How To Succeed In Sourcing By Really Trying

I’m sure many of you have seen the recent posting on CIOInsight.com, IT Outsourcing: Expect the Unexpected, about whether cost savings really materialize through outsourcing.

Both the CIOInsight.com survey and recent TPI research support the same theory: Nothing of value comes without effort.  Results, notably cost savings, come from diligent management.  (To read our study, see: Restructuring Outsourcing Agreements: An Indication of Failure, or a Tool to Increase Value?.)

However, one of the unspoken realities in the CIOInsight.com report is the urgency to avoid entering an outsourcing relationship that is doomed from the outset.  Our experience reveals that about 35% of aspiring outsourcing clients are guided to take another path – shared services, internal transformation or captive offshoring.

The principle reasons for avoiding an outsourcing agreement?  1) lack of readiness to change the management models employed across the enterprise; and 2) lack of resources to effectively manage outsourcing relationships.

The CIOInsight.com report focused on whether money is saved.  That’s certainly one perspective, albeit arriving at an answer requires a complex computation for most firms.  A true analysis means asking, “What  would I have spent had I not outsourced?” compared with a view of “What have I actually spent for the same quality and volume of services?”   Again, those are difficult computations.

Informed research on the topic reveals that outsourcing, if done right, is always a money saver. The key is to know when to do it, how to do it right, and the best way to manage results.

Comments

[Tom Hynd]

My experience and observation is that the vast majority of companies have no idea whether they are saving money or not. It is very difficult (complex) to do and requires sustained, structured effort to monitor. Frankly, most companies have no idea and most banter in the market is driven by perceptions and agendas. Even structured surveys are not going to tell one anything but perceptions.

[Steve Koutros]

Savings on outsourced functions are a lot like politicans...the less you hear about them, the more they are likely accomplishing. I think there are many successful outsourced and shared service center stories. Of course, these sell less copies of the report or magazine article than a whopping failure.

The ultimate question is: would you ever sign a contract for millions and not think of properly managing the contract?

Why should sourcing be any different?