Gartner: Stop outsourcing now

Gartner: Stop outsourcing now

Summary: Gartner analyst Linda Cohen started off her presentation at Symposium ITxpo with a command for the audience of 6,000 attendees: "You have to stop outsourcing now." She said that the chaos created by compulsive outsourcing is making it harder to produce results.

SHARE:
TOPICS: Outsourcing
19

multisource.jpgGartner analyst Linda Cohen started off her presentation at Symposium ITxpo with a command for the audience of 6,000 attendees: "You have to stop outsourcing now." She said that the chaos created by compulsive outsourcing is making it harder to produce results. Her point is that too many companies have taken outsourcing to an extreme, heading offshore because it's faddish, juggling multiple contracts with incompetence and lacking sufficient governance discipline. Cohen and Allie Young just published a book on the subject, "Multisourcing: Moving beyond Outsourcing to Achieve Growth and Agility," (HPS Press, 2005). The book promotes an approach to outsourcing, which they call multisourcing, that is based on continuous evaluation of sourcing relationships for effectiveness and efficiency.  "Buyers behave as if outsourcer and contractors are responsible for delivering the outcome. Organizations don’t budget and plan adequately for managing outsourcing," Cohen said.

They call multisourcing a "new terrain" for outsourcing, but it's more accurately a rational, common sense terrain. The books lists eight pervasive myths of outsourcing today.

    1. Sourcing independence: Making outsourcing decisions independent of business strategy.
    2. Service autonomy: Believing that one sourcing relationship has nothing to do with another.
    3. Economies of scale: Believing that service providers can deliver unlimited economies of scale to lower costs.
    4. Self-management: Assuming that once a sourcing contract is signed the management is done.
    5. The enemy: Thinking of the service provider as an enemy to defeat in contract negotiations.
    6. Procurement: The notion that best price is the key metric, discounting other important factors.
    7. Steady state: Believing the an outsourcing service will never need to change.
    8. Sourcing competency: Believing that the required management capabilities necessary to manage external services exist in house.

Topic: Outsourcing

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

19 comments
Log in or register to join the discussion
  • We'll wait and see.

    :)
    HypnoToad
  • Bait!

    that's all this article is!
    Reverend MacFellow
  • These observations are compatible

    with experience gathered by firms which have been outsourcing / offshoring for some time now.

    Ousourcing works well in an ideally setup 'utility computing' IT world. You can obtain electricity from one source or another with minimal switchover cost.

    Things are NOT so smooth with other products, unless STRICT interoperation standards are already enforced.

    Example: a carrier company owning cargo ships, does NOT need to own heavy-duty cranes in order to load / unload the cargo. Ships and docks are designed in a compatible fashion: the crane can always pick up the cargo without damage, etc.

    However, companies with specialized operations and products, most often require specialized s/w and IT infrastructure. Experience has shown that only already defined procedures can be outsourced: payroll or accounts, etc.

    I know several people working in companies which invested millions and several years in building specialized s/w and then after started making millions by selling it, some HIGH-RANK MORON decided that 'by outsourcing we save the maintenance cost' !! They did this and ofcourse the quality of the service dropped so heavily that they had to started returning the maintenance in house again.

    In the process they spent more money and the customers grew dissatisfied by the quality of the product and service response times.

    I have heard more often than not similar failure stories.

    It IS afterall common sense. There is NO silver bullet. The quality of the output is what determines the degree of resource investment.

    Usually some high rank incompetent person comes back from the middle-managers conference overcharged with 'smart' ideas on how to save billions and aquire fame and glory. In the process everyone suffers, especially the people who DO the actual work....
    michael_t
  • Hasn't Gartnet been saying the oposite for years

    Now they've changed tunes. How can anyone take reports from Gartner seriously today.

    Outsource GOOD GOOD GOOD, tommorow Outsource BAD!

    Looks to me like all thier preaching of how good outsourcing is has got people going to an extreme and now they are changing thier message.
    voska
    • LOL, so true

      Gartner has been a long time proponent of Outsourcing. Now it looks like it's gone too far for them.
      george_ou
      • Well ...

        ... I think Gartner analysts are scared Gartner will start outsourcing itself ! LOL
        Ardian Daka
      • Told ya this was going to happen

        What Gartner is saying now is basically what I've been saying will come out, for the past year or so. It was more a prediction, based on what I had seen in past corporate behavior, and read about from others who had to deal with foreign outsourcers directly: Yes, companies are outsourcing, but they're not going to manage it well, and they have unrealistic expectations of what it can do for them. I mean, did most corporations suddenly get smart about managing IT? I think not.

        The strange thing was, and still is, that most companies have said for the last couple years that they're pleased with their outsourcing relationships and were likely to continue them. All the while the senior engineers who had to actually deal with the outsourcers were crying out in agonizing pain!
        Mark Miller
      • George, first they charge for advice...

        ... on outsourcing. Then they charge for advice on how to manage outsourcing. Next they charge for advice on how to decide what to bring back in-house and make the transition smoothly.

        Then they charge for advice on how not to listen to Gartner.

        Their product is...
        Anton Philidor
    • I think you have been listening to Gartner too long!

      Especially if you can call them on this one! Good catch!
      B.O.F.H.
    • Well ...

