Eyes Wide Open, Part 4: The Final Segment

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    The Deloitte Consulting report, “Calling a Change in the Outsourcing Market,” provides fives models in which the firm believes outsourcing can be most effective.

    Centralize-Standardize-Outsource

    Processes are centralized and standardized internally, which allows management to understand what the processes consist of and how much they cost to run. Then service providers are brought in to bid on the work. That keeps that initial price savings in-house.

    Transform-Operate-Transfer

    Service providers are brought in to “transform a function” and run it short-term.

    Commodities Outsourcing

    This is defined as “non-core, non-strategic and non-differentiating.” Email and Web hosting come to mind.

    Risk Transfer

    Service providers take on specialty activities that companies can’t perform well in-house. Disaster recovery is the example cited.

    Shifting Fixed Costs to Variable Costs

    This fits the scenario where an organization needs to scale up or scale down quickly, depending on business demand.

    This article in Network World quotes Ken Landis, a senior Deloitte strategy principal, as saying, "When revenues were down [outsourcing] made a lot of sense and it was a perfect tool for publicly held companies to manage their earnings… But in a growth environment, the questions of complexity and friction, the difficulty in relating cultures between two firms and a lot of other questions come to the fore.

    "Cost is still absolutely critical, but firms tend to switch from being cost focused to growth focused as the economy grows… What they're finding is that in growth mode outsourcing makes them arthritic, slow to respond."

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