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.
|