Effective outsourcing
I clearly remember a difference of opinion with a very senior and respected colleague in a top-tier consultancy. He argued strongly that outsourcing is best when a function is neither core to your business nor anything in which you have expertise (ref: X on the graph); he also suggested that cost-saving was the primary value driver. While cost-saving is often the initial motivator for organisations to outsource, it is rarely the most significant benefit - and if you don't have any expertise in an area of business, how would you know if someone else was any good?
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In 1994 when outsourcing was in its infancy I negotiated an applications development with an Indian software house. Within weeks, it became clear that activity we took for granted 'locally' burns time, resource and money when offshore. Crucially, even though applications software was core to our business, we had not learned to manage the outsourcing process and the cost-saving business case was rapidly disintegrating.
Minor queries and apparently small changes had myriad costly implications amply illustrated by impact analyses. And while the quality of the work offshore was of a very high standard, the definition of "what success looked like" for our UK company was in need of clarification. Only by travelling to Chennai was I able to 'manage' the work effectively. Outsourcing something of which you know little, can be like signing a blank cheque!
As a minimum with outsourcing we need to:
  • recognise that an outsourcing partner is, fundamentally, a scalable source of flexible high quality resource (and not necessarily cheap)
  • have expertise competent enough to manage the outsourced skill (ref: Y on the graph)
  • understand the culture of the offshore country for which we have opted
  • consider stationing internal staff overseas in order to manage effectively
  • have a well-defined and secure business case for an exit strategy
Is it worth it?
Outsourcing is not easy, or necessarily a cheap option but it can provide an army of high quality resource at your disposal. Having seen and worked on either side of the outsourcing divide, and experienced first-hand many mistakes from entry criteria to exit strategies, outsourcing remains a strategy that will stand the test of time but requires diligent in-house management with a degree of expertise and enough cultural tolerance to remain worthwhile.
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