change requests or contract variations that will keep the entire engagement in the black. The main beneficiary of all of this is Westpac themselves. They get a lower cost service and they get someone else to blame and cover costs if something goes wrong. A good friend of mine recently left one of the large outsourcing companies as the pressure was too much for him. His company had underbid to win the business and they couldn't take enough cost out to make it profitable. So he was constantly managing a customer that was almost always very unhappy.

If a large organisation (be they a bank or telco or any industry that serves consumers) really cared about their customer base then they would look to manage their IT with a customer focus, rather than with a razor sharp cost only focus. But perhaps the banking shareholders wouldn't like that.