Tuesday, February 20, 2007

Outsourcing and Chicago

Chicago is my kind of town! I spent the last few days in the Windy City. While my primary reason for the visit was to continue to gather data for our ongoing research project, BVI (Demystifying the Link between Innovation and Business Value), I did have time to do other interesting things (e.g., eat some good food and catch up with old friends).

On a business related matter, I gave a talk to the students at DePaul University (www.depaul.edu) as part of an executive panel on outsourcing (http://facweb.cs.depaul.edu/yele/CIO-annual-events/2007winter/program.asp). Professor Olayele Adelakun (http://facweb.cs.depaul.edu/yele/) invited me to address his students and guests. I thank him for doing this.

I had the distinct pleasure of giving the opening talk for the panel; the topic I chose to speak about was the future of outsourcing, titled, "Strategic Sourcing: Sourcing of Innovation." For the talk, I drew on material from our forthcoming research project, IRO (Managing Risks for Rewards: The Case of Outsourcing Innovation), and our current project, BVI, along with findings from our past project, I4I (Leveraging Ideas for Organizational Innovation). An excerpt from my talk:

Outsourcing programs are becoming more complex. One aspect of the complexity comes from the kind of work that is being outsourced. Once, companies only outsourced simple, defined, and structured work. Organizations are now venturing into the outsourcing of innovation, and some are even ready to outsource pieces of their core capabilities. Organizations that are prepared to manage these relationships in a strategic manner will survive and thrive in the marketplace.

Some geniuses think they are beyond outsourcing, or even protected from it -- as I recently heard from one executive, "we will never see ourselves outsourcing our [IT] work...we just do not do that." Such thinking is not only dimwitted but immature and shortsighted. Most banks have outsourced large portions of the IT functions; similarly, supply chain functions and HR functions are being outsourced.

Think about this: most defense sectors of nations have begun to outsource the jobs of the military to private contractors. Once, these jobs were sacred and never to be outsourced.

My talk was followed by a presentation from Richard R. Howe (Vice President, Science Applications International Corporation (SAIC)). Richard drew upon his experience in managing outsourcing deals from the perspective of a vendor and provided a lively discussion of the issues that companies face when aligning outsourcing programs. A presentation by John McCord of the Global IT Consulting Group from the PA Consulting Group was next. John discussed results from a recent PA Consulting survey on the state of outsourcing. What caught my attention was the perceptions from the points of view of clients and vendors as to why they engage in outsourcing programs. Seldom do clients and vendors meet eye to eye or agree on what are the drivers of their relationships.

After the three talks, and a small break, we answered questions from the audiences for about 90 minutes. I must say that the audience kept us honest and asked some very interesting and difficult questions. Issues were raised surrounding the management of SLAs (Service Level Agreements), the protection of IP around outsourcing, the political and economic implications of outsourcing, and the management of risks and opportunities around outsourcing efforts. As the evening closed, there was a book signing event: I had the opportunity to sign copies of my book (The Outsourcing Handbook, Kogan Page, 2006). The day ended with Olayele and me, enjoying a few pints at a pub and enjoying the traditional food of Chicago: ribs and steak!

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