      ... they need to sell their studies, don't they. And aren't them among the trendsetters ?????
      Ardian Daka
    • On Following advice

      Gartner has been advising companies about outsorcing for a while now. Now they are advising companies not to oursource until they have a plan to do it properly.

      Someone could suggest that you need to stop smoking which is good advice. But if you decide that shooting yourself dead is the ideal way to quit, then don't blame the person that told you to stop smoking.

      All Gartner is saying is to come up with a practical plan before outsourcing anything. Outsourcing is bad, like anything, when there is no plan. I missed the part where they said that outsourcing is a bad business decision.
      ibabadur1
    • RE: "Hasn't Gartnet been saying the oposite for years"

      Personally speaking, we the consumers need to do something as well about offshoring and so forth:

      1) We need to push to buy more products that are Made in the U.S.A.
      2) We need to shop more at the local stores instead of all the super mega marks, walamrt's home depots, etc... Yes you're going to pay more, but you are putting money back into your local township, not some national companies pockets
      3) Companies need to stop outsourcing altogether and retain U.S. Based employees, let those other countries have competing companies that use their own country's labor instead of taking ours away
      4) We need to stop fueling this crazy "Deep pockets" crazy that has all the rich people wanting to be even more richer then they are now. How much more money does 1 person, who would probaly never be able to spend it all, need?

      No to bring religion into this, but when Pope John Paul was still alive he made a statement about the western world (A.K.A. the US) to not be so materialistic. And he's right, people don't want to believe that they are going to be living paycheck by paycheck, only the people who are really ripping off a lot of other people are truly not living paycheck to paycheck.


      ""Now they've changed tunes. How can anyone take reports from Gartner seriously today.

      Outsource GOOD GOOD GOOD, tommorow Outsource BAD!

      Looks to me like all thier preaching of how good outsourcing is has got people going to an extreme and now they are changing thier message""
      ajapierce
      • Your #4 is right on spot...

        An example.

        In the SAME sentence, they are saying:

        1. Natural Gas Heating Bills will increase by 50% this winter.

        2. There are plentiful and substantial supplies of Natural Gas, and no one needs to worry.

        No need to worry? In one sentence they are telling us they are going to screw us by 50% this year (prices are SUPPOSED to be driven by supply) and there isn't a damned thing we can do about it.

        I can only hope that the people that are pocketing all this money from fraud (and it is a very few people involved I suspect) can sleep well knowing that people (mainly the elderly on fixed incomes and the poor) are going to die this winter just so they can buy a bigger Yacht next summer.

        The human race is imploding on wealth.
        BitTwiddler
    • Can't expect them to get paid for saying the same thing over and over.

      NM
      MyLord
  • Whatever Happened to Self-Reliance?

    A number of years ago I developed a very useful FileMaker Pro database which would run on Mac or Windows platforms. I rolled it out to a dozen users across the state (as a pilot) and was ready to "inflict" it on everyone the following year.

    But no...our new bureau director decided everything had to be converted to MS Access "because all our new machines come bundled with the MS Office."

    It was outsourced to a contractor (on an annual contract)who was assigned to convert my FileMaker Pro files into Access - a process that should have taken less than 3 months of part-time labor. I even gave here everything in DBF format WITH documentation. She then milked the project for 3 years.

    Before the first year was up I figured out how to convert everything into Access, and added on some features she "didn't have on her RFP". It was only because she messed up an executive database that her contract was not renewed.

    The FileMaker Pro files were never revisited, and now even the MS Access approach is dead in the water, as we roll out a web-based application that must be Oracle compliant.

    I'm crossing my fingers that this next outsource will work - but wouldn't it be refreshing if we could develop in-house expertise to design and maintain data processing applications? This one project could have been resolved in 6 months with one COMPETENT programmer - but we are now on year 5 of its development.
    1ceman
    • And getting Oracle involved?

      What caused the move from FileMakerPro to Access to Oracle in a few years?

      And web-based?

      May I suggest removal of all IT magazines from the executive washrooms? Especially anything with... uhm... IBM?
      Anton Philidor
  • They have gone too far

    and in our company things have gotten worse not better since outsourcing IT. Even trying to purchase IT related items like new computers, mice, etc., has gone from a couple of weeks to a couple of months. Services for the AS/400 are poor, as skill levels are not there. The network is not managed proactively and hardware failures are frequent.
    A co-worker has been trying to get an annual cost figure for the plant in our location and has not been successful as the higher ups are blocking all access to this information.
    If this outsourcing was truely saving the company money, why is it not more transparent. Why is it not celebrating the success of the partnership.
    SimonSays
  • Outsourcing...Giant Sucking Sound...

    Let's call the whole thing OFF!!!

    KEEP JOBS IN USA WHERE THEY BELONG!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
    btljooz
  • RE: Gartner: Stop outsourcing now

    In most case as hours normally the vendor comes in and in the insuing chaos you find out they now have a firm grasp on the family jewels and in most cases have you at hostage. Ours which is like others has cone several years and still not fully instrumented, and they are marketing new better buskits and the light-of-day for the working associates is never realized. I also wonder when the terror mechinisum will realize the the majoriuty of financial, helth, lenging, and production of the USA is homed to Bangalore India. What do yo think will happen when that place goes Mubahi! The concept od outsourcing may sound good but loss of corporate control of theor own assets is lost and recover will be very painful.
    fadria