The Future of Outsourcing

(10709) Michael Corbett says:

The practice of outsourcing literally has the potential to transform every aspect of work and organizations as they exist today. It will raise the bar and reward business specialists more. Outsourcing will also transform organizations from a fortress mentality to the mind-set in which firms will find new and creative ways to combine what they do best with world-class external capabilities. As a result, the business enterprise of the future will harness outsourcing to create more value for its customers than ever before.

The most likely impact of increased outsourcing on the future of business is:

Employees will return to the “craftsman” model. Instead of having work organized in to 9-to-5 jobs, more and more people will manage their careers along the lines of the craftsman work model — start as an apprentice, gain expertise, then get your own customers. In essence, craftsmen approach and develop their careers as if they are self-employed. They initiate the development and enhancement of their own skills and stay ahead of their competitors. Craftsmen see their own value being determined not by what they do for a company but by their own knowledge and experience. Therefore, they take responsibility for their own career development. Craftsmen also develop and enhance their own professional networks in order to seek out customer who value the work they do.

Specialization will increase. As outsourcing becomes more widely adopted and grows, every field of business will develop its own specialty services provider. The growth of these firms, in turn, will mean that more and more people will work for firms that are specializing in one line of business rather than attempting to do business across a broad range of industries. This specialization will also drive innovation forward aggressively.

Employees will stop working in cost centers and move instead to working in profit centers. As more companies outsource their operations, everyone will become more directly accountable for the revenue they generate. This is good. It will enhance the impact every employee can have. With more responsibility will also come greater risks, but everyone will need to become more customer focused.

The more routine tasks of every field will get rapidly commoditized by offshoring or by more advanced technology.Specialist employees will concentrate on those areas where their skills and knowledge can produce exceptional results. The more routine aspects of their specialty will either get passed off electronically to people in countries where wages are lower or better information systems will emerge to handle these tasks. Specialists will continually move up their own field’s skill levels in order to command top dollar.

Managers will become integrators and lateral thinkers. In the traditional corporation, only the top people were expected to think strategically, make deals, grow partnerships and manage change. As outsourcing becomes more widely accepted, every manager at every level of the organization will be operating this way. Instead of worrying about selecting and managing employees, managers will be blending a unique combination of internal and external resources to create value.

There will be a greater focus on leadership. Since more of the work of the business will be done by bringing together teams of people, project leadership competence will come to the fore. Managers will need to understand processes better and how to blend these together.

Firms will outsource their innovation. They will use research centers to test many thousands of potential new products for them at a rate that far exceeds what their own labs could handle. Firms will also tap into the new ideas of their value chain partners to pick up on all the new ideas their suppliers may come up with.

Knowledge management will become increasingly sophisticated.Firms will share their human capital (the combined knowledge of their employees), their structural capital (the infrastructure these firms use to organize their know-how) and their customer capital (the relationship an organization has with its customers) across their entire outsourcing networks. This sharing of knowledge will supercharge and enhance the creation of new ideas in the future. In essence, more business problems will be solved and better tools will emerge for applying that increased knowledge.

Organizational risks will be offset and spread. As outsourcing spreads, more and more organizations will become interdependent. That increasing level of interdependence will mean risks get lowered as there will be a greater pool of knowledge to tap into. All organizations in the network will depend on each other for their success to a greater degree than ever before.