The Hidden Costs of Outsourcing: A Call for Innovation in Government
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Chapter 1: The Case of Kodak and Outsourcing
In 1989, Kodak made a significant decision to outsource its primary IT operations, marking one of the largest instances of corporate outsourcing in America. At that time, Kodak considered IT a “non-core” function. This move likely hindered their ability to capitalize on the innovative concepts they had developed in digital photography. While outsourcing wasn't the sole reason for Kodak's decline, it certainly played a major role.
Similarly, the US government has adopted a flawed strategy by outsourcing essential functions when it is most crucial to maintain control.
Section 1.1: The Role of Government in Citizen Support
The fundamental duty of government is to assist its citizens. Currently, the primary means through which citizens engage with government services is through digital platforms. Yet, the government continues to rely on contractors for these critical functions. The reality is that the US government lacks the expertise to code, debug, or design its own websites.
The insightful book, Recoding America by Jennifer Pahlka, delves deeper into this scenario.
Section 1.2: Misunderstanding Technology
Historically, the government has viewed IT as a commodity, akin to steel. In the 1920s, in a bid to manage high costs, the government attempted to manufacture steel, resulting in a product that was not only three times pricier but also of inferior quality compared to market alternatives. This failure led to a belief that outsourcing was the solution.
However, treating technology like steel does not apply. While this strategy may work for manufacturing or other services, it falls short for essential IT functions. Today's governmental leaders often dismiss IT as merely operational, underestimating its significance.
Section 1.3: The Consequences of Outsourcing
As a result, a rotating series of contractors now manage one of the most crucial roles of government—interacting with the public. In his thought-provoking book, What Were We Thinking, Carlos Lozada questions the lack of innovation within the government, asserting that “we have ceased to lay the groundwork for it.”
With contractors handling all design and implementation, the government is left unable to code, design, or respond effectively to the needs of its citizens. Essentially, the government has outsourced its intellectual capacity.
Chapter 2: Reassessing the Future of IT in Government
To illustrate the implications of outsourcing further, consider the following videos:
The first video, How Does Outsourcing Hurt The Economy?, explores the broader economic impacts of outsourcing and its potential drawbacks on innovation and local industries.
The second video, What Is Outsourcing? Deep Dive in 7 Minutes, provides a concise overview of outsourcing, detailing its definition, advantages, and disadvantages.
Until the government reconsiders its outsourcing strategies, the potential for innovation in IT will remain stifled.