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Book explodes myths of 'outsourcing' and calls for a completely new approach

NOTHING SPARKS HEATED debate in the IT environment so much as the word 'outsourcing'. Views range from contempt to starry-eyed wonder. Some managers swear they have saved millions by outsourcing, others say the exercise has been a nightmare and a waste of time. And that is before politicians get involved and start talking about 'loss of jobs'.

A few weeks ago, analyst group Gartner met in France to discuss the issues of outsourcing and what it means to companies today.

Linda Cohen, a vice-president and analyst with Gartner, said companies had to look at the subject in a completely new way.

Ms Cohen and colleague Allie Young have written Gartner's new book Multisourcing: Moving Beyond Outsourcing To Achieve Growth And Agility, in which they bring a fresh approach to the  subject,  and even give it a different name: multisourcing.

'Companies really need to adopt a new approach, something Gartner calls multi-sourcing, if they are to continue to realise the benefits of outsourcing in the future,' she said.

Perhaps the word 'out' has overtones that do not sit well with Gartner. Over the past few years, many United States and overseas businesses have come to believe that outsourcing can solve many problems and do it cheaply.

Gartner believes this view is flawed, and that too many people get involved in outsourcing without understanding what it is. Gartner believes the situation is so bad that it has issued a list of 'eight myths' about outsourcing.

The myths are interesting as they reflect what some businesses have been thinking. Gartner finds the perception that outsourcing can be a 'quick fix' for certain problems naive and wrong.

And Ms Cohen warned against making rash decisions.

She said it was easier to blame the service provider doing the work than it was to look inside and see that the entire effort was badly managed from the beginning.

'Chaotic and compulsive outsourcing creates as many challenges as it solves,' she said.

'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. Organisations learn too late that managing external services requires vastly different competencies than managing the same, internally provided services.'

In its list of eight myths, the Gartner report says it is wrong for companies to look at sourcing independently of normal business practices. Ms Cohen said business processes and services were interconnected in many ways, and those ties should not be ignored.

'All of a company's business processes and services are interrelated. We have created an operating environment where autonomous services simply don't exist,' she said.

Ms Young said cost savings would occur only if much thought went into it, and standards were aplied. Highly customised solutions were  not cheaper simply because they were huge. 'Service providers can only pass along cost savings from economies of scale if they can achieve scale through standardised offerings,' she said.

If companies truly wanted to move beyond outsourcing and look at multisourcing, they would require a strategy that was integrated across all services, Ms Cohen said. They required some kind of governance to oversee the relationships, and  also a way to measure performance.

'Remember that it's about building a network of relationships, not just signing contracts,' she said.

Some kind of sourcing could  be beneficial to companies, especially  if they reached an agreement and created a relationship of trust with the service provider, she said.

More IT projects had come to grief because of misunderstood goals than for any other reason. Getting everybody 'on board' was often not easy.

Ms Cohen said  one thing that was not considered in the Gartner report was the matter of trust.

She said it was all very well to tell firms to work with service providers to allow the sourcing project to include all aspects of the business strategy. The problem was that some of those strategies may be seen as corporate secrets that  no firm would give away to just anybody.

Ultimately it came down to the relationship  created between the company and the service provider, she said.



The word is out that a fresh look is needed