I don't think anything has changed about the real business value of
outsourcing from the days of Peter Drucker or more recently - a decade
ago - John Chambers of Cisco. If the same strategic analysis is done of
what are the ideal outsourcing candidates, and also how to manage the
outsourcing properly within the firm, then it potentially creates real
value.
In my experience companies fail in their outsourcing for 3 main
reasons: (1) they don't consider it strategically and holistically, (2) they
treat it as a CFO-driven cost cutting exercise, (3) they fail completely in
having a proper internal management and relationship model with their
outsourcer, who because of (2) they treat simply as a low-cost low-
value-add "vendor". In general companies fail because they don't take
responsibility for managing their side of the transaction.
As I said, nothing has changed in this regard for a long time. We just
see swings because if you have no strategy and no critical thinking
behind your outsourcing decision then you just hop from fad to fad and
the "pressure-du-jour".
Walter Adamson @g2m
Remember how verboten the topic of offshoring was during the most recent U.S. Presidential campaign, and how that debate trickled over to the bigger issue of outsourcing in general? Corporate cost-cutting concerns certainly have put a muzzle on all that loud gnashing of teeth.
Indeed, a new survey conducted by business and technology company Capgemini finds that about three-quarters of executives believe outsourcing is imperative for helping companies hold up their bottom line in the current economy. What’s more approximately 70 percent of executives agree that money they save by switching certain information technology, finance, human resources, customer service or procurement processes to an outsourcing partner can be applied toward growth. Another 60 percent indicate that outsourcing could make businesses more “agile and flexible.”
The Capgemini survey was conducted by Harris Interactive among 151 Fortune 1000 executives between April 29, 2009, and May 15, 2009. Here’s a link to the summary of the Capgemini Executive Outsourcing Survey.
I spoke with David Poole, vice president and head of Americas Business Process Outsourcing for Capgemini, about not just the research but about why outsourcing seems to be coming back into favor — but with a slightly different focus than in the past.
Poole contends that with much of the cost-cutting panic behind them, more executives are looking at business process outsourcing not just as a way of lifting and shifting an existing process for of finding ways to handle a process more efficiently. “They are looking at BPO as maybe a way to speed up the transformation of their company,” Poole says.
Yes, there are certain industries and certain functions that could be highly sensitive to outsource. Poole notes that utility companies, as an example, have a high level of concern around how their customer service is handled — and where. That, in itself, points back to the offshoring question.
Views about offshoring locations have also shifted over the past 18 months, Poole says. More of Capgemini’s U.S. clients, for example, are using its resources in Guatemala. North America consumers tend to be more accepting of Hispanic accents, plus there tends to be better cultural alignment between. Believe it or not, Guatemalans tend to follow a lot of U.S. sports teams, which always seems to be a great icebreaker. Businesses, meanwhile, appreciate the country’s proximity.
Chances are you’re already outsourcing at least one part of your operation. What value are you deriving out of that relationship other than reduced costs? It would be smart to investigate the terms of your contract and make sure you haven’t simply “moved the mess” elsewhere.