Desperation Outsourcing

Did you just stand by and let it happen?

We’ve all seen desperation outsourcing rationalized under the guise of strategy. But these "strategic initiatives" really are ham-handed attempts at rectifying larger ills. The changes are made, different symptoms of the underlying problems emerge, and the root causes remain unresolved. Deployed in this way, outsourcing is a waste of time and harmful to the productivity of the enterprise and the lives of the people involved.

That doesn’t mean that outsourcing (or its varieties of extended staffing, cosourcing, shared sourcing and offshoring) is necessarily a bad thing. It’s a powerful tool—but one that is dangerous in the wrong hands. My assessment is that the executives sponsoring hurried, across-the-board outsourcing initiatives are desperate—busy, scared, frustrated, tired and naive.

Regardless of their motivations, they need some help. If you are a stakeholder of an organization considering outsourcing, you need to get involved, not assume a wait-and-see posture.

Let’s review a real-world, real-time case study. A Fortune 50 IT executive is currently in the process of outsourcing his function. After many years of neglect of IT, the past five years have brought substantial increases in funding, headcount and demand. IT is challenged with lengthy approval processes, increased financial scrutiny, strict headcount limitations and decentralized business clients who have authority to make decisions in every area—except IT. The IT executive in question has a poor reputation for delivery and is becoming desperate.

Outsourcing might be able to help address some of the issues raised. In combination with offshoring, outsourcing can get more IT for the money and reduce headcount. It’s also possible to leverage outsourcing to improve process discipline and, thereby, project delivery. The desperation play of the IT executive lies in the assumption that current internal resources are substandard and that across-the-board outsourcing is the only solution (the "better gene pool theory").

Everyone who works with this IT executive has concerns, but so far, all parties are keeping their distance. His supervisors are letting him develop the concept with the confidence that they will have the final say. His peers assume that calmer (senior) heads will prevail or, failing some intervention from the top, that they will deal with the changes if and when they come. And finally, his subordinates are frustrated that they are not involved.

While it’s true that this IT executive has disregarded the spirit and practices of change management, it’s also true that the rest of the leadership staff is guilty of benign neglect. They talk among themselves while their desperate colleague is giving speeches, pushing forward and slowly destroying (both himself and his organization).

No one really likes outsourcing, even well-run initiatives. But most people are considered "part of the problem" if they raise objections or concerns. The challenge is how to intervene productively without experiencing collateral damage. If you are the boss, your authority opens the door. Your approach is simple: Just ask intelligent questions and, based on the responses, require changes in the scope and approach. If you are a peer, your influence is through personal involvement, information and resources. If you are a subordinate, your path to influence is through supporting the effort by offering to be part of the team. Regardless of your vantage point, you have to be clear on outsourcing benefits, risks and best practices so that you can base your discussions on principles—rather than being positional and emotional.

It’s impossible to summarize outsourcing wisdom within the constraints of this column. I encourage you to do your homework by accessing the IT research organizations (for example, Gartner, Meta Group, the Corporate Executive Board), periodicals such as CIO, and university research such as that from Harvard Business School Publishing. It’s hard to rely on expertise from consultants since many have conflicts of interest, but if you ask around, you may be able to find smaller firms that have good experience.

One very small firm that I have used in the past, NDMA, has a nice write-up (Outsourcing: How to Make Vendors Work for Your Shareholders, by N. Dean Meyer) that will give you the highlights and lowlights without too much pain. Meyer says (and I agree) that under certain conditions, outsourcing will save money, reduce risks, accommodate peak loads, and develop internal staff and processes. But these benefits come about only if internal staff remains in charge of the client relationships by deciding whether to "make or buy," selecting and managing vendors, establishing strategies and technical directions, defining standards and policies, and seeing that the vendor’s knowledge is transferred internally over time.

Protect your organization by ensuring that those managing IT delivery work for the same shareholders that you do. Desperate executives, by definition, are not focused on the long term or thinking with a level head. Don’t stand by and let them destroy your organization with outsourcing.

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Copyright © 2004 IDG Communications, Inc.

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