BFM2013_2_08_Outsourcing and “internal outsourcing”

Most customers are afraid of the “Big Bang” approach to outsourcing, and try a step-by-step approach.

Interestingly, few companies have in place what is required to carry out a step-by-step approach.

As discussed in the previous issue of BFM , if you have KC (Knowledge Configuration) Management in place, you have defined the basic elements that are required to outsource parts of your processes and outputs.

The key issue is always the same: you cannot outsource what you do not know- and a step-by-step approach, seemingly the most cost-effective approach, could actually be the less cost-efficient.

A quite common mistake is to transfer to the outsourcing supplier the required internal people before the customer builds its own internal support and management structure.

Therefore, planning the rolling out of outsourcing should be based on knowledge boundaries, to ensure that you still retain internal resources able to control the interfacing with the outsourced activities.

Outsourcing is usually supposed to involve external suppliers- or this is the common wisdom.

Actually, consolidation activities are the most common type of internal outsourcing, but almost never planning activities recognize the similarities.

Our approach is to consider internal consolidation activities as overall outsourcing activities, both to ensure that the “outsourcing” organizational units still keep control of their own knowledge and that the consolidation is based on a sound economic and financial assessment.

Managing the consolidated activities as “outsourced” also clarifies the boundaries, as quite often the originating organizational units tend to “forget” that they are now supposed to focus on the outputs, not on the way they are produced (they mix up outsourcing and facilities management or body rental).

We suggest adopting sound guidelines to identify if the real solution is selecting an external outsourcing supplier, or “internal outsourcing” is the safest choice.

While talking about Business Continuity Governance in the next issue we will also discuss the concept of “maturity levels”.

Before adopting a “best practice” from somebody else (including standards or an ERP), you should assess if your own organization has the “structural maturity” to comply with rules that assume that everybody works as a “cog in the wheel”.

If that is not the case, then some adaptations will be needed.