{"id":1721,"date":"2010-03-03T06:23:00","date_gmt":"2010-03-03T06:23:00","guid":{"rendered":"http:\/\/localhost\/projects\/horsesforsources\/avoiding-sourcing-catastrophes-part-1\/"},"modified":"2024-09-11T11:26:02","modified_gmt":"2024-09-11T11:26:02","slug":"avoiding-sourcing-catastrophes-part-1","status":"publish","type":"post","link":"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/","title":{"rendered":"Avoiding sourcing catastrophes, Part I"},"content":{"rendered":"
\n
\"\"<\/a><\/p>\n

Lee Coulter, Research Fellow, Horses for Sources<\/p>\n<\/div>\n

We received a few messages yesterday requesting we stay “provocative and edgy”, now that we’ve declared that we <\/em>should be taken seriously<\/em><\/a> as a cohesive group of professional analysts.\u00a0 <\/em><\/p>\n

So without further ado, I went and\u00a0dragged our new Research Fellow, Mr <\/em>Lee Coulter<\/em><\/a>, out of his woodwork shed to lay it on large with some strong words on sourcing catastrophes,\u00a0and some steps enterprises can take to try and avoid them… over to you, Mr Coulter:<\/em><\/p>\n

Avoiding sourcing catastrophes<\/span><\/strong><\/p>\n

An event resulting in great loss or misfortune. That\u2019s how Webster defines catastrophe. In the world of outsourcing, the stories of catastrophe are legendary, and the statistics on how often it occurs are not very reassuring. What is it about the strategic services sourcing space that makes it so prone to issues? Even if things don\u2019t end in public catastrophe, the stories of mutual success are just not that numerous. The question remains: how does one avoid catastrophe?<\/p>\n

To use Six Sigma jargon, my own analysis tells me there are a \u201cvital few\u201d contributors to catastrophe. When I analyze the laundry list of visible symptoms<\/em> of outsourcing catastrophes, I keep coming back to two root causes. Not surprisingly, these same factors, when included in the process, are often the elements that advantage an outsourcing relationship for success. So what are they?<\/p>\n

Strategic alignment is first and foremost. There is a lot to say about this, but let me put it in simple terms:\u00a0 Outsourcing is not<\/em> a strategy. It is a strategic enabler to meeting business goals. What goals you ask? I use a list of six (there can be more) potential business objectives that can<\/em> contribute to a strategy that includes the tactic of outsourcing:<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Scale \u2013 leveraging the size of a service operation<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Scope \u2013 using end-to-end process thinking to optimize a service<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Quality \u2013 using operating model and relevant metrics to improve the business result<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Cost \u2013 reducing costs in one of three ways: arbitrage, efficiency, and effectiveness<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Control \u2013 using better systems, process, and metrics to improve control of a process<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Focus \u2013 reducing (but not eliminating) leadership distraction on non-core business processes<\/p>\n

When working with organizations contemplating outsourcing, I can – and do – spend hours talking about each one of these six business objectives, and how they can be possible motivators in a decision to outsource. Too often though, organizations turn to outsourcing without doing the essential diligence of first establishing the business or functional strategy that brings the right blend of the six potential business benefits of outsourcing into clear focus. That results in misalignment of the sourcing relationship with the business objective and strategy. There are specific and different ways of implementing an outsourcing deal to meet different business objectives. If the specific outsourcing methods and structures are not constantly realigned through the sourcing process, then when the organization strikes a deal, the business objectives have a tendency to be reduced to one: cost. Don\u2019t get me wrong. Everyone loves to save some money, and often the misalignment isn\u2019t felt for the first couple of years. Striking a deal that optimizes cost generally sub-optimizes other aspects. As I like to say, you can have speed, quality or cost; pick any two. This principle applies to the balancing of business objectives in an outsourcing relationship as well.<\/p>\n

To illustrate the point, a study was released last year showing that more than half of the largest 2000 companies in India actually outsource parts of their back office to other Indian service providers, often at a slight price premium. Why? Top answer is focus. Sure, these companies have access to the same low cost labor and could keep the processes in-house, but chose to do so because their business objective is focus. The message here is to spend the time to build strong linkage from the business objective to the business strategy to the outsourcing strategy and finally to the deal structure with an outsourcer. Catastrophe strikes when the strategic misalignment becomes profound enough for the client business to suffer strategic restrictions because their outsourcing relationship was optimized for a different business objective and can\u2019t change fast enough to meet the needs of the business.<\/p>\n

