October 17th, 2005
Gartner: Stop outsourcing now
Gartner analyst Linda Cohen started off her presentation at Symposium ITxpo with a command for the audience of 6,000 attendees: "You have to stop outsourcing now." She said that the chaos created by compulsive outsourcing is making it harder to produce results. Her point is that too many companies have taken outsourcing to an extreme, heading offshore because it’s faddish, juggling multiple contracts with incompetence and lacking sufficient governance discipline. Cohen and Allie Young just published a book on the subject, "Multisourcing: Moving beyond Outsourcing to Achieve Growth and Agility," (HPS Press, 2005). The book promotes an approach to outsourcing, which they call multisourcing, that is based on continuous evaluation of sourcing relationships for effectiveness and efficiency. "Buyers behave as if outsourcer and contractors are responsible for delivering the outcome. Organizations don’t budget and plan adequately for managing outsourcing," Cohen said.
They call multisourcing a "new terrain" for outsourcing, but it’s more accurately a rational, common sense terrain. The books lists eight pervasive myths of outsourcing today.
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Sourcing independence: Making outsourcing decisions independent of business strategy.
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Service autonomy: Believing that one sourcing relationship has nothing to do with another.
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Economies of scale: Believing that service providers can deliver unlimited economies of scale to lower costs.
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Self-management: Assuming that once a sourcing contract is signed the management is done.
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The enemy: Thinking of the service provider as an enemy to defeat in contract negotiations.
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Procurement: The notion that best price is the key metric, discounting other important factors.
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Steady state: Believing the an outsourcing service will never need to change.
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Sourcing competency: Believing that the required management capabilities necessary to manage external services exist in house.
Dan Farber, editor-in-chief of CNET News.com, has more than 20 years of experience as an editor and journalist covering technology. See his full profile and disclosure of his industry affiliations.
