There’s a great deal of debate these days about outsourcing, particularly offshore outsourcing. Like many business processes, the use of outsourcing can be interpreted in a positive or negative light.
On one hand, management typically is under tremendous pressure to control costs, so outsourcing can help with that. On the other hand, if you are a worker concerned about losing your job or an economist concerned about the long-term effects, it can be of grave concern.
The purpose of this particular article is not to take sides. Instead, it focuses on a model that looks at environmental stability and process maturity as two key factors of jobs that can be outsourced — offshore or not.
First, the rate of change in the environment is a variable. As the rate of change increases, the difficulty of change management increases. As the difficulty of change management increases, it becomes increasingly difficult to outsource due to the overhead involved.
For example, if an organization or functional area is static, their risks associated with change are lower. Conversely, if an organization or functional area is in a state of constant radical flux, the risks are far higher.
In order to be effectively managed remotely, processes must be sufficiently mature that they are both defined and repeatable. Without at least these two elements, outsourcing becomes difficult, if not impossible. With this in mind, there are three process layers to consider:
Ideally, all three need to be relatively mature. Bear in mind that a strong outsourcing partner can only help so much. The reason the diagram is a series of circles is that each ring is dependent on the others. Process maturity in isolation only works on paper! This intertwined dependency is true about operations in general and is not unique just to outsourcing relationships.
Now, by applying the environmental stability and process maturity dimensions to a graph, we generate the compartmentalization diagram. I refer to this as “compartmentalization” expressly to underscore the ability to isolate, package and move the job. Essentially, the model serves to illustrate how environmental stability and process maturity are two key drivers of whether a position can be outsourced or not.
To facilitate discussion, picture four quandrants inside a square. They are:
Outsourcing — both within a country as well as offshore — is on the rise. Organizations pursuing an outsourcing strategy need to factor in the rate of change and maturity of their processes before proceeding. As environmental stability decreases, the need for robust processes increases. Organizations that do not take these dimensions into account will face unmanaged risks including potential failure.