Recently I had a discussion with couple of my project colleagues on Outsourcing and Offshoring, the two most misunderstood (and controversial) words in American business. The context was if we are better off with insourcing and that the trend is more towards insourcing. Again those who are having this debate with are not affected by outsourcing rather they are masters in managing the business model with heavy outsourcing/offshoring. So there is no explicit protectionist stand there in the debate.
The points raised by them are
1) Outsourcing makes institutional knowledge go out of the company. My counter is - that is inherent problem with relying too much on people. Your organization's business knowledge is your most valuable asset. We are better off to have it in a good KM system than with people. People part of the equation is extremely important too. But if your key resources leave your company the risk is even higher, if you do not have a good KM Model.
2) Outsourcing gives flexibility to react fast to business needs. My counter - Yes and No. Yes, if it is a fast analysis report that is needed if you want to take a decision within few hours. No, if your need is to build a durable software system with solid framework. Needless to say other operational aspects of business like Back Office Operations, ITIS, other operations. You are basically making sure your resources are well spent on the core business and market.
3) Outsourcing is expensive in long run. This I disagree. Outsourcing is a derisking option. You have to pay for the risk you are offloading. Total cost has to be carefully measured and managed. I think by going for a specialized organization, which has virtually unlimited resource pool, experience of running similar projects/ operations, and agility to adapt best industry practices, the candidate organization will have lot to gain than lose.
Offshoring - It is a very sensitive subject but we have to bring it when there is an outsourcing discussion.
Offshoring needs at the core level understanding of the model, strong partnership with a manageable set of vendors, a solid RFP and award process, a good VMO setup, tracking, reporting and controlling process.
My personal experience - I have seen even simplest projects fail and most complex business processes succeed. While the models help a lot, it is ability to form and lead strong teams matters the most.
In this context, I remember the quote from one of my favorite movies "Das Boot" when the crew repairs and floats the sunk U-boat "You have to have good men. Good men, all of them."
