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A Call for Bold Outsourcing Leadership

By Andrew Kris, Director Borderless Outsourcing

Yes, most outsourcing headlines lately have been dominated by the Satyam scandal in India, but long-term this tragedy will be just a small blip on the outsourcing horizon. The outsourcing  capacity and capabilities that have developed in India and the overall benefits of outsourcing in general are, simply put, too great to ignore.

As the economy shrinks and market confidence wavers, companies have even more pressure to services clients – internal & external - efficiently and, most importantly, affordably.

Efficient and affordable have always been the hallmarks of outsourcing.
According to the “Gartner on Outsourcing, 2008-2009” report published in early January, current outsourcing clients are re-evaluating their contracts in light of the global economic slump. As a result one sees clients carefully reviewing the services of their vendors with an eye to consolidating providers and improving processes. But the greatest driver of all is cost, cost, cost.
Clients are pressuring vendors into giving substantial discounts, sparking fierce competition amongst providers.

"Whenever there’s a downturn people outsource more, not less. Organizations want to take costs out wherever they can,” says the Gartner report.

Interestingly, in the US, much rhetoric has centered on a call to eliminate tax benefits to companies engaged in outsourcing. In fact, as the crisis deepens, there’s much talk  of protectionism across the globe. Great for politics. Not for business. And ultimately the economics of business will determine the outcome. For the first time last year, European companies overtook US firms in the signing of outsourcing contracts, according to a TPI report.

So as outsourcing looks increasingly palatable, what’s needed to ensure that it delivers the returns expected?

First and foremost is leadership. Too many outsourcing firms are managed by consultants who are experts at…consulting. They know how to structure outsourcing arrangements and make deals, but  many make lousy managers.

Companies should be bringing in senior executives from service companies who know how to run the business as a service organization.  Service organizations are run as teams, not as a clump of prima donnas. What’s needed are leaders who can develop and oversee the execution of the sourcing strategy, and inspire, motivate and manage people.

When weighing up the case for or against, outsourcing will generally be the more compelling solution. Most corporate teams are facing up to the fact that there are some things that just can’t be done effectively within their current organization. There’s too much resistance, it takes too long and/or it costs too much. Outsourcing eliminates all three.

What’s needed now are courageous, persuasive and knowledgeable leaders - a legion of savvy  Chief Sourcing Officers able to design and enact a holistic sourcing strategy (products, services and activities) for competitive advantage and value.