The Outsourcing Dilemma - The Search for Competitiveness.pdf

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introduction Both the title of this book The Outsourcing Dilemma and the sub-title The Search for Competitiveness deal with the most frequently asked question in business today: ‘How can we become competitive and remain competitive over all our business processes’ My conclusion is that outsourcing is probably the answer, but it is likely to be a different type of outsourcing from what is generally practised today. Outsourcing is not something that can be considered in isolation. It has become a major factor in commerce because the dramatic advances in technology over the last few decades have created an almost intolerable situation for everybody involved in management. Managers in all organizations must now seek to achieve maximum competitiveness in performing all business processes. In order to do this, they must constantly evaluate the technology on offer and try to achieve performance improvements with what is usually a less than adequate internal skills base. Quite frequently, the need to bring about the desired change is both sudden and dictated by an external organization, for example, when supermarket chains began to demand that their suppliers utilized Electronic Data Interchange (EDI) systems. In these circumstances, the use of full-time external specialists through outsourcing has become an important solution to the problem of maintaining competitiveness. However, outsourcing is just one possible solution to the competitiveness problem and any reasonable evaluation of the subject must logically compare it to other options that are being used or could be developed to enhance a competitive position. Most of these options have considerable merit even if they are not always equally applicable to all types and sizes of organization. However, whatever their merits and demerits, the truth is that all these theoretical solutions fail far too often in practice. I suggest, though, that the current failure rate of performance improvement projects is only tolerated because the full extent of failure is disguised; few organizations or individuals are willing to admit the extent of failure on a major project. The vast majority of attempts to become more competitive can be divided into two parts: the internal solutions, which involve some type of performance improvement project, and the various external outsourcing options. All further references to internal projects in this book are to major projects that involve organizations in costly attempts to improve performance. The results of a high technology project failure can be very damaging. The general public is constantly being reminded of the risks involved with high technology projects because they suffer as a result. In the UK, for example, the Department of Social Security has had a succession of computer disasters going back over many years, affecting many
x the outsourcing dilemma thousands of people and in 1999 50,000 people had their holiday plans disrupted when the Passport Agency’s new project ran into trouble. Why is the consequence of failure not normally given adequate consideration prior to approving major projects This is a particularly vexing question when one considers the number of research reports that have been published in recent times giving clues to senior managers regarding the potential for failure. The main reason is, of course, that major projects are normally conceived to correct a current problem that is seen to be damaging the organization’s competitive position and is likely to get worse. Consequently the senior management believe that the problem has to be corrected as soon as possible because the responsibility is clearly theirs. In such circumstances there is a certain amount of logic in the argument that goes: ‘As the core problem had not been anticipated earlier we have no alternative but to carry out this project, so let’s not dwell on the risk of failure, let’s make sure it is a success’. In a great many projects the senior management have a vested interest in not making the targets too difficult or the parameters for success too precise, because this will increase the chance of being seen to fail. Most senior managers will from time to time be faced with choosing between a project that is likely to provide the maximum benefit for the organization but will take a number of years before worthwhile results are seen, and another project that may be more expensive but will provide quicker results. As the tenure of office of senior managers gets shorter and shorter, it is only natural that managers increasingly look for short-term glory even though this may not be in the best interests of the organization. Centaur Application Software Services, the Aylesbury-based firm of management consultants, experienced this at first hand in 1995 when they carried out a series of direct selling calls on UK Finance Directors, warning of potential Y2K difficulties and offering a service to correct the problem. The consultancy was surprised by the number of FDs who openly made comments such as ‘Five years is a long time off and it is likely to be someone else’s problem then’. A further indication of the declining tenure of office for senior managers came to light in late 1999 when the market research company TSS was asked to check certain marketing databases. Over a three month period earlier that year TSS called 600 of the 2000 largest organizations in the UK and established amongst other things, the name of the Finance Director. In one month late in the year they called all these organizations back again and found that during the six to nine month intervening period, just over 10 per cent of the organizations had obtained new Finance Directors. Whatever the reasons, the risk of failure with major projects never seems to exercise the corporate mind to the extent it should. Only for a brief period did this subject get anywhere near the attention that it deserves. That was a few years ago when the American CSC Index for 1994 reported on a survey of 600 organizations and claimed that as many as 67 per cent of these companies reported zero or only marginally improved results from their business process re-engineering (BPR) projects. Even then, the concern was that BPR projects (which had previously been considered almost foolproof) could fail and not the fact that more projects had failed than had succeeded.
Page 2 and 3: theoutsourcing dilemma
Page 4 and 5: theoutsourcing dilemma the search f
Page 6: about the author My own involvement
Page 12 and 13: introduction xi If, despite the nat
Page 14 and 15: introduction xiii it’s time for r
Page 16: introduction xv Since my return to
Page 20 and 21: changing times in commerce 3 Introd
Page 22 and 23: changing times in commerce 5 Only o
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Page 44 and 45: the outsourcing alternative 27 Outs
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variations on the outsourcing theme
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chapter 6 points to be aware of whe
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chapter 8 potential drivers of outs
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chapter 9 risks and concerns for bo
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what does this all mean 115 The com
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what does this all mean 117 life. S
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what does this all mean 119 time an
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what does this all mean 121 ● For
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chapter 11 an alternative way of ap
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appendix b before contemplating the
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Sometimes the transition begins wit
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the essential elements of the contr
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appendix d the rights of transferre
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index Abbey National Treasury Servi
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index 203 employees see staff enter
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index 205 outsourcing aims, identif
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index 207 Social Security, Departme
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