Problems off or onshore
Outsourcing has become a way to dump problem processes, say Rudy Puryear and Christine Detrick.india Updated: Mar 28, 2006 13:25 IST
To senior managers at a major US investment management company, the decision at first seemed easy.
Back-office financial operations had become a costly distraction. So, why not simply outsource payroll, accounts payable, and other routine financial reporting functions offshore? But as company executives looked more closely, they realised that contracting the work to someone overseas alone was not the answer: the processes themselves needed a significant overhaul.
To outsource now would simply transplant inefficient processes elsewhere, and the company thus misses the bigger opportunity to streamline them.
Revamp business processes
Stripping out any complexity and eliminating waste can pave the way to significant cost reductions. However, to overcome deeper operational deficiencies, companies need to break down barriers, which hold back information that should rather flow freely.
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Companies often turn to specialised contractors to help them achieve challenging technical goals within tight budgets. But reliance on external suppliers too often masks dysfunctional relationships between departments that fail to effectively work together. Successful outsourcers ensure that the key players within their organisations agree on the objectives of a project before handing it over to outsiders.
For instance, over the past year, the alliance between the business units and IT has gone a long way towards restoring trust in IT's contribution to profitable growth and has instilled a sense of shared destiny, in the IT firms.
Find the scale
Managers trying to improve operations in today's customer-focused environment can find themselves whipsawed between two goals: pushing autonomy down to frontline teams closest to the market and keeping a lid on costs. And knowing which way to go requires careful analysis.
One global financial services company, for instance, realised it could cut costs significantly by consolidating a host of customer service centres scattered around the world.
To find out what was the problem the company analysed client cost data and found out that a host of inconsistent procedures had rendered customer service fragmentary. Some damage control measures were put in place
and the situation improved.
So, very often the solution lies in process improvement and an intimate experience with current operating procedures - the decision whether to outsource a process becomes secondary.
HMU distributed by New York Times Syndicate