Tuesday, September 18, 2007

Why Not Outsource? The Burning Questions Continue

This is my second post related to the "Outsource Product Development" roundtable we hosted in Ottawa this month.

After we asked the panel "why outsource?" we asked them "why not outsource"? The panel was comprised of companies of outsourcing beleivers, people who were actively leveraging outsourcing in R&D, so this question gives us an idea of what experienced managers see as the risks and potential pitfalls:
  • It could have an impact on your own team - you have to be careful which parts of the product you outsource. Another panelist noted that this risk can be mitigated if you make it a point to integrate the in-house and outsourced team
  • The risk of failure, and the costs of failure. Contrary to what some beleive, it's simply more difficult to manage an outsourced project. It requires at least as much follow up, if not more, than an inhouse project.
  • It's difficult to forsee the hidden costs, such as management overhead, or the cost of bringing the product back in-house to be maintained once it has been developed.

The next question, what should you not outsource, spawned a good discussion about what is core and what is not core, which I'll cover in my next post.


OutsourcingGuru said...

We are an outsourcing provider specializing in finance and accounting and are targeting the mid-market. We are finding that all the giant companies are outsourcing, but we are having trouble reaching the mid-market. By this we mean, companies with about 50 back office employees. Might you have any suggestions?
Arlene Hauben
Director of Marketing
Global Outsourcing, Inc.

Matt Hately said...

Great question. Is the problem that you're having trouble reaching them in the first place, or that they are not receptive to the message? I'm not that familiar with BPO (business process outsourcing), but in our business (product development outsourcing), we find it's not necessarily harder to reach the mid-market, but they are generally late-adopters of outsourcing, so you have to do more educating. Generally, larger companies have more sophisticated outsourcing strategies, so you don't have to convince them to outsource in the first place. Often with a mid-market company, I find you need to educate them on outsourcing AND on your company, which can make the sales cycle longer. The good news is that if you have been helpful at educating them, they will see you as a valuable peer, and are far more likely to do business with you.