Outsourcing Ain't Easy Street
A recent study by AlixPartners LLP (Southfield, MI) provides yet more evidence that outsourcing is hardly the no-brainer some of its proponents would have you believe.
A recent study by AlixPartners LLP (Southfield, MI) provides yet more evidence that outsourcing is hardly the no-brainer some of its proponents would have you believe.
According to the study, which was based on responses from the chief financial officers at 35 companies, about 38 percent of all midsized companies find that their outsourcing projects are less than fully effective, with 15 percent reporting they are “worse off” after outsourcing. Approximately 60 percent of those surveyed said their companies were not enjoying the combination of high cost savings coupled with high operational improvement that they had hoped for.
Bear in mind that these results-which come from companies or company divisions with annual revenues of less than $5 billion-reflect a predominantly financial perspective on the issue. They don’t necessarily take into account the day-to-day headaches that many production engineers face when coordinating with vendors in another part of the world, like working across different time zones or resolving supply chain snafus.
According to AlixPartners Director, Neal Ganguli, the reason many companies aren’t getting the financial returns they want is that they are not implementing their outsourcing initiatives effectively. “While companies rightfully devote a lot of energy to looking ‘outward’ as they outsource-working to select the right vendors, etc.-they all too often don’t also look ‘inward’ enough, in order to adequately prepare themselves for all that successful outsourcing demands inside their own companies,” Ganguli says.
However, if outsourcing is so much work, what’s the point? Granted, there are plenty of instances in which outsourcing does indeed make sense. But, I can’t help wondering whether in many cases all that “inward-looking” time couldn’t be better spent figuring out ways to do something profitably in-house, as opposed to trying to get in synch with a bunch of techies at the other end of a high-speed line in Mumbai.
A recent study by AlixPartners LLP (Southfield, MI) provides yet more evidence that outsourcing is hardly the no-brainer some of its proponents would have you believe.
According to the study, which was based on responses from the chief financial officers at 35 companies, about 38 percent of all midsized companies find that their outsourcing projects are less than fully effective, with 15 percent reporting they are “worse off” after outsourcing. Approximately 60 percent of those surveyed said their companies were not enjoying the combination of high cost savings coupled with high operational improvement that they had hoped for.
Bear in mind that these results-which come from companies or company divisions with annual revenues of less than $5 billion-reflect a predominantly financial perspective on the issue. They don’t necessarily take into account the day-to-day headaches that many production engineers face when coordinating with vendors in another part of the world, like working across different time zones or resolving supply chain snafus.
According to AlixPartners Director, Neal Ganguli, the reason many companies aren’t getting the financial returns they want is that they are not implementing their outsourcing initiatives effectively. “While companies rightfully devote a lot of energy to looking ‘outward’ as they outsource-working to select the right vendors, etc.-they all too often don’t also look ‘inward’ enough, in order to adequately prepare themselves for all that successful outsourcing demands inside their own companies,” Ganguli says.
However, if outsourcing is so much work, what’s the point? Granted, there are plenty of instances in which outsourcing does indeed make sense. But, I can’t help wondering whether in many cases all that “inward-looking” time couldn’t be better spent figuring out ways to do something profitably in-house, as opposed to trying to get in synch with a bunch of techies at the other end of a high-speed line in Mumbai.