A new book from Gartner has heavily criticised what it terms the
"compulsive outsourcing" culture that now dominates many companies.
Organisations are embarking on outsourcing without thinking through
the complex train of consequences, the authors of Multi-sourcing:
Moving Beyond Outsourcing to Achieve Growth and Agility, claim.
The book takes a sharp-edged cutlass to a number of outsourcing myths
that afflict it, and IT outsourcing in particular. These include:
over-estimation of the economies of scale on offer; naivety about the
extent to which outsourcers can manage the services independently;
and a tendency to buy on the cheap without appraising hidden business
costs.
The damning picture painted is of a business world that would rather
rid itself of important but troublesome business problems in the
mistaken belief that they can be shunted on to a specialist company
for a fixed, low price.
"Chaotic and compulsive outsourcing creates as many challenges as it
solves. Furthermore, in many cases, the problems are caused by the
immaturity of the organisation's sourcing practices rather than being
the fault of the service provider," says co-author, Linda Cohen.
"Companies need new approaches to sourcing strategy, sourcing
governance, sourcing management, service provider selection and
service measurement."
Being analysts, of course, Gartner doesn’t quite close the door on
the out-of-house concept entirely. Forget outsourcing, here comes
"multi-sourcing" to solve the problems.
It is really no more than a sophisticated version of outsourcing, but
embarked on with a different mentality. The book suggests that
companies going down the outsourcing route should restructure
themselves to manage the contracts in a hands-on way, and consider
how to do this across different suppliers in an integrated way.
Simply trying to cut costs will not deliver the expected benefits.
Critics of business outsourcing can point to the sandwich horror
story of British Airways. Earlier this year, dire industrial
relations afflicted its outsourcing catering supplier, Gate Gourmet.
The resulting strike ended up costing the airline tens of millions of
pounds - about what it had hoped to save with the contract - leaving
it without in-flight catering and curried egg on its face.
Would multi-sourcing have saved the company from this debacle?
Possibly. But a multi-sourcing approach would probably have told it
not to put such a critical service in the hands of a third-party in
the first place.
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