Video: Why did we outsource that?

Companies often talk about outsourcing as the holy grail of business. If it isn’t core business, “outsource it”, if someone can do it cheaper or better “outsource it” but over time, the reason for outsourcing a service or a whole function can get lost and businesses can find themselves asking “so, why did we outsource that?”

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Video Transcript

Companies often talk about outsourcing as the holy grail of business. If it isn’t core business, “outsource it”, if someone can do it cheaper or better “outsource it” but over time, the reason for outsourcing a service or a whole function can get lost and businesses can find themselves asking “so, why did we outsource that?”

If you are currently asking yourself this question, you have probably already asked your colleagues the same question.   You probably received many conflicting answers and are still find yourself wanting a better one.

The reason that people find themselves asking this question is because businesses are generally very poor at managing outsourcing contracts.

Mismanagement often looks like micro-management. Companies spend a lot of their time telling the outsourced provider exactly how to do their job. They often get so specific that their imposed requirements actually negate the benefits that the outsourcing deal was intended to generate.

So, why companies are so poor at managing outsourced providers? It comes down to two reasons:

  • The company often finds it difficult to define what they want and instead they specify exactly how the outsourced provider should do the work.
  • The company doesn’t trust that the outsourced provider will be able to deliver the results. This lack of trust leads the company to constantly probe the provider for information instead of leaving them alone to do their job as they see fit.

So, if you are questioning why you have outsourced a specific job or a whole function, ask yourselves the following questions:

  • Can they do it better,
  • Can they do it cheaper,
  • Can they do it faster, or
  • For an incremental cost, will it make our life easier if someone else does this work instead of us

If you didn’t answer yes to any of these questions something is very wrong. An outsourcing solution should achieve many of these outcomes and at least one of them.

If you find yourself in this situation there are two possible solutions:

  • Ask yourself, “Are we the problem?”
    If the answer is yes, then either get out of the way of provider or better define what you are trying to achieve – or possibly both
  • Alternatively, if you are not the problem then you can probably bring the work back in within the company.

So I hope this helps you and your company better answer your question about outsourcing. Just remember, if you don’t know if you are the problem, just asks the supplier. I’m sure they will tell you immediately, if you just give them the opportunity.

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