OUTSOURCING 3.0 - Outperform: Outsource: Outprofit

Book excerpt: Besides the 3 O’s of Outperforming & Outprofiting via Outsourcing, it also signifies that we are now into the third generation of outsourcing. In the first generation, before the 80’s, outsourcing was mainly cost driven. In the second generation, in the 90’s, arrived the capabilities and value driven outsourcing. The key focus was on how to extract the maximum value out of an outsourcing relationship. Only recently, in the third generation are we moving into the strategy driven outsourcing paradigm. This subtle shift is leading the business leaders to question that very underpinnings of a modern organisation. The key focus is “How can outsourcing assist in driving even more strategic advantage to our business?”. Let us have a quick exercise to warm up. Can you guess what the most outsourced service on earth today is? Think of all potential services in your company that can be outsourced; cast your mind far and wide. Try not to miss anything. Once you have thought of all the possibilities, make the guess again. What is the most outsourced service on earth today? If you guessed call centres, I would have to say no. In fact, if you guessed any of the following services – logistics, IT, sales training, fleet management or payrolls – all popular services to be outsourced, I would not nod my head once. The answer, which lies somewhere in this chapter, is going to be a surprise to you. Whether your guess is correct or not, there is a lot more to be explored. You will come to recognise how ubiquitous outsourcing has become in the modern-day commercial world, and how to keep your eyes open to recognise situations that are amenable to outsourcing. The full list of all outsourceable activities within a company may include an element of surprise. You will also know the answer to the second part of the $483 billion question, i.e. when you must NOT outsource. In our work, we frequently encounter people who are dogmatic about outsourcing – on both sides of the fence. We have worked closely with directors serving on boards of large organisations who are against outsourcing. On the other hand, we also talk to people at all levels in companies who would rather outsource than do the tasks internally. We have come across situations where companies are reluctant to outsource, and where that would have been the best course of action.