AG: Some people see outsourcing as the way to go to make more economic sense. Talk about that overall decision at a high level, and how the current economic environment may be sharpening peoples’ focus on whether or not they have things insourced or outsourced.
SG: Really, where I come from is that I've had almost a decade worth of outsourcing experience; 10 years worth of that experience, therefore I understand outsourcing inside and out. I can tell you that, all things being equal, the outsourcing companies will typically make anywhere between a 10-20 percent margin on an account. Because of that, and depending on the size of the account, you're obviously spending a lot more money to have them in the door. Now outsourcers will typically tell you that, “We will be able to save you money because we have multiple clients utilizing our helpdesk.” That may be true, but it really depends on how the contract is structured and how you are internally structured. So I propose — after that experience and now being on the other side — that you can do it just as inexpensively as the outsourcers because they still have to pay for the people. You can also improve your quality and your customer service and satisfaction astronomically based on that.
If people say they can save money on outsourcing, then I would first look internally to see if they are optimized there. Secondly, what are you going to gain with that; is it truly cost savings, or are you going to be stretched in other areas? Many outsourcing companies come in and they may give you a low price on a helpdesk, desktop support or your server support, but then they get you with various other things - like the software and hardware that they use - with their contracts for the projects that they run. Typically, you're dependent upon them to be able to implement anything if they're running your infrastructure.
So those projects that they run really are the ones that can cost a company a great deal of money, so that they will make their different dollars in different ways if they aren’t making it within the contract. I can go on and on and on. I’m doing my Ph.D. and dissertation on outsourcing and showing the pluses and minuses. By being on both sides, it’s allowed for a very good look at how you can actually run an organization without outsourcing it and do it much more successfully, cheaper and in a less costly way.
AG: Are there specific types of processes or technologies, things that fall under the CIOs purview, that you think are right for outsourcing, or are you essentially in favor of insourcing across the board?
SG: It’s probably dependent — and that’s a very good question. I would say that there are definitely certain applications that we outsource, as an example. With our EMR, we have a team of clinical analysts onboard (11 of them) that manage the smaller enhancements for our Cerner application. Cerner does a very good job of major enhancements to the application and EMR, and they do a very good job of managing the servers, so we have a remote hosting set up with them. They keep the servers in Kansas City, so we outsource with them heavily. They are our largest outsourcer. But because of the fact that the EMR application is so complex, and that it would be highly unfavorable for us to be able to try to find the right people to work with a company in tandem, it makes a lot more sense to be able to outsource for those complex applications. That’s typically what I have seen, any complex applications that are out there — and if there is a real difficulty in trying to find those types of resources — then outsourcing is what you sometimes have to do.
AG: It sounds like the contracts are incredibly important. Do you think most CIOs are able to do this on their own, or if you're doing outsourcing, do you need to bring in third party help to make sure your interests are covered in a contract?
SG: You definitely have to make sure that your contract covers as much as you possibly can. I spent two years in London, and a year before that in between when I worked for CSC, which is an outsourcing company — I worked as their global procurement director for VA systems on that account, which was CSC’s largest at the time. All I did was work on contracts and procurement of all IT functions, hardware and software for the company. It was over $300 million in spend at the time, and that really gave me the experience necessary to be able to make sure the contracts are what they need to be. So being on the outsourcing side, as well as being on this side, really has made a huge difference to be able to make sure that the contracts are in place. So I would highly recommend that you have an expert in any type of field or area to be able to make sure that you have everything you need in those contracts; they're absolutely critical.
AG: On the other side of it, what are some projects that are definitely better done in-house?
SG: Primarily what we found was anything infrastructure-wise, we would do and lead the project internally. So all of our servers, all of our network, we’re replacing our entire network, and — with the exception someone coming in and actually doing the wiring for us — we've done the entire project ourselves. That’s a massive project to be able to replace every switch, router and every AP. We also just installed the new distributed antenna system for our wireless. So all of that is in place. We've completely redone our server environment; we’re virtualizing that now as we speak, and we’re moving through desktop refreshes and everything else that was in the presentation. (click on the "download now" button at the bottom of this interview)
So I would say that infrastructure, primarily, is nearly a commodity, especially on the desktop side. In that area, you should be able to do it yourselves, absolutely. I can state that you should be able to do that much better than anyone else that says they can do it, and at nearly as at the same costs.
The other side is the applications. It really depends on the applications side what you're talking about. So if it’s a highly complex application, then I would recommend that you get help. It depends on who you go with before you jump into that. The contract is also critical for the complex applications, like your EMR.