The cycle continues...
I have seen this so many times, in large companies, governments, you name it, over a 20+ year career. It's almost as regular as a pulsar -- the outsource-insource cycle.
1. Newly minted MBA turned CIO sees massive IT savings on a spreadsheet provided by a large outsourcing vendor, signs multi-year deal outsourcing "routine IT tasks."
2. Good internal people quit, vendor takes over and tries to migrate the customer to their "standard operations framework" of this year. The rest of internal IT gets fed up and quits, or is quietly fired by the outsourcer.
3. Vendor now has control of most of IT and a huge wall of process exists to get anything done anymore.
4. IT is declared an "inflexible shambles" and plans are made to bring it back in house.
The only thing that's different now is the existence of "The Cloud" which only serves to hasten a vendor's takeover of internal IT. The cycle remains the same though, and probably will forever.