Save Money - OUTSOURCE!

I heard a commentator on CNBC this morning refer to the recent credit crisis as symptomatic of our "microwave" culture. You just have to love that term. It captures the shallowness and immediate gratification that has come to be accepted as the norm for many of our corporations. We see it in everything particularly outsourcing. Indeed, outsourcing can save money. But use of outsourcing as a solution does not (NEVER!!!) absolve the outsourcing organization of its responsibilities in managing the relationship and, more importantly, understanding what they are outsourcing in the first place. This is true for application development as well as data center operations. One might think that outsourcing should not only reduce costs but, at a minimum, maintain current service levels. This cannot happen under an outsourcing contract, though, for two reasons:
1. It is impossible to capture all that a dedicated internal team does in contract language that is acceptable to both parties to the contract.
2. The contract itself becomes the upper limit of the work effort.

When the manager of a development effort who does not understand the task he or she is outsourcing, makes the decision to outsource, too much falls through the cracks. The work that may have been done by a dedicated team is rarely fully understood or documented. It then cannot be translated into a contract that represents all that the team was doing for the project. It is nearly impossible to capture every nuance of effort expended by the team. Even a well-meaning manager cannot possibly account for everything in a contract. The outsourcing arrangement then, represents only a portion of the work actually being executed by the in-house development team.

Once the contract governing the work of an outsourcing arrangement is drafted and agreed to, not only does it fail to account for all the work that is done, but it becomes a limiting constraint to realizing the quality that may have been produced by an in-house development team. The reason is quite simply the nature of business. The outsourcing team will typically work only to the limits permitted under the contract. They will certainly do no less than called for, but they will most certainly do no more. Thus, while the existing service levels may suffer, improvement most certainly will suffer. There is seldom any incentive for the outsourcing team to drive improvement.

There is a third reason we accept less than optimal quality in our outsourcing arrangements. Since the primary motivation of outsourcing is cost savings (and is often done to pad the managing executive's resume with high-profile - albeit short-term - accomplishments), too few organizations will demand an internal process owner with the required skills, authority and motivation to own and improve the process. This sounds too much like overhead! I know from experience that the cost of outsourcing what you don't understand (and for which you don't have an accountable, internal process owner) is higher than taking the time to first understand the process and identify a process owner. To be successful, the process owner must then be allowed to manage the process and endowed with all the authority implied as a process owner.