In my last post, I submitted that today’s outsourcing is not all that different from basic economic specialization. We can see that due to advances in technology – particularly communications – the pool of places, talent and resources to draw from is now essentially global and nearing limitless. Often times my customers ask me questions and I have to point out that the question they have asked is not a matter of “can” something be done, but instead “should” it. That is where these options with outsourcing have left us.
So what areas should a successful corporation focus on? Obviously those that offer the biggest return in cost savings. Now those who have done business with me over the years know me to be perhaps obsessive when it comes to focusing on hard dollar ROI and having very little tolerance for the soft dollar pay-backs that are often used to justify technology sales. That being said, one has to consider all the COSTS including harder to estimate impacts on other areas of the organization. Continue reading “2 Areas Not To Outsource”→
For years now, companies in corporate America have been turning to outsourcing to help improve margins and make their organizations more competitive. The thing is that the successful stories – the ones that truly deliver on the promise – are the ones we hear the least about. Conversely, the biggest disasters are told many times becoming modern versions of the warnings to mariners of sea monsters or the edge of the earth over time.
Why hide it?
Well as it turns out, large companies in America have lots of competition looking to tighten the belt just as much as they are. When a company outsources successfully a particular part of the operation, the only people they would want to tell about it might be shareholders or potential shareholders. Then again, if it is successful enough, the better numbers should speak for themselves better than any details of their process ever could. As such they would be only giving their competition a roadmap to re-level the playing field. In addition, outsourcing can have negative connotations with some customers regardless of the positive overall effect on the product or service they are purchasing. Better to keep the best stuff under a hat overall in most cases.
As it turns out, there are huge amounts of information available on successful cases of outsourcing things as varied as IT Services, Call Center work, Tech Support, Data Entry, Manufacturing or any number of others. The problem is that this information is usually generated courtesy of the company providing the outsourcing services. Predictably they are going to give “case studies” that proffer stories that might as well include cutlery jumping over celestial bodies (ibid Neal Stephenson).
So how is the busy COO or President to know what is best to pursue and what things should be avoided? My approach to almost all problems in life is to reduce them to their primary and build back up from there. I’ll try to be brief since most readers understand the background, but the point needs to be made. Outsourcing is a modern way of expressing a very old concept: economic specialization. Without economic specialization, the modern world could not exist. If each of us had to grow our own food, build our own shelter, weave our own clothes, provide our own healthcare, etc. we would have little time left to concentrate on designing efficient engines, packing more transistors on a wafer of silicone or making a beautiful sculpture. Today’s modern communication and transportation have simply allowed us to take advantage of varied conditions in further away places. The answer to WHY outsource lies in the very same roots as any economic specialization.
There are reasons I enjoy my work in a technology related field. One of the most fun is the whole idea of better, faster, cheaper that I get to see new examples of every day. If you think back a bit, in 1980 if you bought a VCR it was about $500 (in 1980 dollars), the size of a refrigerator, had no remote, no auto-tracking, no stereo audio output and broke if you rewound tapes too much. Just before they stopped selling VCRs a couple years ago, you could go into a Walmart and buy one with a remote, produced a clear picture automatically, stereo output, was only maybe 4 times larger than the tapes themselves and cost $39 in 2006 dollars! It was better in every imaginable way and way cheaper to boot.