“These (outsourcing) efforts were mainly one sided; information and requirements moved from client to vendor, who would then construct the product and/or service and deliver this back to the client. Information and knowledge would seldom flow back from vendor to client, as the client was assumed to be more knowledgeable than the vendor.”
Paraphrased from ‘The Outsourcing Handbook’
Modern day business has something in common with modern day tennis- this is an era of specialists. Business, nowadays, invariably requires excellence in every department that it operates. Regardless of the fact whether you are an automobile manufacturer or a software developer, you require top-notch customer service- run by people who are masters of the field. It doesn’t matter if you run a bank or a television channel, you need IT infrastructure that would cater to the needs of both internal and external customers.
And being the best in all the fields that your business relates to requires a lot of effort, resources and most importantly, intense domain expertise. No matter how big an organization is this will remain a hard combo to achieve.
I have seen many mangers show an attitude towards business where they stay calm and content being the best in their chosen markets, and let others be the best in theirs. I had always been very aggressive towards sustaining growth beyond what comes as granted. I believe that money has to be extracted and not just taken as it comes. And that is the way most modern managers would look into business.
And that can be achieved by making others do what they do best, for you.
This is what we call strategic outsourcing. Outsourcing certain functions within an organization to vendors who have the necessary experience in the respective domains.
A lion’s share of outsourcing decisions is taken keeping financial benefits in mind. For example in the CIO annual survey conducted amongst India’s top organizations by Network Magazine, it was found that nearly 54 per cent of outsourcing is done as part of cost cutting.
I can actually quote Larry Elder to substantiate this further. “Outsourcing and globalization of manufacturing allows companies to reduce costs, benefits consumers with lower cost goods and services, causes economic expansion that reduces unemployment, and increases productivity and job creation.”
This is what is just obvious. But great organizations became great, since they had exceptional people who could see beyond what is obvious.
These outsourcing moves bring short-term profits for both the client and the vendor, but what about the improvements? How would you cater to the increasing demand in terms of quality and competition?
The answer lies in strategic outsourcing. Here, information flows to and fro. The vendor contributes not only by driving direct cost cutting for the client, but also by contributing change that is of strategic nature.
And those decisions need to be taken by the top management, as they would be the people being held responsible for the success or failure of such a decision. When you go against a high and aggressive financial benefit opportunity for embracing continuous improvement and long-term success, you have to be able to show the financial gains in the end. Everything is measured in terms of money.
The best strategy to ensure the success of such an outsourcing move is to consider it as a standalone business. Consider the transition as a planning process. Thanks to Jack Welch, we know that a clear mission statement is crucial for the success of an organization. So design an achievable mission statement for the outsourcing project separately. However, this should be complementing both the organizations mission statements, or at least, not contrary to any.
As the world gets more and more demanding, I could predict more and more top notch companies opting for vendors who offer strategic outsourcing over the ones who could entice only with the financial advantages.
As the former 13th United States Secretary of Housing and Urban Development (HUD) Alphonso Roy Jackson once said, “The other part of outsourcing is this: it simply says where the work can be done outside better than it can be done inside, we should do it.”
The other part seems to be the future.
So all the companies, who know only to chop costs, start recruiting business excellence people!
PaperPuli 