Reversing Course?

Abstract:A survey finds that almost all responding organizations have outsourced some functions. However, only 56 percent of respondents said the outsourcing met or mostly achieved financial goals, and less than half said the outsourcing met or mostly achieved internal service, quality or productivity goals. The most commonly outsourced functions were manufacturing & production, outsourced at least partially by 61 percent of respondents, IT, 56 percent, and security, 54 percent. Managers at some organizations found that while the direct costs of outsourcing were lower than in-house operations, the amount of management attention required created additional costs. More than a third of respondents said their organization had changed its mind about at least one decision to outsource. Organizations seeking to outsource should clearly define the goals of the outsourcing and the priority of those goals, use holistic measurements that take into account more than the direct costs of outsourcing, and evaluate …

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Excellent article. It reaffirms that much of what I have observed is askew with outsource services management. I find the 25% who characterize relationships as 'guard-inmate' or 'predator-prey' to be a stunning stat. Partnerships drive business, leave brinkmanship on the playground.
--Garry Schultz, 07-13-2011

Recognition that outsourcing is not necessarily win-win should come as no surprise.

Outsourcing work that has traditionally been done internally requires tedious and detailed capture of task elements, workflow results and specific deliverables for inclusion in the contract. Most firms should do this but do not have this information well documented or readily at hand. They don't do a good job of documenting current internal work processes and outputs.

Further, and most importantly, you should NEVER outsource something that touches your customers. The firm you hire sees YOU as their customer, and to them your customers are incidental. Want a bad example? Check out most auto dealers' websites, as well as any other site, outsourced to a technology firm. See how well the links work and how up-to-date inventory is.
--John, 07-13-2011

Well-written article with good action implications at the end. I agree with what the authors have written. My experience working with vendors at my company has been that more time working with the same vendor and thinking of them as a partner can result in a win-win situation. In the short term, there will be a lot of miscommunications, which may be due to language, culture and not meeting the expected levels of performance on quality, service and productivity.

Apart the suggestions provided by the authors, I would like to add one: Stick with the same vendor for the long term (if possible).
--Muthu, 07-03-2011

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