It doesn’t seem that long ago outsourcing was something no one really wanted to talk about or acknowledge doing, and certainly not doing for any reason other than cutting costs. It’s different now; I hear more and more companies talk about outsourcing as a strategic part of their business, changing the reference to service providers from the other team to partner.
Times have changed. And they’re changing still.
For decades, companies experimented with different forms of outsourcing and associated business models. Everything from offshore, near-shore, internal outsourcing and a combination thereof have been put to the test. So have business models such as co-sourcing, multi-sourcing, and joint venturing. Overall, the results have been positive, but not without some concern and failed attempts.
When I look at the history of outsourcing and the number of quality companies who have engaged in it with varying success, I can’t help but wonder: Why do some companies have more success with outsourcing than others? The answer appears to be that companies that struggle with outsourcing lack fundamental communication and good processes within their outsourcing relationship.
Speaking with companies and people involved in outsourcing, a number of clients commonly voice a series of issues and concerns, most commonly time zones, cultural differences, communication problems, and quality. All are valid concerns of any business relationship, but there may be something larger that leads to or even creates these issues.
Companies who are successful with outsourcing typically create a unique approach to selecting a service provider and managing the business relationship. On one hand, that makes sense: A company develops an internal process to define its outsourcing need and to vet a prospective service provider.
On the other hand, the self-created process creates a series of on/off engagements. Success is often based on the narrowly defined task at hand and the direct involvement of the people who lead the initial engagement. The challenge in this approach is sustaining the relationship beyond the initial project, and it may be a leading contributor to many outsourcing relationships failing within two to five years as the initial project expires and follow-on projects continue with processes not idealized for their scope or outcome.
There are too many one-off elements in many outsourcing relationships based on the initial project, and not enough structure to replicate and sustain ongoing success in subsequent engagements. In other words, the initial project drives the structure of many outsourcing relationships, but that structure can’t adequately support new projects and initiatives.
What’s likely needed to head off potential issues and concerns found in poorly performing service provider relationships is a more structured partnership than a relationship built around narrow tasks and tactical cost reduction. The client’s concern of geography, communication and quality may be nothing more than a symptom of a faulty foundation of the client/service provider relationship.
Lessons from early outsourcing
IT professionals have long acknowledged an ad hoc approach to software development will not deliver desired results. You can’t reinvent the wheel on every project and consistently deliver quality products on time. Interestingly, early experiments with outsourcing did just that: Each project was initiated, managed, performed and delivered ad hoc. The result was often disappointing.