Corporate In-Sourcing

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Corporate In-Sourcing

We all know what corporate outsourcing is. It's when companies in first-world countries move their work to cheaper, third or second-world countries to save piles of cash. Countries all over the world have been doing this for a few decades now, and it's a good idea most of the time. (You should do it yourself, using sites like Elance.com and AskSunday.com.)

But as always, times are a-changin'. Now we have corporate IN-sourcing. As an example:

General Motors is building a new, $258 million enterprise data center in Moring, Michigan. This takes them from 23 outsourced data centers around the world to two data centers that are, in essence, in-sourced. This move of bringing the data centers back to Michigan and back to the full control of GM is a complete reversal of their prior business strategy.

So why are they doing this? To reduce costs? Remember, that was the reason they initially OUTsourced everything. However, with this new strategy, GM says they can reduce costs by an additional 40%. In other words, they initially outsourced to reduce costs, but now they’re in-sourcing to reduce even more costs.

What the hell? How can they do that? Two reasons:

1. They're consolidating everything. They're getting all the data, equipment, and talent in one location instead of 23. That right there will generate huge savings.

2. Technology is getting cheaper. Processing power, storage, and bandwidth are all far less expensive than they were just a few years ago, and continue to get cheaper at exponential rates. Your cell phone has more computing power than the Apollo 13 spacecraft had.

By in-sourcing all of their data centers, GM is now able to inexpensively consolidate in ways that would have been financially unfeasible just a few years ago.

Expect this trend to continue.

This article was originally published on June 29, 2014
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