Last time ("Mitigating Outsourcing Risks: I," Point Lookout for April 15, 2009) we explored outsourcing risks associated with knowledge migration. In this Part II, we examine risks associated with the processes we outsource. As in Part I, the term "customer" refers to the organization that decided to outsource something, and "vendor" refers to the organization that carries out the outsourced activity.
Here are three risks associated with the processes we outsource.
- Process stiffening
- Outsourcing agreements typically include assumptions about the nature of the outsourced processes. These assumptions can vary widely — they might pertain to the frequency of changes in requirements, or to the requirements themselves, or to how well documented the processes are. Changes to these assumptions usually entail negotiation with the vendor. Sometimes those changes go beyond the scope of the contract, which makes the negotiations challenging. In effect, these sometimes-hidden assumptions can stiffen the processes that are outsourced. In dynamic organizations, process stiffness is a liability.
- Vendors and customers who can make assumptions explicit during initial contracting will be able to devise more flexible and durable contract arrangements.
- Wagging the dog
- Occasionally the vendor wants a change that the customer didn't request. For instance, the vendor might want to cease support of an operating system or operating system version. Usually, continued support is available at a higher price, but that might not make economic sense to the customer. In this way, vendor priorities can become customer priorities, whether the customer likes it or not. The tail wags the dog.
- Contracts that address this issue are more durable. They permit both parties to plan for change from the beginning of their collaboration.
- Insulation from improvements and economies
- Once a process is outsourced, the vendor might have an incentive to improve it. If lower-cost methods for producing the required deliverables are consistent Intent on maximizing short-term
expense reductions, many customers
lay off those who might have
understood the vendor's improvementswith the contract, the vendor might be able to retain all or some of the resulting savings. Often, the vendor is not even obliged to transfer knowledge of the improvements to the customer. Even when knowledge transfer occurs, many customers might no longer have employees who can understand what is transferred. In effect, the customer is insulated from process improvements and cannot benefit from them. When the customer moves to a new vendor, those improvements are often lost.
- Customers who retain employees who are fully capable of understanding the details of the activities that were outsourced, and who are allocated to supporting the outsourcing relationship, have a better chance of capturing any process improvements the vendors produce. Intent on maximizing short-term expense reductions, many customers are unwilling to maintain such staff. But even those customers who do maintain an internal capability must rely on the willingness of their vendors to disclose any such improvements.
Are your projects always (or almost always) late and over budget? Are your project teams plagued by turnover, burnout, and high defect rates? Turn your culture around. Read 52 Tips for Leaders of Project-Oriented Organizations, filled with tips and techniques for organizational leaders. Order Now!
Your comments are welcomeWould you like to see your comments posted here? rbrenURLhwRARAmXPhYLSner@ChacDIMeKGNaBaCVZrVRoCanyon.comSend me your comments by email, or by Web form.
About Point Lookout
Thank you for reading this article. I hope you enjoyed it and found it useful, and that you'll consider recommending it to a friend.
Support Point Lookout by joining the Friends of Point Lookout, as an individual or as an organization.
Do you face a complex interpersonal situation? Send it in, anonymously if you like, and I'll give you my two cents.
More articles on Personal, Team, and Organizational Effectiveness:
- Don't Worry, Anticipate!
- Dramatic changes in policy or procedure are often challenging, especially when they have some boneheaded
components. But by accepting them, by anticipating what you can, and by applying Pareto's principle,
you can usually find a safe path that suits you.
- Ten Reasons Why You Don't Always Get What You Measure: III
- The phrase "You get what you measure," has acquired the status of "truism." Yet
many measurement-based initiatives have produced disappointing results. Here's Part III of an examination
of the idea — a look at management's role in these surprises.
- Four Popular Ways to Mismanage Layoffs: I
- When layoffs are necessary, the problems they are meant to address are sometimes exacerbated by mismanagement
of the layoff itself. Here is Part I of a discussion of four common patterns of mismanagement, and some
suggestions for those managers and other employees who recognize the patterns in their own companies.
- Take Charge of Your Learning
- Many of us let others set our learning agendas — peers, employers, or the mass media. But you
can gain much both personally and professionally by setting your own learning agenda.
- Intentionally Unintentional Learning
- Intentional learning is learning we undertake by choice, usually with specific goals. When we're open
to learning not only from those goals, but also from whatever we happen upon, what we learn can have
far greater impact.
See also Personal, Team, and Organizational Effectiveness for more related articles.
Forthcoming issues of Point Lookout
- Coming February 28: Narcissistic Behavior at Work: I
- Briefly, when people exhibit narcissistic behavior they're engaging in activity that systematically places their own interests and welfare ahead of the interests and welfare of anyone or anything else. It's behavior that threatens the welfare of the organization and everyone employed there. Available here and by RSS on February 28.
- And on March 7: Narcissistic Behavior at Work: II
- Narcissistic behavior at work threatens the enterprise. People who behave narcissistically systematically place their own interests and welfare ahead of anyone or anything else. In this Part II of the series we consider the narcissistic preoccupation with superiority fantasies. Available here and by RSS on March 7.
I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrenEZDZcxDFYsqjByWXner@ChacKejPzzyEondPSaqvoCanyon.com or (617) 491-6289, or toll-free in the continental US at (866) 378-5470.
Get the ebook!
Past issues of Point Lookout are available in six ebooks:
- Get 2001-2 in Geese Don't Land on Twigs (PDF, USD 11.95)
- Get 2003-4 in Why Dogs Wag (PDF, USD 11.95)
- Get 2005-6 in Loopy Things We Do (PDF, USD 11.95)
- Get 2007-8 in Things We Believe That Maybe Aren't So True (PDF, USD 11.95)
- Get 2009-10 in The Questions Not Asked (PDF, USD 11.95)
- Get all of the first twelve years (2001-2012) in The Collected Issues of Point Lookout (PDF, USD 28.99)
Are you a writer, editor or publisher on deadline? Are you looking for an article that will get people talking and get compliments flying your way? You can have 500 words in your inbox in one hour. License any article from this Web site. More info
- The Power Affect: How We Express Our Personal Power
- Many people who possess real organizational power have a characteristic demeanor. It's the way they project their presence. I call this the power affect. Some people — call them power pretenders — adopt the power affect well before they attain significant organizational power. Unfortunately for their colleagues, and for their organizations, power pretenders can attain organizational power out of proportion to their merit or abilities. Understanding the power affect is therefore important for anyone who aims to attain power, or anyone who works with power pretenders. Read more about this program.