Stan Lepeak, Managing Director, EquaTerra Global Research

The Wall Street Journal recently published an insightful article on how to address some common problems buyer organizations face in their global – and not so global – outsourcing efforts.  The article, entitled Advice for Outsourcers: Think Bigger, has a subtitle of Too many companies mistakenly limit offshore work to routine tasks. While this statement is often true, the more important point of the article is that management and workers in buyer organizations often struggle to collaborate well with their peers in the outsourcing service provider organization. This invariably leads to problems and can make even routine tasks difficult to complete successfully, not to mention more strategic activities.

The article’s authors, professors from the London School of Economics and the Indian School of Business, are clearly fans of globalization and offshore outsourcing.  They understand, however, that problems exist within any organization attempting collaborative efforts involving workers dispersed across multiple locations, time zones, countries and cultures.  Such problems can occur whether involving an outsourcer,  business partner or just within the walls of their own organization.  Given that globalization’s growth will invariably continue, and through it the growth of more global supply and service chains, it is an imperative that organizations work to improve these collaboration skills.

Optimizing collaboration is obviously a tall order and a task that is never completed. It is in part a function of experience. It helps if there is a good cultural fit between the buyer and service provider. It is also dependent on fitting the work being performed to the delivery model and the buyer’s collaborative skills level. For instance, highly collaborative work that requires strong business and industry knowledge is harder, and often less suited, to a multi-location global sourcing effort or for a buyer inexperienced with global sourcing.

In some situations, however, the level of collaboration needed is much less and at times not necessary at all. The amount of collaboration required depends on whether the client organization is buying a process or an outcome from a service provider. Often it is both, but increasingly buyers need to focus on the outcome rather than the process the service provider uses to deliver the outcome. Simply, if the provider is the expert at performing an activity (and if it is not, why was it hired?), then leave it to the experts (i.e., don’t tell the pilot how to fly the plane but make sure it’s taking you where you want to go).

Buyers in many outsourcing scenarios are well served to not micro-manage their service providers or dictate how work is performed. If buyers can (safely) take this approach then success in outsourcing in general and global sourcing specifically becomes more viable. This approach also enables buyers to refocus more of their scarce resources and management attention on more strategic business issues (like how to exploit IT capabilities and not define how IT operations are organizations are run).

Competitive differentiation, particularly for western businesses, is derived from innovation and specialization. Outsourcing can support efforts to improve differentiation if, where and when applicable, buyers can cede greater control to outsourcing partners and allow them to deliver best in class services via their own standardized processes and systems.

Filed under: How to..., Offshore & Captive Centers, Outsourcing by EquaTerra