Stay tuned for Part II… which will touch upon the risks of Mutually Assured Distruction<\/em> if a relationship isn’t centered on common business outcomes for both stakeholders<\/span><\/p>\n

Lee Coulter (pictured) is Research Fellow and Distinguished Analyst for Horses for Sources.\u00a0 Lee supports Horses for Sources’ enterprise customers with their outsourcing and shared services strategies – you can read his fill bio <\/span><\/em>here<\/span><\/em><\/a>.<\/span><\/em><\/span><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Lee Coulter, Research Fellow, Horses for Sources We received a few messages yesterday requesting we stay “provocative and edgy”, now…<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48,50,81,832],"tags":[404],"organization":[],"ppma_author":[19],"class_list":["post-1721","post","type-post","status-publish","format-standard","hentry","category-business-process-outsourcing-bpo","category-captives-and-shared-services-strategies","category-it-outsourcing-it-services","category-sourcing-best-practises","tag-horses-for-sources"],"yoast_head":"\nAvoiding sourcing catastrophes, Part I - Horses for Sources | No Boundaries<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Avoiding sourcing catastrophes, Part I - Horses for Sources | No Boundaries\" \/>\n<meta property=\"og:description\" content=\"Lee Coulter, Research Fellow, Horses for Sources We received a few messages yesterday requesting we stay “provocative and edgy”, now...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/\" \/>\n<meta property=\"og:site_name\" content=\"Horses for Sources | No Boundaries\" \/>\n<meta property=\"article:published_time\" content=\"2010-03-03T06:23:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-09-11T11:26:02+00:00\" \/>\n<meta property=\"og:image\" content=\"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/03\/Lee-Coulter-31.jpg\" \/>\n<meta name=\"author\" content=\"Phil Fersht\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@pfersht\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Phil Fersht\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/\",\"url\":\"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/\",\"name\":\"Avoiding sourcing catastrophes, Part I - Horses for Sources | No Boundaries\",\"isPartOf\":{\"@id\":\"https:\/\/www.horsesforsources.com\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/#primaryimage\"},\"thumbnailUrl\":\"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/03\/Lee-Coulter-31.jpg\",\"datePublished\":\"2010-03-03T06:23:00+00:00\",\"dateModified\":\"2024-09-11T11:26:02+00:00\",\"author\":{\"@id\":\"https:\/\/www.horsesforsources.com\/#\/schema\/person\/c4f084ff7ad43632f537b3b30918e69f\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/#primaryimage\",\"url\":\"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/03\/Lee-Coulter-31.jpg\",\"contentUrl\":\"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/03\/Lee-Coulter-31.jpg\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.horsesforsources.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Avoiding sourcing catastrophes, Part I\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.horsesforsources.com\/#website\",\"url\":\"https:\/\/www.horsesforsources.com\/\",\"name\":\"Horses for Sources | No Boundaries\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.horsesforsources.com\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.horsesforsources.com\/#\/schema\/person\/c4f084ff7ad43632f537b3b30918e69f\",\"name\":\"Phil Fersht\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.horsesforsources.com\/#\/schema\/person\/image\/86ee0c0ac2d033eed87f327162eb27f7\",\"url\":\"https:\/\/www.horsesforsources.com\/wp-content\/uploads\/2020\/11\/phill-150x150.png\",\"contentUrl\":\"https:\/\/www.horsesforsources.com\/wp-content\/uploads\/2020\/11\/phill-150x150.png\",\"caption\":\"Phil Fersht\"},\"description\":\"Phil Fersht is\u00a0a world-renowned analyst, writer and visionary in\u00a0emerging technologies, automation, digital business models, and the alignment of\u00a0enterprise operations to\u00a0drive customer impact and competitive advantage\",\"sameAs\":[\"http:\/\/hfsresearch.com\/team\/phil-fersht\",\"https:\/\/www.linkedin.com\/in\/pfersht\/\",\"https:\/\/x.com\/pfersht\"],\"url\":\"https:\/\/www.horsesforsources.com\/author\/phil-fherst\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Avoiding sourcing catastrophes, Part I - Horses for Sources | No Boundaries","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/","og_locale":"en_US","og_type":"article","og_title":"Avoiding