
The bark of the American Sycamore. This tree, like many others, sheds bark the year round. Some trees shed seasonally. Hypotheses explaining why some trees shed bark and some don't are varied, but one possibility is that bark shedding also sheds any parasites that use the bark to anchor themselves. One type of parasite is the class of structural parasites, which includes vines. Vines use self-supporting trees to reach higher into the forest canopy, in effect, hitching a ride on the sycamore. The vines have thus outsourced structural strength to the sycamore, which eventually shrugs them off by shedding bark. The vine is thus the customer, and the sycamore is the vendor. When the vendor's (the sycamore's) business goals no longer match the needs of the customer (the vine), the vendor sheds the customer by raising prices, or by ending support for an operating system the customer needs. Photo courtesy Virginia Department of Forestry
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.
When modeling the economics of a decision to outsource, these risks are important. Including them in your decision process will produce higher-quality results. First issue in this series
Top
Next Issue
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 welcome
Would you like to see your comments posted here? rbrenaXXxGCwVgbgLZDuRner@ChacDjdMAATPdDNJnrSwoCanyon.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.
This article in its entirety was written by a human being. No machine intelligence was involved in any way.
Point Lookout is a free weekly email newsletter. Browse the archive of past issues. Subscribe for free.
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.
Related articles
More articles on Personal, Team, and Organizational Effectiveness:
Coaching and Haircuts
- Lifelong learners use a variety of approaches, usually relying heavily on reading. Reading works well
for some ideas and techniques, especially for those with limited emotional content. For adding other
skills and perceptions, consider a personal coach.
Wacky Words of Wisdom
- Words of wisdom are so often helpful that many of them have solidified into easily remembered capsules.
We do tend to over-generalize them, though, and when we do, trouble follows. Here are a few of the more
dangerous ones.
Clueless on the Concept
- When a team member seems not to understand something basic and important, setting him or her straight
risks embarrassment and humiliation. It's even worse when the person attempting the "straightening"
is wrong, too. How can we deal with people we believe are clueless on the concept?
How We Waste Time: I
- Time is the one workplace resource that's evenly distributed. Everyone gets exactly the same share,
but some use it more wisely than others. Here's Part I of a little catalog of ways we waste time.
Disjoint Awareness: Assessment
- When collaborators misunderstand each other's work and intentions, they're at risk of inadvertently
interfering with each other. Three causes of misunderstandings are complexity, specialization, and rapid
change.
See also Personal, Team, and Organizational Effectiveness for more related articles.
Forthcoming issues of Point Lookout
Coming July 23: Microdelegation
- Microdelegation is a style of delegation in which the delegator unintentionally communicates the task to the subordinate in such detail and so repetitively that the subordinate is offended. As a result of this delegation style, many subordinates feel distrusted or suspected of fraud or goldbricking. Available here and by RSS on July 23.
And on July 30: What the Dunning-Kruger Effect Actually Is
- Although the Dunning-Kruger Effect is widely recognized, people describe it — and understand it — in many different ways. Some of these expressions are misleading. Proceed with caution. Available here and by RSS on July 30.
Coaching services
I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrenaXXxGCwVgbgLZDuRner@ChacDjdMAATPdDNJnrSwoCanyon.com or (650) 787-6475, 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, )
- Get 2003-4 in Why Dogs Wag (PDF, )
- Get 2005-6 in Loopy Things We Do (PDF, )
- Get 2007-8 in Things We Believe That Maybe Aren't So True (PDF, )
- Get 2009-10 in The Questions Not Asked (PDF, )
- Get all of the first twelve years (2001-2012) in The Collected Issues of Point Lookout (PDF, )
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 500-1000 words in your inbox in one hour. License any article from this Web site. More info
Follow Rick
Recommend this issue to a friend
Send an email message to a friend
rbrenaXXxGCwVgbgLZDuRner@ChacDjdMAATPdDNJnrSwoCanyon.comSend a message to Rick
A Tip A Day feed
Point Lookout weekly feed
