To Reach the Kingdom of Outsourcing you need to overcome a Moat of Myths

As consumers we are continuously engaged in outsourcing. We hire painters, plumbers, gardeners and mechanics. Some naysayers may retort by stating that they, in fact, perform many, if not all of these activities themselves. Yet they are in the minority and furthermore, have you ever looked at a professionally painted home or landscaped lawn and compared it to the "do-it-yourself" variety?

Surely most would agree that the quality and timeliness associated with the professionally performed work far exceeds that of the other.

So why is it when it comes to reviewing our business processes that organizations often balk at the thought of outsourcing? Fear mostly. The thought of losing control and the belief that many of the myths surrounding outsourcing are factual have kept many from even considering outsourcing.

The reality is that organizations that embrace outsourcing and leverage their resources to focus on their core business will in effect continue or be the market leaders of tomorrow.

So before you consider running for the hills at the mention of outsourcing, let's separate the moat of myths from the solid ground of facts.

Myth: Outsourcing a function means that the company does not consider it critical to its success.

Fact : Businesses often outsource functions that they define as critical to their success. According to the Outsourcing Institute over 30% of companies today are engaged in some form of outsourcing.

Consider how many corporations have outsourced their information technology, or the major automobile firms who outsource much of their manufacturing. Aren't car engine components critical to an automobile company's product performance and thus reputation? Isn't date and information flow critical to the success of all corporations?

Critical and core functions are not mutually inclusive. In fact, it is the visionary corporation that understands it may not have the expertise, resources or the strategic focus on a critical function and that having these services provided by a world-class outsourcer can significantly enhance them and thus their competitiveness.

Myth: Outsourcing can cost more when considering factors beyond headcount reduction.

Fact: If headcount reduction is the PRIMARY focus of an outsourcing activity then it is doomed to failure. When determining the relevancy of proceeding with outsourcing of a function a total cost evaluation must be considered.

When outsourcing a function significant opportunities for cost savings exist including:

• With experience and knowledge of best practices, the outsourcer can review the complete business cycle and deliver on-going best-in-class value;
• Benefits derived from leveraging facilities, equipment, personnel, technology, etc.;
• Enhanced knowledge and control afforded over process/methodologies used with metricing and monitoring SLA's and KPI's;
• Avoiding the need for capital investments for new technology, equipment etc., while having access to the latest tools. Obviously some aspect of this would be in the pricing of the outsourced contract, however, instead of a capital expense and all that this entails, the outsourced contract payments are an operating expense, thus potentially providing some relief to the balance sheet.

The fact is that outsourcing can result in a company quickly reaping the benefits through expertise, enhanced control, leverage, without any capital expenses and with reduced operational costs!


Myth: An Outsourcer will not be motivated by the same business drivers, as an internal group, to ensure customer focus and maintain flexibility in a changing market.

Fact: Whether you purchase a product, service or outsourcing, it is crucial that the customer set the ground rules and negotiates service level agreements, wherein expectations and targets are set and regular business review meetings are conducted to ensure that the supplier is "measuring up". Internal politics or other issues that an internal group is often faced with, or the potential budgetary constraints that often hamper progress or restrain flexibility do not restrict the outsourcer.

The supplier of outsourced services is there to support the client and to assist the client in meeting their goals and objectives. There is usually much greater conflict between internal resources than there is between a client and a supplier whose long-term relationship and payment depends on the customer's satisfaction.

Myths are created as a result of fear and trying to develop one's own interpretation of the situation given that fear. There is no need to dread outsourcing!

The outsourcing moat of myths is an illusion conjured up by some who just like things the way they are.

So are you going to stop corporately milking the cow and growing the wheat? Isn't it easier just going to the grocery store?