"If the focus of outsourcing for your organization is short-term and tactical, the benefits will be both short-term and tactical." — Frank Casale, CEO, The Outsourcing Institute
The Outsourcing Institute, with CEO Frank Casale at the helm, has been around long enough to see plenty of outsourcing mistakes. Since 1993, Casale has been watching firms work at getting outsourcing right — and still get it wrong. One of the biggest errors he sees: lack of communication.
"An outsourcing engagement tends to be complex and far-reaching," he says. "Oddly enough, even when a deal is done, most people don't know, or can't track, where it initiated from." A CEO may see outsourcing as an interesting option; and passes the idea to the CIO. From there, perhaps it makes its way to sourcing and procurement or HR. "It's almost like a game of telephoneÉ" Mr. Casale says, "where each person translates [the project] their way. When it finally gets to wherever it's going, it very rarely resembles what the C-level executive had in mind."
After all, Mr. Casale points out, 12 months or more might pass from an executive's "I think we should outsource this" to signing the contract, depending on the deal. Because of the length and complexity of outsourcing deals, top executives are typically involved only in the first 10 percent and the last 10 percent, he says. "So that middle 80 percent is a dry time."
The solution is as simple on the surface as this, Mr. Casale says: Throughout the project, keep communications open up and down the chain of command. Rather than treating the outsourcing project as a handoff in which the CEO has the idea, then hands it off to others to achieve, sustain the project with continuous communication with everyone involved, from the bottom up. Rather than a single exchange, Mr. Casale says, an outsourcing project is "more of a team dialog."
Even when you've made communication a priority, the C-level executive who initiated the project may not be active in the actual transaction or in the ongoing project itself. Still, he or she remains in the communication loop — and that's crucial. Keeping top executives informed means maintaining continual access to updated documents, including the project's goals and missions. That, in turn, assumes there is good project documentation.
"When [a project] is documented early and at a high level," Mr. Casale says, The Outsourcing Institute has found "that the ROI on the outsourcing engagement tends to be more strategic in value." That's because the CEO or CFO tends to focus on cost savings, but not at the exclusion of other benefits, like time to market.
How often does Mr. Casale see a company pull off an outsourcing project with good communication? "Rarely," he admits. Instead, companies continue to focus on cost savings.
Fortunately, however, experience is a good teacher. "As companies get through their second or third outsourcing deal," he says, they "start to realize that [it\'s not all about] pricing."
In The Outsourcing Institute's outsourcing index, Mr. Casale's institute surveyed 1,900 buyers. In response to a question asking member companies why they outsource, "cost savings" ranked high; but "strategic reasons" was creeping up the list from previous surveys.
"So it's moving in the right direction," Mr. Casale concludes, "but it's not there yet."
Summary: Keep everyone apprised of progress as the outsourcing project moves along. That includes the CEO, the primary managers, and anyone else affected. Good communication is key.
The Outsourcing Institute
Frank Casale, firstname.lastname@example.org, (516) 681-0066