Opinion: Should M&S have outsourced its tech team?

Instead, I’m going to explore the significance of its £25m outsourcing agreement with Tata Consulting Services, significantly reducing its own in-house digital team in the process.

“This is not just outsourcing, this is M&S outsourcing”

The move is part of the brand’s plan to deliver ‘digital-first’ retailing and aims to save the business £30m.

This is not just outsourcing, this is M&S outsourcing.

This substantial business decision raises the wider question: when should a retailer outsource and when is it best to keep things in-house? Or rather: to outsource or not to outsource?

The risks of outsourcing

Let’s start with when you shouldn’t be outsourcing.

Retailers face a range of issues. These can be anything from ineffective solutions to volume of change and high costs.

Fight the urge to palm these off in the hope of an instant fix. When outsourcing you need to be hyper-focused on what problem you specifically want to address.

It is not the answer to a general business problem.

Secondly, make sure what you are outsourcing is not at the heart of your business proposition. These will likely be activities affecting the front end of your business – the part that the customer interacts with on a daily basis.

Best practice should be to keep these in-house, as success will depend on the involvement of individuals who understand your business, your customers and how technology can best add value.

“Brands are looking to drive more and more value from data, but the expertise in insight analytics and data science should be kept at the heart of your business”

You need to ensure technology moves in the same direction as your business goals, not on a tangent.

Thirdly, anything to do with driving value from the current favourite buzzword – data – should be kept in-house.

Brands are looking to drive more and more value from data, but the expertise in insight analytics and data science should be kept at the heart of your business.

You need these people as close as possible to business teams and decision-making to maximise value.

Finally, take care if you are outsourcing to save money.

M&S has said that outsourcing will save it £30m – but this could be naïve.

It is very common for costs to escalate as hidden complexities and additional requirements come to light through the transition phase.

For example, while in-house employees will undertake additional work out of good will, once outsourced this becomes billable activity.

When you should outsource

The areas most suited to outsourcing are those at the back end of your business that typically evolve at a slower pace and are further from the customer, or commodity items.

Examples of areas to consider first could be office IT, network management, data centre (especially if not already cloud-based) and ERP platforms.

Generally speaking, more traditional facets of IT in the back office can be outsourced successfully. A collaborative approach here will free up internal time to focus on issues at the core of your business and generally ease the pressure on internal staff.

Another reason to outsource could be access to talent.

Many agencies hire the best digital talent that the world has to offer and are prepared to address even the most imaginative business problem.

If you need access to niche, in-demand skills in a location or sector where it is difficult to attract this kind of talent then outsourcing is likely to yield better results than in-house.

Overall, outsourcing can be a fantastically effective way to grow and evolve your business long term. Just be sure you are doing it for the right reasons.

• Derek Palmer is associate director at digital transformation consultancy Transform