Insight

Outsourcing: Insanity or opportunity? (hint, it's both)

With so many services to be delivered, there's no single approach to every outsourcing business challenge - you need flexibility

Brian C. Lewis

Brian C. Lewis

Director Advisory, Procurement & Outsourcing, KPMG US

+1 303-459-7903

We all recall the definition of insanity: doing something the same way and expecting a different result. This old adage certainly applies to outsourcing. For years, we have tried singular approaches to outsourcing and, not so ironically, have had mixed results—some wildly successful and some, well, not so much. We’ve tried big bang, best of breed, managed service, as a service, and co-source; sometimes those approaches worked pretty well. When it didn’t work, we focused on governance and performance measurements to make it work better, or we switched providers. Again, sometimes the new provider brought improvements and in other cases, it got worse. You have to ask yourself: What are we missing? The answer is actually pretty simple—stop doing it the same way! We have so many services that need to be delivered. Why should we expect that the same delivery approach will work for each service? There is a time and a place for each approach to outsourcing. What you need is a flexible decision and governance framework that helps you select, switch between and then operate in multiple delivery models each optimized for a particular service. Yes, this is a more complicated model than doing it all the same way. Yes, it will cost more to govern. But, if it works better and reduces overall cost while delivering additional value to the business, wouldn’t that be worth it? In this series, we will explore this overall approach to outsourcing. We call it Micro-Sourcing, not because it is small but because each segmented delivery model is smaller than the whole and addresses specific business outcomes.

First, let’s outline the delivery models:

  1. Contract for skill – Skill augmentation
  2. Contract for innovation – Agile ways of working
  3. Contract for sustainment – Managed services
  4. Contract for solution – Standard solution.

These are not new approaches. Each has been tried and has distinct advantages and disadvantages to the others. The new concept, Micro-Sourcing, is the framework that integrates each approach so that they successfully coexist in your portfolio and can be utilized when needed.

In upcoming Micro-Sourcing blog posts, we will address:

  1. How Micro-Sourcing enables product owners the necessary flexibility to deliver business outcomes
  2. Establishing a sourcing strategy that supports the transformation journey to a modern information technology operating model
  3. Finding the balance between product owner flexibility, risk, cost, and value to the business
  4. Allowing product owners the ability to switch between delivery models
  5. Governance maturity in contract, demand, and financial management
  6. Collaboration and integration in a multisupplier environment
  7. The importance of change and communications management in adoption of the framework
  8. Pricing strategy for each segment and across all segments
  9. Future-proofing your Micro-Sourcing strategy by allowing for future models and fluctuating industry trends.

Coming up next in our Micro-Sourcing Series… Blog 2: Flexing for the Future. Hybrid outsourcing strategy, multiple delivery models and flexible governance frameworks are foundational elements to the success of technology-enabled transformations.