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Transformational outsourcing is quite different from the type of outsourcing that most managers have grown up with. It's not characterized by well-understood processes and easily measured outputs. And it's not necessarily just for noncore activities, either. Instead, transformational outsourcing is a bold approach to effecting step-change performance improvements across the enterprise-and doing it fast!
Transformational outsourcing is definitely not the most common form of outsourcing; it's an unusual and specific flavor. However, it's also an essential tool in every executive's bug of tricks. In some important situations, it's the only tool that works. These are bold assertions, but I'm confident that they're true. Let me Lake you through my logic.
What Is Outsourcing Anyway"?
Until I asked executives this question, I thought outsourcing was well understood. In fact, the definition is quite fuzzy. Most leaders would agree that outsourcing involves purchasing services from an outside company. But that's where the agreement stops. Some argue that is isn't outsourcing unless a company's employees transfer to the service provider. Others would not hold that high standard but would stipulate that the organization has to have once provided the service lor itself. Alter speaking to hundreds of executives, here's what I have found to he the real underlying concept:
Outsourcing menus purchasing ongoing services from an outside company that a comany currently provides, or that most organizations normally provide, for themselves.
For example, if a company uses an outside company to do its manufacturing, most managers would say it "outsources manufacturing." This is true even if the company never made a single widget on its own. Why? Because companies generally manage their own manufacturing operations. By the same token, almost no company would say it outsources its investment banking, auditing, or garbage collection because the vast majority of companies purchase these services.
This definition also establishes that projects, while they may be service purchases, are not usually considered outsourcing. When a company contracts with XYZ Systems to develop a computer application for them, XYZs responsibilities end when the system is delivered. Outsourcing providers, in contrast, offer ongoing services. Their responsibilities end when the contract date arrives.
What's important about this definition is that the line between what is and what is not outsourcing moves over time based...