August 21, 2008
   
  Outsourcing Isn't Easy
Posted by John Soat | June 24, 2008

Companies are struggling with what it means to operate in an R=G world, according to our very unscientific outsourcing poll. When almost everything is available from third parties, how do you know what to make and what to buy?

Here are the decidedly mixed results of our latest quick poll, the respondent base too narrow to be anywhere near statistically valid:

How has your company's outsourcing strategy evolved?

>> We look to outsource as many business functions as we can. -- 22%

>> We outsource only non-essential functions. -- 29%

>> We're struggling to find the right mix of in-house and outsourced functions. -- 24%

>> We've had problems; we're taking back functions we outsourced. -- 7%

>> We've never outsourced, never will. -- 18%

The largest percent of respondents say they outsource only non-essential functions, which sounds like a very sensible outsourcing strategy. Except if you're business model is constantly evolving based on the co-creation of business value you're doing with your customers (N=1), how do you know what your essential functions are -- or are going to be in the near future?

I'm not being disingenuous. I think outsourcing only non-essential functions is a smart reaction to the outsourcing overindulgence that took place a few years ago. However, is it the right strategy going forward, as business models and markets change with increasing fluidity?

The next largest percent of respondents is struggling to find the mix between outsourcing and insourcing. That's an honest response, perhaps the right response, the answer to which will will determine the future winners and losers in the N=1, R=G world.

The next largest percent outsource as many business functions as they can. This seems to me to be the outsourcing strategy of the future. The most important thing here is to recognize what it is that your customers are asking you to do (N=1), and what you can hand off to someone else to do.

Only 7% of respondents report taking back functions previously outsourced. Is that surprising? Does it suggest that business functions once outsourced tend to stay outsourced? And is that a fluid enough strategy in the fluid markets of the future?

And 18% have never outsourced and never will. That's a courageous stance -- and a foolhardy one. I'd venture to say most of those organizations have outsourced at least one business function – payroll, for instance, or corporate travel – but are unwilling to recognize that for what it is.

Outsourcing is the way business is done in the modern world, and the ship of globalization has sailed. What authors Prahalad and Krishnan have done is recognize the criticality of developing the most effective outsourcing strategy in a global, opportunistic environment.

 
 


This is a public forum. CMP Media and its affiliates are not responsible for and do not control what is posted herein. CMP Media makes no warranties or guarantees concerning any advice dispensed by its staff members or readers.

Community standards in this comment area do not permit hate language, excessive profanity, or other patently offensive language. Please be aware that all information posted to this comment area becomes the property of CMP Media LLC and may be edited and republished in print or electronic format as outlined in CMP Media's Terms of Service.

Important Note: This comment area is NOT intended for commercial messages or solicitations of business.


   
 
  The Book »  
 
Partner with your customer. Optimize your supply chain. Innovate by connecting the two. This book tells why this is the new model for business, and how to succeed at it.
Buy the book »
Amazon.com
Barnes & Noble.com

  Read the introduction
 
  Featured Case Study »  
     
  E-CHOUPAL: A RURAL E-MARKETPLACE
ITC, a $3.5 billion Indian conglomerate, created an electronic marketplace for rural Indian farmers, giving them access to real-time market-demand information and customized farming knowledge. Read Case Study »

This is a detailed explanation of the case history referenced in chapter four of The New Age Of Innovation. For more information, go here.

Case Study Contest: Submit a business innovation case study and win a lunch date with the authors of The New Age Of Innovation, C.K. Prahalad and M.S. Krishnan. Contact John Soat

 
  Look For The New Age Road Show!  
     
  Join authors Krishnan and Prahalad, and moderator Bob Evans, in a discussion of the concepts and examples presented in of The New Age Of Innovation, at select cities across the country.

Upcoming Dates:
June 25th - Chicago, IL
August 14th - San Francisco, CA
September 25th - Irving, TX
To Be Announced - New York, NY
To Be Announced - Boston, MA



New Age Of Innovation Webcast
Executive Editor John Soat leads a discussion with authors Prahalad and Krishnan on the specifics of their new paradigm, their formulas for innovation, the meaning for old-line companies as well as entrepreneurial startups, and how these developments will affect the use of information technology in the future. Register for the Webcast here.

 
Advertisement
  New Age Podcast »  
     
 

Second in a series: The authors discuss the dynamic between efficiency and flexibility, and how they work together in The New Age of Innovation.

 Click here to download our podcast


 
  Technology Sponsor »  
     
 


 
 
  Privacy Policy | California Privacy Policy | Terms of Service | ©2008 United Business Media Limited