Explaining fuzzy logic
- 27 August, 2001 13:11
MANAGEMENTSPEAK: We have re-organised to focus on our core competencies.
TRANSLATION: The things we focused on in our last re-organisation turned out to be some of our core incompetencies.
Argument by assertion seems to be on the increase. After recently arguing against the popular non-core-competency theory (exercise core competencies in-house and outsource everything else), I received quite a few letters presenting the counter-argument that you should outsource non-core competencies. Why? Because they aren't your core competencies, that's why!
It's hard to come to grips with logic like that, let alone argue against it. But I'll give it one more try. The more I try to figure out what "core competency" means, the more murky the whole thing becomes. I'm left with four outsourcing determinants.
1. Outsource when the outsourcer can provide the equivalent function for lower cost.
2. Outsource when the function being outsourced requires scarce high-value talent (ad agencies, for example).
3. Avoid outsourcing when the cost of changing your mind, the switching cost, is high -- as in IT.
4. Don't outsource if your real goal is to solve a personnel problem. If you've accumulated an inventory of unproductive employees throughout the years and you're outsourcing the unpleasant task of terminating them, there are far less drastic ways of handling this chore than outsourcing the function.
Nothing is quite this simple, of course, but I can at least understand these four decision factors. Why you'd want to increase the cost or risk of a function because it isn't a "core competency" -- a term whose definition is murky at best -- continues to baffle me.
Not only that, but outsourcing doesn't always solve the problem. Curt Sahakian of the Corporate Partnering Institute, which helps companies create partnership and outsourcing agreements, says many outsourcing deals are structured so badly that it's like drinking sea water when you're adrift at sea.
Sahakian offers this advice: because your employers are going to buy their salt water from someone, why not buy it from you? If outsourcing is inevitable, take charge of the situation and suggest a restructuring that turns your existing IT organisation into an outsourcing provider, either as an independent or as a joint venture with one of the major outsourcing vendors.
When your choice is whether to be dinner or chef, chef is probably better.
Bob Lewis is president of IT Catalysts, an independent consultancy.