Sunday, December 16, 2007

Outsourcing Myths and Secrets

I've been thinking about a recent Wall Street Journal article titled "Seven Myths About Outsourcing" (subscription may be required). Basically, it is a cautionary tale that's been told many times in outsourcing circles. Last year an outsourcing advisory firm also wrote a report along the lines of something like "the seven secrets of successful outsourcers". Five years ago the authors could have written the same article about CRM and before that ERP. We all know quite well that every business/IT trend follows the same path. Gartner hit the nail on the head when they came up with their Hype Cycle.
True, vendors sometimes over-promise, but the problems in many outsourcing cases are due to failure to properly plan by the outsourcer -- that and a lack of dedicated program management. Many first time outsourcers jump onto the bandwagon with visions of huge cost savings. What they fail to realize is that if they don't have a good sense of their internal operations, they won't know what they are outsourcing and can't manage it well enough to get the desired savings. The moral of the story is that outsourcing is a strategic activity, one that requires planning, partnering, and a strong sense of internal processes and costs. It also requires executive leadership, stakeholder buy-in, and dedicated ongoing management, which is the same for any strategic undertaking. In raising these points the article is actually quite positive. If anything, we and the other offshore vendors should be thanking the authors for pointing out what to most experienced outsourcing practitioners is obvious.
The main problem that I have with the WSJ article is that it follows the recent trend of using the terms outsourcing and offshore interchangably. The same myths have been and continue to be applied to domestic outsourcing, e.g., the old "your mess for less" approach that led to headlines a couple of years ago about dissatisfaction with outsourcing in general.
True, the offshore approach does include a cultural wrinkle, which is one reason, but not the only reason why some our most advanced sourcing clients travel to India and other sourcing locations between 3-5 times annually to meet with us. That kind of dedicated management and attention to relationships yields results. So does experience, which is another point the authors make.
by Stephen Lane

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