By Karl Flinders, ComputerWeekly
Ferenc Szelenyi, vice president EMEA public sector services at Dell Services, says that although outsourcing is a hot topic at the moment it is actually a practice that is over 100 years old. As such people should not try to resist it but rather manage it better.
I think outsourcing is a lot older. Didn’t the Romans outsource and even offshore soldiery and war?
But here is his view on the current hype surrounding outsourcing to cut costs in the public sector. He also gives advice about how organisations can avoid some of the pitfalls of outsourcing.
By Ferenc Szelenyi
"Although outsourcing has gotten a lot of press recently due to the Government looking into various ways to cut the national deficit, it’s hardly a new phenomenon. More than a century ago, industrialisation gave rise to specialisation and the practice of companies working for each other. The trend abated briefly when Alfred Sloan developed the famed vertically integrated organisation of General Motors, but by the 1950s, competitive pressures had again driven companies to send work beyond their walls."
"Today, given the economic times we live in and relentless demand by customers for getting more for less, it’s certain that work will increasingly be outsourced to partners around the corner and around the world. As various studies and decades of actual experience have shown, the value added through outsourcing not only benefits the outsourcing provider and customer, but the economy as a whole. Global sourcing is not a zero-sum game. However, as smart a business move as outsourcing usually is, effectively managing the workflow is tricky, since a company’s knowledge accompanies its work–often to another shore. Executives need to avoid common pitfalls to ensure that their outsourcing relationships deliver maximum value. I call them the seven deadly sins of outsourcing relationships."
The seven deadly sins of outsourcing relationships and how to avoid them, according to Ferenc Szelenyi
1. Launching an outsourcing relationship without understanding the core competencies versus the work that can most effectively be outsourced.
"A key benefit of outsourcing is that it enables a company to focus on the work that is core to its value proposition. Obviously, it is vital to know exactly what that is. That might sound elementary, but the truth is that many companies have only a superficial knowledge of how they truly create value for their customers. If you’re a pharmaceutical company, is your success based on the quality of your research, on your sales and distribution network, on your unique manufacturing capabilities, or on something different altogether? Don’t be surprised if you find yourself considering outsourcing one of your operational strengths. Although you may be good at something tactically, it still may not be core, and someone else may do it better and at a lower cost."
2. Underestimating the importance of process standardisation
"Every company begins with the belief that the work it is outsourcing is unique and must be managed uniquely. The company expects its outsourcing service provider to maintain the complexity rather than to simplify and standardise the work processes. Processes and people are moved to the provider in their existing state and are independently managed next to countless similar processes of other companies. Consequently, the cost and service benefits of standardization and simplification are lost."
Tags: outsourcing