Is "Outsourcing” Passé?

Today's post on the declining use of the term "outsourcing" comes from Peter Allen, Partner & Managing Director, TPI.

After spending a day with a leading India-heritage service provider, an epiphany occurred to me: could it be that the term “outsourcing” is passé?

The purists among us will recall that outsourcing was borne in an era when companies were transitioning employees and certain operational assets such as systems and applications. The preface of “out” versus “in” conveys movement from internally-aligned to externally-provisioned services.

But we are seeing less and less transitioning of employees and assets from the balance sheets of clients to balance sheets of service providers.  Why? 

The previously-popular lift-and-shift sourcing is giving some ground to clients’ desire to contract for provider-defined services. One reason is that clients are less inclined to insist service providers take over existing systems and processes.  This isn’t true for all processes and all situations, but the tendency for contracting for Services is certainly increasing.

One other contributing factor? Offshore delivery solutions aren’t labor movement conducive.  Sure, there are some employees making the badge switch, but nowhere near the percentages of the past.

But don’t be fooled. The term “outsourcing” is not gone entirely; rather, “services contracting” is increasing in popularity for achieving new profiles of cost, capability and capacity. 

To take advantage of this opportunity, a client must accept a greater degree of provider-defined services and insist less on imposing legacy systems and processes.

Might it be time to adopt the term “contracted services” to allow for this variant?

Comments

[Phil Fersht]

Peter,

Unfortunately, the term 'outsourcing' is about as engrained in corporate lore these days as the term 'IT'. I think we're stuck with it.

I was having this conversation with a client recently, and the key issue is, whenever a third-party services firm with offshore staff is engaged over a multi-year contract, calling it anything else just makes employees in the client think it's their management covering up for "outsourcing" - even if it's really service contracting, or staff augmentation. Most of the time, it's simply cleaner for management to tell staff they're "outsourcing, but no-one is getting laid off". That way they're being direct, but reassuring staff it won't impact them negatively. Using cleverly engineered terms, such as "co-sourcing", or "service-partnering" simply gives staff the impression management is plotting to "outsource" them under a cunning guise, so directness is normally the best policy.

I prefer simply "services", but that is just too broad these days...

PF.

[Peter Allen]

Phil;

As always, good points. I just think that we might begin to weave the reality into our lexicon. The boundaries between economies are dissolving when it comes to cost-effective and efficiency-minded work.

As time passes, employees at all levels of the modern enterprise will come to appreciate the networked system of participants in their business.

Recent work with companies in the high-technology sector (which are generally lacking long histories of 'job for life' cultures) show that these companies "get it."

[Rick Dane]

Given that companies can use high speed internet connections to have workers connect remotely there is nothing that can be done to really prevent outsourcing, its happening and people need to adjust

http://rickdane.info/content/outsourcing-traditional-way-may-be-slowing-technology-will-make-things-easier-and-cut-out-mi