Corporations Struggle With Questions: What To Outsource, And When?

The Answer: Think Through Each Step of the Process, says Alsbridge CEO

DALLAS, December 1, 2008 -- Corporations worldwide are wrestling with two business questions: What functions are best outsourced, and when?

“The traditional answer to the ‘what’ question is, only outsource non-core processes,” said Ben Trowbridge, CEO of Alsbridge, a leading outsourcing consultant. ‘The usual response to the ‘when’ question is, never outsource a mess. But these are often oversimplified clichés.”

Mr. Trowbridge said the decision on which processes to outsource is tied to what the company wants to achieve, such as cost reduction, service improvement, process transformation or headcount reduction.

“Then, ask for each function, can this best be achieved through outsourcing, or not?” Mr. Trowbridge said. “This includes the critical issue: is there a market for these services, and if not, are you prepared to create one.”

If the answer is yes, then ask, are there any overriding considerations that would change this, such as loss of brand or loss of a customer relationship? “If the answer is no, then the function is a candidate for outsourcing,” Trowbridge said.

When it comes to the ‘when,’ the best answer is, never outsource a mess without defining in the contract how and when it will be fixed, Mr. Trowbridge said.

Look at what can be achieved through outsourcing, and its priority for the business. “If outsourcing will deliver significant savings this year and that is a priority, then that would lead you to act sooner rather than later,” Mr. Trowbridge said. “But if the priority is, say, to stabilize processes and service, and that is already under way, then outsourcing may need to wait.”

He said the key is to recognize what outsourcing will deliver at what cost in time and effort, and how that fits with the business strategy. Outsourcing is always a major-change project, absorbing a lot of senior management and operational management time.

Processes that need to be moved should be stable at the time of the change. “If a major ERP implementation process is planned, any outsourcing should be timed for before the rollout or after the rollout, but not during.” he explained. “During tough economic times, it is important for every CFO to look at outsourcing as an option and to understand that outsourcing does not necessarily mean offshoring.”

However, Mr. Trowbridge cautioned that “outsourcing is not a magic wand. Understand why you think it is a valid tool to meet your needs, and then think through the implementation thoroughly. When you do that, you find the answers to both ‘what’ and ‘when.’”