Outsourcing is not for wimps

Many Americans in the global sourcing industry will attest that they never did quite separate themselves from their old colonial masters (but we let them think they did…). One such example has been the UK’s very own David Poole, imported by European outsourcing giant Capgemini to spearhead its Americas BPO business. Upon his arrival at these shores two years’ ago, David even adorned the title “Deputy”, in the hope he could quickly assimilate himself with the Wild West, installing himself and his family in Chicago, where he could steer them of clear of crime and corruption.

David, today,David has firmly established himself as a veteran of the BPO industry, leading Capgemini to some major new global F&A BPO client wins that have firmly established the firm’s global delivery footprint across the Americas, Europe and Asia (including major operations in China and India). He joined Capgemini in 2004, from PwC in London where he was a partner and a founding member of the firm’s global BPO business prior to IBM acquiring their operations. He’s made a significant contribution to the development of the global BPO industry, helping to craft several major global engagements since the early ‘90s. David is also a qualified management accountant and can wax-lyrical for hours about operational excellence with invoice processing. Enough said – over you Deputy Poole for your take on what outsourcing means to businesses today…

Outsourcing is not for wimps

I spend a lot of time talking about why outsourcing is a smart idea – I talk to clients, at public forums, in meetings, to my staff, heck I’ve even bent the ear of my dog on occasion. So, when Phil asked for volunteers to contribute to this blog, I naturally jumped on the soapbox. I couldn’t resist another chance to make my case, which is this: When the going gets tough, the tough outsource.

Some people think outsourcing is a sign of weakness, but actually just the opposite is true. It takes a strong organization to admit that someone else can do a process or function better, faster, and cheaper.

There’s a good reason the word “outsourcing” has “source” at its heart: sources are good things.

For example if you’re a cop or a journalist, a “source” has “insider” information; the value of the source depends on credibility, reliability, and trust. Same goes in business, where sources are fundamental to success. Where do you get your raw materials? Your talent? Your information? Without good sources, your business would go bust.

When the idea of outsourcing started to gain traction in the 1980s, it seemed like a brand new idea. Companies could off-load non-core processes to a “source” that could do them more efficiently and effectively. But in many ways, outsourcing was ― and is ― just plain sourcing on steroids: a ratcheted-up version of finding the best resources (people, processes, knowledge, and technology) for the job.

And that’s exactly why outsourcing continues to be a great business strategy, not despite tough times but because of tough times. What could make more and better sense in today’s troubled, global economy?

At its most basic, outsourcing is a perfect choice today: it’s still the best way to perform back-office processes more efficiently. Since most businesses do not gain an advantage with administrative activities, why waste any time and money trying to make them unique? An outsourcer can establish a standardized process; the best ones do this quickly with a “speed to value” model that delivers savings faster.

While cost cutting alone justifies outsourcing, that’s not the whole picture.

The real test of outsourcing is the value delivered. Today, many (maybe most) companies are thinking only of reducing expenditures. But a few are actually looking for ways to innovate, and they’re the ones likely to come out of these doldrums with a real, meaningful advantage.

What can be done with the savings that come from outsourcing? How should savings be invested back into the business to support growth? Where are opportunities for continuous improvement? When an outsourcer provides business intelligence to answer questions like those, it becomes a true, collaborative partnership. A good outsourcing partner has ambition to explore, special knowledge to apply, a technological edge to exploit, and unbending ethics to guide its behavior in relationships and in the world.

I’ve been working in business process outsourcing for 15 years and, in that time, I’ve seen outsourcing help companies reach the top of their game, even when the economy was unsteady.

Here are some truths about outsourcing that I’m glad to share.

• Outsourcing can make a company better at what it does.

• Outsourcing can be self-funding.

• The faster a company gets to the benefits of outsourcing, the better.

• The best outsourcers deliver measurable “value” beyond cost reduction.

• Outsourcing is a bold strategy for growth.

