Strategic outsourcing trend

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Companies outsource various functions for all kinds of reasons. The most common ones, according to the, are to reduce and control operating costs, to improve company focus, to gain access to world-class capabilities and to free internal resources for other purposes, in that order.

Mainly, outsourcing is evolving into a visionary tool for change and this change is having an impact on the types of services involved, suggests Dr. James Brian Quinn that the big shift in this area has been to intellectually based service activities, such as research, product development, logistics, human relations, accounting, legal work, and marketing and market research.

A Professor, who has been studying innovation for more than 40 years and wrote some of the first articles on core competencies and strategic outsourcing, asserts that if an enterprise does not excel in an area yet continues to do it in-house, it gives up an important competitive edge

A chief analyst at Stamford states that the outsourcing market has been shifting gradually from a cost focus to a business focus, and that a new emphasis on access and speed to market has been visible. The focus now is on business outcomes, not just infrastructure.This is about taking advantage of relationship types and models, and a variety of contracting modes and structures. It is very complex.




Another factor contributing to that complexity is the truly collaborative nature of these agreements. For it being effective, a transformational outsourcing deal requires that each partner have a considerable stake in the game, and often that means sharing both risk and reward. To make that work, the deal must fund the necessary investment at the best possible cost of capital and simultaneously motivate the outsourcing partners commitment by aligning goals.

As might be expected, outsourcing at this level raises a number of challenges, particularly in the areas of management and measuring results.



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