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Has 2e2 failure put back the cause of outsourcing by a decade?

Over the last couple of years, there has been a growing awareness that the Big Issue with cloud computing and outsourcing is not the technology but the viability of the service providers – in otherwords the key is not IT but due dilligence. Unfortunately the latest developments in the ongoing collapse of the 2e2 business in the UK has just served to underline the risks associated with outsourcing, the importance of due dilligence – and ensuring the contractual small-print is fully understood.

But back to 2e2… the latest development came earlier this week when the administrators wrote to all 2e2’s customers, warning them that unless they committed to paying out £4000 by 5pm tonight (Friday 8th February) they would be unable to keep the data centres running and the customers might lose their data. Basically 2e2 has run out of money to keep the data centres functioning, and added complication being that the kit in the 2e2 data centres is apparently leased from HP. You can read the administrator’s letter HERE.

However, what about the longer term impact of the 2e2 failure? Will it frighten off other organisations from outsourcing and cloud-type deployments? Already IT industry discussion forums are starting fill up with comments along the lines of companies that outsource such operations will have to think hard about where the data is and how to get it back in the future and relying on The Cloud is a really, really bad idea. And the sooner everyone realises this and decides to keep their own files on their own servers the better … you give control of your data to other companies only at your peril.

2 replies on “Has 2e2 failure put back the cause of outsourcing by a decade?”

An interesting question Charles and one that I blogged on just as the 2e2 story broke. My view is that the weight of the outsourcing wave and the strength of the arguments behind it are just too strong for this episode to be anything other than just a ‘bump in the road’. My experience is that law firm IT departments are struggling under the weight of two parallel expectations. First, partners have really woken up to the opportunities that IT might just bring to the firm – CRM, social media, process streamlining, mobility, consumerisation and BYOD all have great potential benefits and need to be considered. The second stress on IT results from the (comparative) lack of investment over the past four or five years which has, in some cases, led to strains on infrastructure, services and IT organisations themselves. IT teams are fire fighting the issues and therefore can’t get to the opportunities – fertile ground for the outsourcing arguments. Anyway, time will tell – but my bet would be that outsourcing in law firms will grow healthily this year.

As a interested (and possibly naive) observer I really do not understand how this could the law firm could not have access or control of its own information. Surely a regular backup containing all of its important data sets (clients, matters, accounts/time transactions etc..is made and held either offsite or in the possession of the firm itself. I would have thought the problem would be not so much one of information but more of processing capability what with the end-vendors system going awol . Maybe someone can explain. You can of course give control of your data to these other companies but you must also surely keep some sort of backup data set just in case….

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