Ten lessons for avoiding outsourcing disasters
/Here's a summary of a blog from AMR Research dealing with potential pitfalls of outsourcing deals.
1. Don’t just focus on core versus non-core, but evaluate what is fit and ready
2. Don’t jump at the lowest priced offerings
3. Temper executive expectations
4. Collect experiences of peers in other organizations
5. Think about future flexibility
6. Think about your internal learning
7. Think about the strategic value of IT
8. Evaluate the impact to the local community
9. Anticipate the impact to your corporate culture
10. Focus on broader outsourcing governance across IT, supply chain and financial processes
Conclusion
As the lessons above outline, the impact of outsourcing cuts far deeper than merely entering into a transaction with a service provider. Corporate leaders need to focus on their people, processes and technology in tandem when they evaluate and execute their outsourcing opportunities. Experienced outsourcing practitioners often use the “30% rule of thumb” when they evaluate an outsourcing business case: Simply put, if you’re not taking more than 30% of cost from the bottom-line, it’s probably not worth the upheaval to your business. Adhering to these 10 lessons should help you make that 30% worthwhile, if that’s your chosen path.
I particularly like point 2. As important as it is, an outsourcing arrangement should never be just about price. Reliability, the ability to partner with a client organization, flexibility to adapt to future needs and the position of the service in the overall delivery strategy of the organization are all critical factors in deciding what to outsource and to whom.
