Aaron Alexis – a tragic side to Corporate Virtualization. And who is working in your supply chain?

30 years ago, we would suspect that all or the vast majority of the IT staff working on a sensitive military site in the US or the UK would have been employed directly by the military authorities. Following the first major wave of IT outsourcing in the late 1980s and early 90s, the chances are that many would have been working for a large outsourced service provider – an IBM, HP (EDS), CSC, or Accenture maybe.

This week, we heard and saw much too much about  an IT worker, Aaron Alexis,  who was an independent contractor, working for what appears to be a respected and major IT services firm in the US called The Experts, who were working under contract to Hewlett Packard, who were themselves under contract to the US Navy.

“Aaron Alexis was an employee of a company called 'The Experts,' a subcontractor to an HP Enterprise Services contract to refresh equipment used on the navy marine corps intranet (NMCI) network. HP is cooperating fully with law enforcement as requested."

Alexis, for reasons we don’t yet understand, on Monday shot 12 people dead at the Navy Yard in Washington DC in the USA.

What a tragic demonstration of the trend identified in the report that we’ve been featuring here recently.  Corporate Virtualization – A global study of cost externalization and its implications on profitability” (download it here) shows that the average organisation spends 69.6% of its revenues with suppliers now, compared to just 12.5% on staff costs.

Of course much of this external spend is, in reality, people. People doing IT work; cleaning or catering tasks; project managers or consultants; external lawyers, window cleaners or security guards.  And many of these will at some stage be working on the client’s premises.

“What was once a payslip is now a supplier invoice,” as the report puts it. And this example highlights that not only are firms now buying in services they might once have carried out in-house, but the firms to whom they give the contracts (the prime contractors) are often sub-contracting themselves, creating longer and more complex supply chains and networks.

Now of course, that does not in itself increase the possibility of tragedies such as this. There have always been examples of angry, evil or disturbed  employees committing terrible crimes.  But this move to the “virtualized organisation” brings some new challenges for the ultimate client.

There is some suggestion in reports that Alexis may have been angry about a perceived issue over payment and money he felt his firm owed him. (Now we should stress this is just hearsay and there may be no truth in it). However, that does highlight one issue – even if it proves to be a red herring here - how does the ultimate client know that the people who are working for them (in some sense) are motivated, positively aligned and capable, when they don’t have that direct employment relationship?

Now there are other issues here around security clearance processes, the past history of the gunman, gun control of course and so on.  But this is a tragic example of a supply chain risk that we might not have even imagined once upon a time.  It also emphasizes again those issues around the importance of contract and supplier management that we frequently feature, and the need to consider suppliers and their staff (in some ways at least) as you would your own staff.

Finally, and most importantly, our sincere condolences to everyone who has been affected, and good wishes for recovery for those injured this week.

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