Chief Digital Technology Officer & SVP
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The Simple Side of Outsourcing
I was just at the IAOP 2007 Outsourcing World Summit conference in Las Vegas, and the main topics of discussion were these two: What do you outsource or offshore? What is the outsourcing life cycle?
Does that sound remedial? Too elementary for a global conference on a mature business solution? Not too me. Yes, we've been discussing these same topics "at nauseaum" for years. But for me, these topics are timeless. Why? Business so few businesses get them right.
Three Simple, Critical Considerations
Businesses constantly need to analyze their operations and part of that regular scrutiny should ask, "Could this be outsourced and what do we gain and lose from the outsourcing process?"
Core versus Non-core?
To identify what can be outsourced, you must consider your business from a core versus non-core perspective. Which functions are aligned with revenue generation? Which are necessary for your operation, but not vital to revenue generation? This simple sorting process gives you one dimension to your business outlook.
Strategic versus Non-strategic?
A second, important way to look at your business when considering outsourcing is to ask "What is strategic versus what is non-strategic?" You might see some interesting overlap with the first question. In any case, these two questions will help you identify tasks that can be most easily outsourced and red flag the areas that should stay definitively within your business' oversight.
After strategic and core functions have been sorted out of the outsourcing pile, a business can begin considering delivery options. Do the functions you can outsource require on on-site solution? An off-site but managed domestically set up? Do you have functions that can be offshored completely and take advantage of low-cost global talent options?
These three exploratory steps will give you a three dimensional look at your business from an offshoring perspective, and they are steps too few businesses take seriously or complete fastidiously. One of the key findings shared at the IAOP conference was a list of what most commonly goes wrong in outsourcing engagements. If you look at the list (provided below), you see that it is a perfect testament of the value of the three dimensional perspective and why businesses need to carefully examine 1) core versus non-core functions 2) strategic versus non-strategic functions and 3) the right delivery method for each potentially outsourced function. They are three simple steps, but whether or not they are taken seriously determines the success of an outsourcing engagement.
Why Outsourcing Goes Wrong (from the IAOP World Summit Conference 2007)- A lack of management knowledge leads to failed outsourcing arrangements
- There is no strategy behind what is outsourced
- Depending on function selected, the economics might not work or it was underestimated how much additional management is required to manage the offshored solution