Strategic Outsourcing
Outsourcing is the transfer of control of a process or product to a
supplier. Companies outsource operations or processes that are not
one of their critical core competencies for economic gain or better
quality. At the strategic level, outsourcing allows not only the
transfer of control to an outsider, but also the method of
production using a different technology or process. In strategic
outsourcing a company may outsource an entire service, product, a
product line, or an entire plant for strategic value.
The largest single concern in strategic outsourcing is the
giving up of control of a process or product. The risks involved can
be decrease of quality, delayed deliveries, poor production, theft
of proprietary design or process, and unintentional creation of a
competitor.
A question one might ask is does strategic outsourcing actually
benefit an organization? Will it really benefit the company in the
long run?
Many large multinational companies have chosen outsourcing as a
strategic business decision to accumulate tangible and intangible
benefits in the near future as well as in the long run. Outsourcing
is best adopted after carefully looking at ones business needs and
available options. It is vital that the outsourcing relationship
provides strategic business benefits in the future.
Outsourcing does in fact provide a company competitive strategy
benefits in a number of ways. It enables ease of management, less
manpower, reduction in cost, and frees up internal resources.
Strategic outsourcing is not a short term endeavor. Although
it can, and frequently does, provide companies both long- and
short-term gains, provided they have a strategic objective for
outsourcing. Medium and long-term benefits are best realized by
selecting a provider who brings value to a company’s core business
processes, rather than selecting one that can provide you with the
lowest prices.
All things said, outsourcing is a strategic business decision that
should be made only if a company recognizes true business benefits
in it. Poorly-planned outsourcing could result in deterioration of
service value and cost buildup, but a well-planned outsourcing
decision leaves a company assured, knowing that their processes are
in safe hands.
Certain recommendations can be made as to the decision making on
strategic outsourcing:
• Understand different business perspectives and how they affect
outsourcing decisions.
• Understand how the perspectives must be controlled in order to
drive outsourcing decisions.
• Develop a structured sequence of steps for the outsourcing
decisions.
• Develop internal outsourcing decision roles
• Develop evolving governance architecture to support outsourcing
decisions.