sourcing catastrophes, Part I - Horses for Sources | No Boundaries","og_description":"Lee Coulter, Research Fellow, Horses for Sources We received a few messages yesterday requesting we stay “provocative and edgy”, now...","og_url":"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/","og_site_name":"Horses for Sources | No Boundaries","article_published_time":"2010-03-03T06:23:00+00:00","article_modified_time":"2024-09-11T11:26:02+00:00","og_image":[{"url":"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/03\/Lee-Coulter-31.jpg","type":"","width":"","height":""}],"author":"Phil Fersht","twitter_card":"summary_large_image","twitter_creator":"@pfersht","twitter_misc":{"Written by":"Phil Fersht","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/","url":"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/","name":"Avoiding sourcing catastrophes, Part I - Horses for Sources | No Boundaries","isPartOf":{"@id":"https:\/\/www.horsesforsources.com\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/#primaryimage"},"image":{"@id":"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/#primaryimage"},"thumbnailUrl":"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/03\/Lee-Coulter-31.jpg","datePublished":"2010-03-03T06:23:00+00:00","dateModified":"2024-09-11T11:26:02+00:00","author":{"@id":"https:\/\/www.horsesforsources.com\/#\/schema\/person\/c4f084ff7ad43632f537b3b30918e69f"},"breadcrumb":{"@id":"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/#primaryimage","url":"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/03\/Lee-Coulter-31.jpg","contentUrl":"http:\/\/www.horsesforsources.com\/wp-content\/uploads\/2010\/03\/Lee-Coulter-31.jpg"},{"@type":"BreadcrumbList","@id":"https:\/\/www.horsesforsources.com\/avoiding-sourcing-catastrophes-part-1\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.horsesforsources.com\/"},{"@type":"ListItem","position":2,"name":"Avoiding sourcing catastrophes, Part I"}]},{"@type":"WebSite","@id":"https:\/\/www.horsesforsources.com\/#website","url":"https:\/\/www.horsesforsources.com\/","name":"Horses for Sources | No Boundaries","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.horsesforsources.com\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.horsesforsources.com\/#\/schema\/person\/c4f084ff7ad43632f537b3b30918e69f","name":"Phil Fersht","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.horsesforsources.com\/#\/schema\/person\/image\/86ee0c0ac2d033eed87f327162eb27f7","url":"https:\/\/www.horsesforsources.com\/wp-content\/uploads\/2020\/11\/phill-150x150.png","contentUrl":"https:\/\/www.horsesforsources.com\/wp-content\/uploads\/2020\/11\/phill-150x150.png","caption":"Phil Fersht"},"description":"Phil Fersht is\u00a0a world-renowned analyst, writer and visionary in\u00a0emerging technologies, automation, digital business models, and the alignment of\u00a0enterprise operations to\u00a0drive customer impact and competitive advantage","sameAs":["http:\/\/hfsresearch.com\/team\/phil-fersht","https:\/\/www.linkedin.com\/in\/pfersht\/","https:\/\/x.com\/pfersht"],"url":"https:\/\/www.horsesforsources.com\/author\/phil-fherst\/"}]}},"authors":[{"term_id":19,"user_id":3,"is_guest":0,"slug":"phil-fherst","display_name":"Phil Fersht","avatar_url":{"url":"https:\/\/www.horsesforsources.com\/wp-content\/uploads\/2024\/02\/Phil-Fersht-HFS-Updated.jpg","url2x":"https:\/\/www.horsesforsources.com\/wp-content\/uploads\/2024\/02\/Phil-Fersht-HFS-Updated.jpg"},"job_title":"","first_name":"Phil","last_name":"Fersht","user_url":"http:\/\/hfsresearch.com\/team\/phil-fersht","description":"Phil Fersht is\u00a0a world-renowned analyst, writer and visionary in\u00a0emerging technologies, automation, digital business models, and the alignment of\u00a0enterprise operations to\u00a0drive customer impact and competitive advantage"}],"_links":{"self":[{"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/posts\/1721","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/comments?post=1721"}],"version-history":[{"count":0,"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/posts\/1721\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/media?parent=1721"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/categories?post=1721"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/tags?post=1721"},{"taxonomy":"organization","embeddable":true,"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/organization?post=1721"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.horsesforsources.com\/wp-json\/wp\/v2\/ppma_author?post=1721"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}