7 July 2010 | comment by Karsten Fogh Ho-Lanng

Exploit the true benefits of outsourcing
Outsourcing, understood as “handing over responsibility for IT operations to a service provider”, has always been used as a means to cut costs. In the beginning of this millennium numerous businesses chose to outsource and even in this (post) crisis scenario outsourcing still outgrows most of the IT market. The need is there and the notion of outsourcing is widely accepted as a way of conducting business. But it is time to consider outsourcing version 2.0.

The evolutionary question is: Do we get value for money?Recent studies investigating the motives for outsourcing show that companies simply don’t exploit the outsourcing potential to the full extend.

What is your focus?
Usually first-time outsourcers focus on the contract price. The experienced outsourcer focus more on TCO because he knows that he has to take into consideration the internal ability to execute the other part of the plan: cutting internal costs, which is part of the good outsourcing business case. However, it takes a good deal of knowledge about your own business processes, strong insights into outsourcing and even courage to perform an adequate cut at the right time and the right place. The focus is mostly defensive. One customer expressed it very much to the point: “Outsourcing didn’t give us our market leader position – but it ensures that we keep it”.

The strategic use of outsourcing
The unexploited value of outsourcing lies in a more strategic and offensive approach. The injection of competencies, the cultural match and the process improvement are all steps in the right direction, but it still isn’t a truly strategic use of outsourcing. It is rather comfortable side effects spun off from the decision to cut cost. So how do you turn outsourcing into a proactive tool that can create strategic advantages, instead of simply a means to control the cost level?

Business processes
An obvious area to look at is the improvement of your business’ processes. Successful outsourcing requires a high degree of maturity in your business, and the structured approach from your outsourcing provider will force you to establish well defined processes for the interface to the supplier.
If outsourcing should be used more directly in business development to create a competitive advantage, it requires an active decision:

• Start by formulating the strategy for outsourcing related to growth and innovation
• Evaluate the business models that use outsourcing actively
• Together with your outsourcing partner, create outsourcing KPIs that not only guarantee accessibility, but also reflect your business targets
• Finally, choose an outsourcing partner that not only delivers IT skills, but also contribute with solid knowledge about your business

The above applies for all businesses, but for life sciences companies outsourcing is - if not complicated, then characterized by the requirement for validation, documentation and the need to stay inspection ready at any point. This doesn’t rule out the possibility to fully unleash the benefits of outsourcing – it only rules out the IT-consultancies with no experience into the field of life sciences.