Shifting the outsourcing experience up a notch

Organisations need to take control.

There is a powerful need to master outsourcing. From basic IT services to computer business processes, organisations are increasingly obtaining services and capabilities from a shifting blend of internal and external sources to meet goals for cost efficiency, agility, and growth. That was a clear message from Gartner VP and analyst Linda Cohen, who kicked off the Sydney Gartner Outsourcing & IT Services Summit 2008 last week.

Cutting costs remains the primary reason that most organisations go down the outsourcing route, Cohen said, but the ad hoc and fundamentally tactical approach to outsourcing practised by most organisations will be unsustainable by 2010.

"Many are stuck in good old fashioned outsourcing and need to kick it up a notch", Cohen commented.

Cohen, who co-wrote Multisourcing: Moving Beyond Outsourcing to Achieve Growth and Agility, said companies should look beyond the traditional view of outsourcing and adopt a more disciplined approach, now called multisourcing, if they are to achieve business growth and agility.

Outsourcing has changed tremendously over the past decade or so. What is being outsourced, who is doing the outsourcing, how they are outsourcing, and where they are outsourcing has all changed. On the who, what, how, and where questions, Cohen said that outsourcing is not only growing, it's also becoming more complex.

Multisourcing, where organisations are mixing and matching various kinds of providers to obtain better services, raises another layer of complexity.

Building a successful sourcing operation requires a new approach. Multisourcing goes beyond quick fix cost-cutting, enabling capability-building, global expansion, increased agility, and competitive advantage. This requires a new mindset and framework for communicating, interacting with, and overseeing service relationships both inside and outside the organisation.

The process of measurement is an ongoing cyclical set of activities as outlined in Linda's paper and book. Chaotic and compulsive outsourcing creates as many challenges as it solves. Organisations learn -- often too late -- that managing external services requires vastly different competencies and metrics than managing the same services when they are provided internally.

Outsourcing is prone to failure because of breakdowns between outsourcing providers and clients, but the blame is far from being on one foot. Both parties need to review progress and achievement of objectives on a regular, formal basis. All sourcing actions must be aligned to the business strategy. To make the right delivery model choice means all involved parties must understand the different delivery options and then align preferred options to business goals.

"Sourcing is a discipline, not an action," Cohen said. "Organisations need to make multi-sourcing management and governance a core competency and many organisations now need to skill up quickly to the many challenges that lie ahead of them".

Len Rust is publisher of

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