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Multisourcing: belated recovery of forgotten first principles

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Having long held that "insultants" outnumber consultants, and mindful that certain consultancies prey upon the short attention spans of their clients even as certain clients use their consultant's opinions as 'security blanket' surrogates for omissive decision making, I am displeased that the consulting community has ridden the outsourcing pony for years and only now is actively turning on the outsourcing concept as its political and structural impacts are becoming increasingly obvious. In point of fact, the consulting community is beginning to issue a new prescription for a disease which they themselves helped to construct.

I would like to offer a realistic assessment of why and how firms outsource. Firms almost universally devolve the problem to a divisional or unit level, thus the means, omissions and results that are achieved will vary on a case-by-case basis. The upshot is that the same problem is solved in differing ways, as a colleague said, "to avoid some organizational consequence" such as cost savings, headcount reductions (which can be to protect existing staff or to get credit for any reduction), functionality (that is missing, failing or inconvenient), or at the personal level, a positive annual personnel rating (which may be measured against suboptimizing criteria). What is missing is a decision making framework that integrates global and national aspects of need, technology, business considerations, risks, scope, duration, cost implications and ultimately solutions (there is always more than one solution, depending upon the desired outcomes and the bounds of monies, mindshare, and timing available).

I am displeased that Gartner's Linda Cohen is now leading the charge to "stop outsourcing now" and is conveniently substituting 'multisourcing' in its place, which is nothing more than a return to first principles, to what outsourcing should have been in first instance.

Only now does Gartner say that "Most organizations are utilizing ad hoc approaches to outsourcing that are both short-sighted and ineffective. Successful outsourcing requires a new operational model - multisourcing - that seamlessly blends internally and externally delivered services, not just to cut costs or gain efficiencies, but to maximize growth, agility and bottom-line results."

Yes, Gartner has been honing this multisourcing idea for a while.  Gartner was flagging multisourcing in early 2003 even as it noted that "IT outsourcing has been a rare bright spot in a gloomy technology spending climate." By late 2004, Gartner was finally noting that industry needed a sourcing strategy that assesses a firm's "cultural, financial, contractual and statutory factors [so as to] be capable of fulfilling business objectives for the long term"... that "multi-sourcing is the "new normal"; senior executive involvement is gained and retained; and governance is regarded as a core competency." By mid 2005, they were noting that firms needed to "replace or retrain the executives responsible for managing outsourcing."

One has to ask, where were they back then, over the past decade, and did they, in effect, train those they now recommend for redundancy? Sun's Scott McNealy was already using multisourcing by Aug 2002.

"Outsourcing" should have been 'multisourcing" from the onset. Gartner is calling multisourcing a "new terrain" for outsourcing, but I agree with Farber that it is "more accurately a rational, common sense terrain" and one that should have been pressed years earlier. Gartner's eight "pervasive myths" and eight "outsourcing maladies" were predictable at the dawn of outsourcing.

Worse, neither Gartner or Forrester address the implications of essential information security and Intellectual Property (IP) security components both here and abroad. Protection of IP on the "sell side" of manufacturing must be matched on the "buy side" of consulting and outsourcing services. Rules applicable to outsourcing apply equally to manufacturing and the manufacturing supply chain, yet they are handled in isolation thereby creating more opportunities for corporate inefficiency and hemorrhage of IP. See Outsourcing obscured by distortion and fog.

Sidebar:

There are small ways to venture outside accepted norms in estimating outsourcing impacts and designing new work rule streamlining. We recommended that Northwest Airlines' streamlining of work rules (job redesign) and outsourcing was applicable to the business continuity interests of clients in other sectors with regards to their core labor unions in both outsourcing and manufacturing operations. We recommended that they put Northwest on their watch list for continuous examination so as to produce an AAR (After Action Report) for lessons learned by Northwest (NWA) and their applicability to each client's condition, i.e., assemble a cross-functional 'war room' to track and model Northwest actions against the client's situation, in effect gaming the NWA effort internally.

[History: I remember the 1998 UAW strike (here and here) against General Motors who then secretly trucked out stamping dies out of Flint, MI, to Mansfield, OH, to preserve production of profitable truck and SUV models, the resulting labor storm and production interruption that closed 27 of GM's 29 assembly plants and laid off some 200,000 of its work force, cost GM $2.2 billion, and then GM effectively folding after 53 days without gain. Remembering that GM's approach seemed mad, I thought that a Northwest approach is a workable means to plan-in-advance for a restructuring and use the inevitable strike as an opportunity to readjust without significant business interruption. (It has long been my opinion that the relatively buoyant automotive labor market was an anomaly due to pent-up demand after WW II and was (is) unsustainable, no matter what labor management wants for its aging members. Yes, management and engineering are going to have to design better, more desirable product, but labor must cooperatively work to produce it at most efficient cost. Yes, union membership might not/would not grow as much but I think that there would be more continuity and stability for those at work. Your mileage may vary.)]

Part 2

Gartner: Stop outsourcing now
Posted by Dan Farber @ 10:03 am
October 17, 2005

Gartner: Outsourcing managers must be retrained
Or given the chop...
By Simon Sharwood
Silicon.com
Published: Tuesday 7 June 2005

GARTNER: OUTSOURCING NEEDS STRONG RX
By Linda Tucci
CIO
04.05.2005

Well-Laid Plan Kept Northwest Flying in Strike
By MICHELINE MAYNARD
New York Times
August 22, 2005

Do it right, or not at all
By Maggie Macrae
CFO (Australia)
01 September 2004

GARTNER: OUTSOURCING DEALS WILL GO ON A DIET
By Barney Beal
CIO
02.26.2004

Gartner: IT outsourcing will disappoint
By Ed Frauenheim
CNET News.com
Published: March 25, 2003

Gordon Housworth



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