Optimize Your Opportunities to Outsource

(10703) Michael Corbett says:

Using the top-down and bottom-up approaches, or a combination of the two, you will probably have identified several potential new outsourcing opportunities for your organization. To prioritize these in terms of impact, benefit and risk, look closely at three key questions:

1. For which of these activities is there a robust pool of providers already in the marketplace and a track record of success? If your competitors are already outsourcing extensively, you may need to do liewise to remain comeptitive in your markets.

2. What customer processes could be outsourced to generate the greatest return at the lowest level of risk? These opportunities should be pursued first. Pay particular attention to areas where you can embed a service provider’s offerings right into your own customer-facing interfaces. Doing this can substantially enhance your ability to execute and generate significant cost savings and other benefits.

3. What are the risks involved in outsourcing your key business activities, and can these be offset by the amount of resources you’ll need to invest if you don’t go down the outsourcing path? When companies consider outsourcing, they typically balance perceived risks and projected benefits. Risks may be strategic (loss of control), operational (loss of performance) or result-oriented (will the anticipated benefits actually be realized). To offset these risks, you should analyze what level of internal resources will be needed if you choose to perform these activites in-house. The level of investment required to stay state-of-the-art in this area may also be considerable.

In general, most organizations will only outsource when managers feel the risks involved are well understood and manageable. You should regularly prioritize your outsourcing opportunities and revisit that list frequently as the marketplace evolves. This will especially apply to any organization’s most cirtical interface — that between the company and its customers. Even when activities arond this customer interface are outsourced, it should be ovcious you’re not delegating responsbility for creating a great customer experience. Rather, you’re trying to create the conditions within which your own assets can be optimally applied. Leveraging the assets of a service provider is ideal and desirable as long as you maintain full responsibility and control of the experience.

The Outsourcing Revolution