The world’s political and business leaders are trying to tackle some tough, global economic problems. I like to think that outsourcing is part of a smart solution – one way for a company to get stronger. The right outsourcing relationship can provide the momentum needed for positive change.

And isn’t that exactly what everyone’s looking for right now?

 

David Poole (pictured) is CEO of Americas Business Process Outsourcing for Capgemini

Comments

[Jeff Brown]

There seems to be a consensus on this blog that the term "outsourcing" no longer adequately describes the forces at work these days.

I was reminded of an introduction to outsourcing I wrote last year for a university audience -- it echoed David's key point (if in drier language): outsourcing is no longer a discrete activity but a pervasive, persistent approach to maximizing business results.

"Modern strategic management considers outsourcing the next logical step in the evolution of virtual supply chain integration, which revolutionized manufacturing in the 1980s. This model created efficiencies in production systems by breaking them down into discrete components. These components, in turn, allowed for greater specialization by niche firms such as contract manufacturers and order fulfillers. Thus, outsourcing is essentially a specific manifestation of various classical economic models governed by optimal allocation of capital and resources by firms, and of economic specialization in particular. Seen in these theoretical terms, outsourcing is synonymous with subcontracting work to a supplier who can provide a good or service more efficiently – a practice that certainly predates the globalized markets of today."

[Dipankar Chowdhury]

Although it takes determination and change
management to conduct processes outside
the corporate walls, the precedent was set
decades ago. Therefore, the concept isn’t as
radical as it may seem. Companies rarely build manufacturing plants in the United States or United Kingdom anymore.

Instead, China,Eastern Europe, India, the Philippines, South Korea, and Taiwan are the locations of choice.

By the same reasoning, why should companies
build data centers and general or administrative (G&A) factories - often called shared-services centers - in high-cost, onshore locations?

A fundamental shift is under way to migrate
transaction, technology, and administrative
processes offshore over the next decade.
Just as the physical supply chain moved
to best-shore locations in the 1980s, the
information supply chain, including IT and
software-application development and
maintenance, moved offshore in the 1990s.
Now it’s the turn of the administrative supply chain.

In the next wave which is already happening, many knowledge intensive
positions are likely to go offshore too.
These would include highly trained CPAs
and accountants.

[Victor]

It still is unbelievable that neither politics nor economics theories have evolved much since the fundamental changes induced by modern technologies. We live in a whole new world compared to our parents and yet we fail to understand that clasical capitalism is pretty much dead and we are witnessing the birth of a new theory based on a global logistics model. Whether this is good or bad, time will decide, for the time being we can only try to adapt.

[Jim Langley]

It´s refreshing to read a does of realism, and this hits the mark. I believe we´re on the cusp of an era where companies and vendors will experiment far more freely to drive more value from outsourcing relationships. While cost-reduction is the driver, it´s the value being experienced by referenceable clients that is providing the differentiator.

[Ronnelle]

A great article on the virtues of outsourcing and the value that it brings to businesses. The question is what to outsource and who to outsource to? My vote is for a Virtual Assistant; we have skills varying from bookkeeping to desktop publishing. As noted in the article - outsourcing is not for wimps but for those you want to bring value to their business! Get your perfect VA at VAnetworking.com; the following will help you in your search: http://www.vanetworking.com/articles/

[Stephen Cohen]

This is a great piece - thanks for sharing. The current economy is proving a great opportunity for companies to move into F&A outsourcing engagements. Businesses can scale their operations to the needs of their customer demand, gain a tighter control over their cash flow, and drive strandardization into their processes that can give them tighter global control and access to their critical financial information. Didn't someone say "There's nothing like a good crisis?" Surely this is time for businesses to use this situation to make changes to their global business operations that bring them out of the dark ages?

Stephen Cohen

[Daniel Cairns]

This is a great synopsis of outsourcing today - and very funny too! "A ratcheted-up version of finding the best resources" is the perfect desctiption of why firms move into "outsourcing" models today.