The Next Big Thing
Posts about next generation technologies and their effect on business.

Common problems in the current state of outsourcing

cooperation.pngThe Horses for Sources blog described an interesting blueprint report they developed on addressing the challenges faced by outsourcing today.


Captured in the blueprint report are the four key challenges the buyers who attended their outsourcing conference agreed the industry is facing today:


1. Overcoming the singular focus on cost that strips the industry of value – I agree that this can be a stumbling block, since the organization should be entering into a relationship with someone where the area outsourced is their area of expertise. It is definitely a case of one organization’s “commodity” is another’s core strength. They organization should be looking for a supplier’s on-going delivery of improvement and innovation. They should not just be driving out costs without supplying the insight and innovation in the suppli... It should be easy to see what they are proud of…


2. Leveraging outsourcing as one of a variety of vehicles to achieve business objectives – This is definitely true, outsourcing relationships are bring fragmented into much smaller deals. Unfortunately, at least in my experience, this means that there is usually much more bureaucracy and “watchers, watching the watchers” than actually getting the work done in a cost effective manner. Effective 3rd party management is becoming a core skill and having said that is also something some organizations are outsourcing because they don’t have the time or patience to manage all these relationships effectively. This micro-sourcing of work can lead to siloes and communications issues that may absorb any perceived cost savings or innovation.


3. The need for service providers to invest smarter in their account management teams – The organization that is outsourcing only delegates the work to others and still retains responsibility. Unfortunately, in all the effort and confusion, this can be lost. The report states:

Buyers acknowledged that poor communications with their service providers is leading to stagnant BP relationships, with vague business objectives and a lack of senior-level buy-in from both buyer and provider.”


The reward mechanisms for both the supplier and the outsourcing organizations actually need to be re... Business Relationship Managers need to be empowered and accountable for the relationship, beyond the role of just being “watchers”.


4. The need for buyers and providers to partner to foster innovations into business and IT process outcomes – This area is key. Both organizations have skills, otherwise they wouldn’t be in business. Once outsourced attention will focus elsewhere, but there needs to be a drive to maximize the benefits from this new “strategic relationship”.


There can easily be intellectual property (IP) issues that get in the way; after all this work is core to the supplier they better have some IP in the game. The contracts can’t be written in such a way that the outsourcing organization owns all the innovation. On the other hand, the supplier needs to realize that this relationship is transient and at the end the outsourcing organization needs to continue to operate. It can’t be held hostage by an inability to operate because of an IP shift. I’ve mentioned before the issue of lock-in and outsourcing/cloud computing.


Overall, it was a good article to review every once in a while. This is an area ripe for improvement, even by those who are experts.

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