Do You Think Outsourcing Works?

On the first outsourcing assignment I worked on I was asked a question by my client at our initial meeting: “Do you think outsourcing works?” The public sector spends tens of £millions a year procuring tens of £billions worth of multi-year outsourcing contracts for important services and yet “Do you think outsourcing works?” is a persistently valid question.

My answer was, and still is, that outsourcing does work, but not in every instance. That’s not surprising, you may say, as one who makes their living from advising on outsourcing deals, I’ve stated that it can work, but importantly I know that to be the case – I’ve seen these deals work, but clearly I’ve also seen them fail. And to confuse things further the media reports and commentary find it hard to get beyond the very simple and rudimentary – there are vested interests and agendas, in both corners, that get in the way of the objective truth.

Maybe the best way to tackle the point is to go back to basics. At its most fundamental level outsourcing is getting someone else to do what you choose not to do yourself, either as you don’t wish to do it so you can do something else, or because you think they may be able to do it better or cheaper, or both. So by way of example, I drive a car – I’m happy to do that, I even enjoy it, but there is an element of the ownership experience I choose to outsource: the maintenance. If I chose to specialise enough to become competent at car maintenance I would not be able to focus on other things that I am better at or find more enjoyable, and indeed it just would not be cost effective – I don’t really know what kit you use to mend a car these days but it doesn’t seem to just involve a spanner and some sticky tape as it did when I was 18. So on this very personal level it works – it’s a much better quality outcome and a lower cost (especially when opportunity cost is factored in).

Now let’s take it up a notch or two – what about an 8 year outsource of a range of adult social care services to a large commercial supplier? Not quite so easy as the above to call is it. So if outsourcing my car maintenance = good, but adult social care services = not sure, then what are the variables that I assessed to assure myself in the former and can they help us with the latter, and how do we apply them?

Well there is no great secret – those considering outsourcing need to understand at the most fundamental level why the deal may work i.e. what is it that an outsourcer can bring that will provide access to a benefit you can’t reach. If you are considering outsourcing and can’t answer that question then your deal may be flawed.

The key thing to remember is that there is no such ‘thing’ as ‘outsourcing’ – it’s a word, a concept, it’s not a magical entity in and of itself, it can only deliver what those whom provide it can bring to the table.

I feel that this question is often not asked rigorously enough and too much store is placed in an assumption that ‘they must be able to do it better and cheaper than we’. This is too simplistic – a structured and considered approach is required.  However, give such an approach, I believe that many more organisations than at present could derive very genuine benefits from an outsourcing based approach, that for them it would ‘work’ as per my client’s question – my suggestion is that you ensure you are very clear why it should work for you if you are considering it.

image via photopin