Most people pursue outsourcing choices in an incorrect way. When you spend time on alternatives that don’t make sense for your organization, you’ve missed an opportunity to outsource something that will put you ahead of competitors.
Here are the typical approaches that can draw your attention away from your best outsourcing opportunities:
-Examining only choices that potential outsourcing vendors propose.
Continue reading ‘Avoid Incorrect Methods of Identifying Outsourcing Choices’ »
What can’t be cured must be insured. –Oliver Herford
When a vehicle strikes another vehicle, an object, or a person, the consequences can be grave. Part of the price paid for mobility is the cost of such accidents.
The human toll is often much greater than the economic one. Although one can never hope to compensate for the human costs, insurance can certainly help soften the economic blows.
In most places, laws require you to purchase insurance for operating your vehicle. That’s a prudent way to ensure that individuals and families have some buffer against the harm from vehicle accidents.
Continue reading ‘Take Out Insurance: Check Your Cost-Reducing Solutions with Outsourcing’ »
Rarely does an outsourcing mistake occur without someone in the organization realizing the mistake before the decision is made. But even more rarely does the organization ask its people to come up with better alternatives to outsourcing before signing on the multiple-year dotted line.
What’s going on? Those closest to the problem usually identify key issues deserving consideration that are easily missed by those who only consider the big picture. Those who understand the details should call the shots, shouldn’t they?
But those who are closest to the problem are generally low-ranking staff members, people who are usually encouraged to do what they are told rather than to create solutions. After all, thinks senior management, if those low-ranking people were so smart, wouldn’t they be high-ranking executives? Not necessarily.
Continue reading ‘Encourage Your Staff to Find Do-It-Yourself Improvements over Outsourcing’ »
Much outsourcing is based on comparing what you do now to what another organization would charge and promises to achieve. That’s too narrow a way to consider your alternatives.
By outsourcing, you may simply be turning a bad process into a permanent feature of your organization’s operations. Instead, consider if you should switch to another process to replace some or all of the outsourcing. This evaluation is helpful both before and after an outsourcing decision, but offers the greatest payoff if you find a better alternative to outsourcing in the first place.
Here’s an example: Many companies have moved from having large internal legal staffs that do everything to hiring specialist law firms as needed for unusual litigation. Done properly, you may have more experienced lawyers on your side, and the total cost can be less because these lawyers don’t have to get up to speed like the staff lawyers would have to do.
Continue reading ‘Examine How New Processes Can Eliminate Expensive Outsourcing’ »
There are times when your internal team simply won’t have the skill or experience to realize that better do-it-yourself options can comfortably replace expensive outsourcing arrangements. If you think that lack of skill or experience might be the case, you are a good candidate for hiring an organization that does outsourcing evaluations to describe what your best internal process choices are.
To avoid potential conflicts of interest, make it clear that under no circumstance will you hire this organization to do any outsourcing for you related to the issue at hand. You should also tell the evaluating organization that you will not hire it to locate outsourcers if the do-it-yourself choices are not chosen.
With those potential conflicts of interest out of the way, you have placed yourself into a happy situation: People who are familiar with industry best practices can evaluate what you really need and how else you might supply those needs. How can you provide a valuable reality check on this thinking? Insist that the outsourcing evaluators add some of your staff members with relevant knowledge and experience to the team.
Continue reading ‘Hire an Expert Outsourcing Evaluator to Advise You on Do-It-Yourself Options’ »
Let’s assume that you’ve moved past silly rules and individuals pursuing “I’ll scratch your back, if you’ll scratch mine” at the company’s expense. There’s a seemingly legitimate outsourcing offer on the table. You’ve investigated all of the reasonable bidders and looked carefully at what you are doing now.
Outsourcing seems like the way to go. But you know a lot of people have been burned in the past. How can you test your thinking before you sign on the dotted line?
Many organizations have found that scenarios are helpful that consider the extreme possibilities of what could go wrong. The wisdom of this approach was validated a few years ago when an earthquake damaged many electronic manufacturing facilities in Taiwan.
Continue reading ‘Use Scenarios to Retest the Need for Outsourcing Before Signing a Contract’ »
Consider outsourcing and you’ll find eager companies and suppliers lined up to offer you long-term contracts. Why? Assuming that the outsourcing provider performs as promised, you are locked into using their service . . . even if a better alternative arises. The more profitable the arrangement is for the provider, the more that organization will want you to sign a long-term deal.
All kinds of reasons will be offered to justify a long-term arrangement. A typical explanation goes as follows: The supplier has to make a capital investment to start serving you and needs you to stay with the supplier long enough to allow the company to recoup the costs.
While that’s highly desirable for the supplier, you have to also consider if it’s equally desirable for your organization. Can the capital investment be used by a large number of other customers?
Continue reading ‘Keep Outsourcing Relationships Short Term’ »
The largest organizations can hope to attract top talent and create unique organizational resources; everyone else can only be jealous of that opportunity. But outsourcing is increasingly leveling the playing field for smaller organizations.
Globalization drives up the value of being the world’s top talent as more people can potentially employ that talent. You see this situation in the entertainment industry where worldwide stars earn 20 or 30 times what someone does who is a star in only one country.
As a result, top talent often seeks the freedom to provide services to the highest bidder. This move usually increases the scarcity value of their skills versus working as an employee for one organization.
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Increasingly, organizations see many fixed assets and virtually all working capital as drags on performance rather than as strategic advantages. Why is that view taking over?
To understand that shift let’s make a contrast between Henry Ford’s day and the automobile industry now. When Mr. Ford started his breakthrough of the assembly line, there were few suppliers who could provide parts that would work interchangeably enough to permit an assembly line to function. If the part didn’t fit, someone had to file it down, weld on something, or make other time-consuming alterations.
Meanwhile, the assembly line either had to shut down or send through cars that were missing lots of parts. Mr. Ford realized that he would have to supply himself to make the assembly line work. In its heyday, the Rouge plant in Michigan was a marvel of modern steel-, glass-, and parts-making methods. For the applications that Mr. Ford was addressing, the Rouge plant was usually the best in the world.
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Years ago, many service organizations jealously guarded their expertise from their clients. The thought behind this caution was that otherwise you would lose the opportunity to sell the same expertise over and over again to that and other clients. The best a client could hope to do was to hire some people from the service organization after the engagement and hope to transfer needed skills and knowledge that way.
Knowledge and skills become obsolete very rapidly now. Many such service organizations realize that they will have to add totally improved skill sets every few years. Under such circumstances, the chances to resell the same expertise to a client are more limited. If the client wants to learn those skills, that’s often a bigger assignment than merely applying the skills once for the client. As a result, more kinds of expertise can now be learned from state-of-the-art practitioners in service organizations.
From the client side, these frequently expensive learning programs can be a turnoff. The courses often take lots of time, and the learning can be rapidly lost if the skills aren’t used every day.
Continue reading ‘Use Outsourcing to Learn How to Do-It-Yourself’ »