28 May 2009 | A comment by CTO Karsten Fogh Ho-Lanng
Outsourcing – focusing on costs and business development
Outsourcing – handing over responsibility for IT infrastructure operations, applications, or even business processes to a Danish or international service provider – has always been used as a cost saving measure. That’s why it’s no doubt high on businesses’ agendas during the current economic crisis.
The boom
The boom started at the beginning of this century, when one large outsourcing agreement after the other made the market explode in size. And now in 2009, when analysts optimistically at best predict zero growth in the IT industry, outsourcing is one of the few areas that’s holding its own and keeping average growth rates up.
But the question is: are we getting good value for money?
A recent survey on the motives for outsourcing in Denmark, conducted by Trellis Consulting (who have been kind enough to let us cite the results), indicates that we might not be adequately exploiting outsourcing’s potential. According to the survey, outsourcing is not a top management decision, but a question of economy and access to resources. And that’s great. But in the current economic situation, this is the primary driving force for the majority.
An incisive quote from the survey sums it up: “Outsourcing didn’t give us our top place in the market – but it ensures that we keep it.”
Experienced contra inexperience outsourcing clients
The survey also shows that there’s a big difference between experienced and inexperienced outsourcing clients. In short: a first-time outsourcer primarily focuses on price, whereas an experienced outsourcer focuses on the extra skills gained, the cultural match and enhancing their own processes. This is not so unusual considering that the initial outsource is typically the most financially rewarding.
But this is not a particularly strategic way to use outsourcing. It’s merely a pleasant side effect of the decision to reduce costs.
The potential for outsourcing
The potential for outsourcing is much more business oriented: how do we make outsourcing an active instrument that can create advantages for us, rather than playing a strictly money-saving role?
An obvious area is to use outsourcing actively to improve your own processes. Successful outsourcing requires business maturity. A good outsourcing supplier can provide a very structured approach to the task and, if nothing else, force the outsourcer to establish well defined processes for the supplier interface.
Not surprisingly, the Trellis survey showed that the most satisfied businesses are those that have experienced an improvement in their own processes as a result of outsourcing.
Your next steps
If outsourcing is to be used more directly in business development to create competitive advantages, it requires an active decision on how to implement the plan.
- Start by formulating the strategy for outsourcing in relation to growth and innovation
- Assess the business models that use outsourcing actively
- Talk to your outsourcing partner about creating outsourcing KPIs that not only guarantee uptime, but also reflect your business goals
- And choose outsourcing partners that, besides good IT skills, can contribute with sound knowledge of your business conditions
Outsourcing can be the key to strengthening your business development.