Don’t Sing the Outsourcing Blues
Outsourced services and functions are common practice for most businesses, yet they come with their own set of horror stories and sad songs. Avoid disappointment with a simple outsourcing rule: Don’t buy the most capable solution; buy the one that will do it your own way.
Many of the problems people discuss with me turn out to be problems that people decide are easier to live with than to fix. Almost all of them are problems with outsourced solutions.
Outsourced solutions are some of the simplest solutions for the business improvement analyst and the biggest nightmares for the process improvement analyst. It’s simple for the business improvement analyst because, on the surface, outsourcing expertise proves to be a cost-effective way to improve upon a business’s tertiary skills and improve on performance in arenas where the business is not an expert and does not want to be an expert. They are nightmarish for process improvement analysts because a business does not control an outsourced process.
See if this story sounds familiar. A medium sized business is growing in a healthy way and the “ins and outs” of customers, orders, services, and shipments has outgrown the effectiveness of the homegrown database. Rather than hiring more experts to build a more capable database, the business decides to license an already existing system.
A leader in the business is tasked with identifying a good solution for the right price and goes shopping. Naturally, the mode settles into one of looking for the greatest capability for the price, and of course considering long-term support. A widely distributed solution is identified, presented to the business leaders, and selected.
Crews of expert personnel from the supplier of the system solution come in and spend many expensive weeks helping to configure the system and teach personnel how to use it.
Eventually, they all disappear and the last remaining developer of the prior, in-house database is now in charge of managing the new system for the business.
While the capabilities of the new system are vast, not everything it does occurs in a way that is right for the medium-sized business that bought it. As people become versed in the new system, they discover how wasteful or difficult certain tasks or functions are. They ask the “one guy” to change it, but he can’t easily do so.
There are limits to his understanding of how to configure the system. He can call on the supplier and under the contract there are some limited adjustments the supplier can make, but major configuration changes will require additional charges for additional experts, and time that is not part of the annual support fee and services. Furthermore, to really get things the way users inside the medium-sized business would like will require some custom code. That option projects a support cost that is well beyond what the business can responsibly invest.
When it is all discussed and the options are presented, the most economical solution is for users inside the medium-sized business to either work around the system, or put up with its inefficient processes. That’s right, it is cheaper to be wasteful than to do it right.
I’d bet a soda that every reader has either experienced or otherwise witnessed this very scenario or one like it. Maybe it wasn’t an outsourced system, but instead a function such as Information Technologies, Human Resources, Accounting.
Just last week a friend of mine met an engineer who said he has worked for years without his own computer, because the outsourced IT function in his business has not provided one. The red tape necessary had been applied repeatedly for years without results and eventually the engineer quit trying. He uses computers set aside in break rooms for the production personnel to access his e-mails. When he needs engineering-specific software, he hops from cubicle to cubicle borrowing computers while others are out of the office or attending meetings.
It rings of urban myth it’s so absurd. I didn’t meet this engineer myself, but I don’t expect my friend to mislead me either. I can’t guarantee the story, but at the same time, we have all witnessed enough waste and trouble from outsourced services that it is believable.
So how do we avoid the horror stories like the engineer without a computer, and the sad songs like the sub-standard system that is more expensive to fix than live with? The answer is simple to explain, but difficult to execute.
Don’t buy the most capable solution; buy the one that will do it your own way.
Simple right? No! It’s very difficult. First we must stop ourselves from getting excited about the vast capabilities and money-saving projections. We aren’t looking for capabilities we don’t need, only the ones we do need. Also, the projections don’t include all of the waste and frustration that comes with being forced to do something someone else’s way instead of the way we want or need.
The hardest part is overcoming the apparent monetary decision. When we find a solution that guarantees that it will do exactly what we want, and look at the price tag; it’s not much different than hiring our own full-time resources and doing it ourselves. That’s not the price tag we were looking for. The “off-the-shelf” solution is less expensive on the surface.
We have to find a way to justify the rule in italics above. The “off-the-shelf” solution is less expensive and provides greater capability than our own expectations would produce. Also, the providers of the solution know the function better than we do, so what makes us believe we can design a better custom solution than they already have?
Perhaps they know the function better than we do, but they don’t know our business or our business’s needs and processes. The solution that is the best “bang-for-the-buck” is the one that does exactly what our business needs, not the one with the most customers.
Here is one more example. A healthy veterinarian business helped pilot a software system specifically designed for veterinarian offices. By piloting it, they have to give a great deal of feedback about what is needed, and they have to license the system at a discount. It’s a great opportunity.
The software system is a highly engineered resource and information database with a very professional interface. It’s much more elaborate and capable than the digital file system that the veterinary office had, and promised much greater effectiveness. If nothing else, it’s much easier to access patient information and run reports with a searchable database and interconnected interface than it is with a PC file system.
However, software developers built the interface according to how software developers think, not how veterinarians operate. So consultations with clients take longer while the receptionists constantly flip back and forth between data screens, and because the veterinarian is doing the same; entering some information, going through an unnecessarily long sequence to enter and save notes and then switch out of that part of the system to another part of the system to look up other notes or prescription history.
The bottom line is that the office cannot service as many clients in a day. The veterinarian has had to extend consultation windows and limit appointments. From a business perspective, the system is limiting the revenue capacity. From a service standpoint, the veterinarian cannot help as many clients and pets as he should be able to help.
A veterinarian isn’t going to hire his own full-time database developer. But, a part-time consultant that continuously maintains and improves the database as needed might be just what the veterinarian ordered. Finding such a solution is difficult. There are very few businesses out there that operate with such a model. It’s a difficult business model. Probably if he does find one, it will cost more than the license of the system he has, but it won’t cost him his revenue.
The examples I’ve described involve licensed software systems. The same pains are often found in other services and functions, particularly the outsourced IT and manufacturing solutions. It even shows up with contracted parts or material suppliers. It proves to be more painful to investigate and qualify a new supplier than to deal with the disappointments in delivery deadlines or quality from an already “approved” supplier.
So we sing the blues because we can’t control the performance or processes of the solutions we buy from someone else, and we can’t afford either the time or expense of changing the solution. When we made the decision, we did so understanding that the solution would meet our every need. We didn’t understand the pain that came with the parts of the solution that were imperfect.
There is nothing more frustrating than talking with a business or process owner about the problems and waste, and then realizing that the problem isn’t something the owner can control or is willing to control. We both want it fixed, but fixing it is perceived to be too difficult or too costly. The conversation ends with the owner making a conscious realization and decision not to fix a very painful and costly problem, and we both walk away shaking our heads.
Outsourcing has become a standard practice across many industries. There are specialists who can do things better than we can. Unfortunately, their ways may not be right for us. The best way to solve this problem is to seek the experts that are willing to do custom and minimal solutions just for us, and can maintain them long-term. Yes the price tag will be higher, but the unexpected and unpredicted pains and waste will be far less.
Stay wise, friends.
If you like what you just read, find more of Alan’s thoughts at www.bizwizwithin.com.