BFM2013_2_06_Consequences of outsourcing

So far, we discussed outsourcing assuming that it is possible- but it is really always possible to outsource?

In our experience, outsourcing should not be considered if the set of activities or outputs outsourced is too linked to other processes that are not to be outsourced.

If you outsource such an activity, your business evolution could be impaired, notably when your supplier is delivering just economies of scale, but without any capability to manage the service and its evolution.

Whenever this is the situation, we suggest instead either to:

  • keep inside the company the process and outsource the technology to support it, e.g. using applications delivered via Web or virtual machines
  • use external resources to supplement the skills lacking inside your own company, but ensuring that the knowledge required on a day-by-day basis is transferred to your people.

Sometimes, outsourcing can still be considered, but would require a focused monitoring to avoid counterproductive side-effects.

Typical examples are call centres, account management, sales management outsourcing, and other sometimes described as “hiring a team of expert resources”.

Why counterproductive?

In this example, because the typical mistake is to leave external resources manage the relationship with your own market using their own processes.

The result? The actual improvement of the sales/account managers market visibility and Rolodex, and reduction of your own understanding of your own market.

A proper management of the services outsourced can avoid these negative side-effects, e.g. by requiring the external sales/account managers to report all the information, and then managing through either internal resources or another company the collection of market feed-back.

As described in the previous issue of BFM , another consequence of some forms of outsourcing (e.g. ERP, a de-facto adoption of external business processes) is the introduction in your eCI (embedded Corporate Identity) of processes that work fine- but only if your company behaves as somebody else has decided that your company should behave.

The focus is to identify which parts of the activities can or cannot be outsourced- and not just those whose outsourcing is economically viable.

Consultants should suggest the best solution based on their own experience and knowledge, but then execute the solution agreed with the customer.

Consultants should plan for their departure from day one, with a clear visibility of the planned knowledge transfer to the customer.

Outsourcing services should be considered for activities that require constant update (e.g. tax law) but that are not used frequently enough to both justify the investment and ensure that the internal people involved are able to be highly efficient (and informed).