Home > Leadership, The Monday Musings Column > outsourcing: getting it right

outsourcing: getting it right

At an industry forum last week we were posed the question; has outsourcing shown rel long term benefit? s the first panellist began to answer I was framing my own response as yes, I think that it has.But as I listened to the others I changed my position a little. Not that I am turning against outsourcing because I am a firm believer in it when it is properly thought  through and have seen it deliver real long term benefit in IT, Logistics and Facilities Management over the last thirty years or so. I have also seen it royally cocked up where those behind it failed to understand what they were outsourcing, how it fitted into their operational strategy and what they wanted to achieve from it, but happily those failures are less common.

The area where I had my change of heart over as I waited my turn to speak was where the outsourcing had been thought through and tendered well against a robust requirement, but although it had succeeded in the goals that had been set there had been a missed opportunity. The missing link is that outsourcing often stunts the growth of systems integration in an organisation.

Where an operation is self delivered the systems that fit around it are usually tightly linked into the organisation’s overall systems strategy; it wouldn’t make sense if they weren’t. However, when a function is outsourced the systems baby is often cast out with the bathwater and whilst the contractor may nurture the orphan and provide their own systems these are usually entirely separate from those of the client. Not always; the logistics industry does this sort of thing very well indeed and has done from the start, but the picture elsewhere is not so rosy.

Part of the problem is the relatively short term contract duration for it is unlikely that a contractor will be able to pay back any systems investment over a three year contract and to try and do so whilst competing for the work against serious competition is going to lead to a shortfall in the order book.

Both client and supplier are to blame when opportunities for mutual benefit from integrating systems is not optimised. It isn’t just the opportunities for automation and management information  that are lost; it is the opportunity for true competitive advantage that they are missing. The problem is that so few organisations actually see what they have lost.

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