Do you know what is outsourcing? If not, have a look on wikipedia.
But if you do: when and how do you define what to outsource?
If you read my summary CV, and moreover the summary of my banking experience you will notice a keyword popping up here and there: outsourcing.
You can search on this blog, and you will find plenty of articles where I discussed various issues related to downsizing and outsourcing, both on the business and corporate culture side.
Probably, the most organic discussion that I presented so far is the oldest online publication- an issue on strategic outsourcing that I first published in July 2003 and reviewed few times in my online e-zine, BusinessFitnessMagazine.Com.
But that is the past. And oriented mainly to large businesses.
Instead, this article is focused on something else, that is visible in my CV, but even more in my pre-banking (i.e. pre-1987) and non-profit activities.
If you have no time: go for the conclusions
A simple concept, that I started re-using from late 1990s with smaller companies: outsourcing a component of corporate identity.
What do I mean with that “corporate identity” concept, so “trendy” in late 1980s/early 1990s?
A compound of the visible side of your company (how it is perceived by all your stakeholders, including the market, suppliers, employees) and its “culture”.
How do you define a culture? The simplest way is to look around you.
If you go somewhere, and see a set of shared values, habits, etc that do not require to be explicitly asserted by members, that is the simplest way to identify a “culture”.
A set of shared and common behavioral traits that are the basis for interaction between the culture members, and to define the relationship between them and “the others”- anybody who they perceive as outside their culture.
I know- some would complain about this quixotic definition of culture- interestingly, some would say that it is too vague, and others that it is too narrow-focused.
Bear with me and the limitations of my definition, and let’s simply assume that, on this issue, we might have a disagreement 
I will refer you to the article linked above for a general discussion on outsourcing.
Let’s see what can be outsourced
The first point is: you outsource what fitting at least one or more of the following:
- non-critical for your activities
- can be shifted from one supplier to another without affecting your ability to continue your business-as-usual
- requires technology or skills that are beyond your means
- requires a level of continued investment (training, innovation, etc) that doesn’t fit your asset management approach
Yes, it is a really short list: but you would be surprised to discover how many companies, also large ones, outsource what should not be outsourced, or for the wrong reasons (usually- to cut costs), without considering the impact on business viability.
A tongue-in-check joke was in a movie, “The Second American Civil War” I think.
Some activities were not possible as the spare components for a critical technology had been outsourced to another country, that wasn’t friendly anymore 
If you are really interested in cutting costs, but it is something critical to your activities, it is probably better an alternative…
…to spin-off that part of the activities, retain a controlling interest
…and be the first and financing customer, while allowing the new unit to offer the same products/services on the market- also to your competitors.
Of course: unless it is really something unique to your organization.
Otherwise, creating a spin-off or outsourcing have the same effect- removing from your company what differentiates you from your competitors.
And if you are a non-profit? Well, frankly, “competition” applies also in the non-profit sector. Again, watch that movie 
You might compete for eyeballs, goodwill, subscribers, etc- but that’s simply a different form of competition for scarce resources.
But outsourcing is not just for generic products or services: you can also outsource niche services and products: an example
In early 2000s, after I was told that Indian accountants could be easily certified as CPA in UK, I proposed to an English partner with business activities and contacts in India to create a simple service.
In UK, setting up a “Limited (LTD)” company is cheap, easy, and fast.
So cheap easy and fast… that in mid-1990s some agencies offered to free-lance a package: a contract with the customer, plus opening a Ltd, to be closed as soon as the activity was done.
Being so easy, many small companies and shop, with just an easy-to-sell product/service and some financial resources set up their company.
But, in many cases, the issue was simple: they really needed just bread-and-butter services, nothing really complex.
At the same time, some UK banks were competing for the accounts of these tiny outfits, fighting on price.
My idea?
- define a basic set of accounting and financial management services,
- package those along with set of banking services,
- create a joint company with a bank,
and offer through that bank to SMEs not just a cheaper account, but a “full administrative outsourcing”.
The concept? Think about the business, we will take care about everything needed to make it run smoothly.
Did it fly? Well… there was some discussion between the partners that were supposed to provide the accountants
What is niche-based outsourcing?
In any industry, there are some services or issues that are nothing more than “tailoring” for that industry something that is available in other industries.
If you have the budget, you can call the typical consultants, seek their expertise, discuss how to tailor that to your case, and then adapt.
From early 1990s, with few customers (in some cases, it was adopted) I proposed a three-tiered market approach:
- off-the-shelf: basic services that require limited interaction with the customer (e.g. exchanging some information)
- like the previous, but with specific, pre-defined options, with either a pre-defined cost or a time-and-material pricing
- ad hoc, subject to a negotiation, but based on the previous two
The “niche-based outsourcing” is nothing more than identifying with few customers in the industry what they have in common.
Then, focus on what they all could need or use, but cannot afford to staff internally or, if they can, would then be unable to adapt to the best practices.
A critical element in this approach is to move from the cost-cutting approach, to the integration in the activities.
In my case- every outsourcing contract that I negotiated included a joint monitoring and feed-back approach, that seemed tailored to each customer.
But was really built on a “set of options”, that were planned and tested and constantly revised (otherwise, it would be management consulting project on each customer).
The idea is: if you move from a simple cost-cutting it is a win-win for both the customer and the supplier:
- the customer
- will be able to have an external perspective, and constant re-assessment toward the best practice, while also influencing the future development of the offer from the supplier
- the supplier
- will be able to build mutually loyal working relationship with the customer, that goes beyond the simple “supply and demand” model, while reducing the cost and risk that is part of any product of service evolution
A small example from a distant past.
When, in late 1980s, I was working on the roll-out of the accounting system for the San Paolo bank, I was told that they had been a beta-tester for a version of CICS (Customer Information Control System).
CICS is a system that had been developed from IBM and (if I am not wrong) Andersen well before then, to allow entering transactions, e.g. sales or banking operations when occurred, instead of waiting for somebody to punch that into a computer (as it was in the 1960 with the almost monopolist of the time, Honeywell).
The point was: the technicians and experts working for San Paolo bank devised a way to ensure that, in case of a security breach, everything would be immediately stopped.
A way of using the system that wasn’t really what IBM had suggested- but that then became almost a standard, as the designer of CICS said that they did not have thought about that, but it made sense.
It was the classical and successful case of a customer-supplier relationship going beyond the immediate needs.
A smalller but more recent example.
After dragging for few years, I was involved in giving new life to an outsourcing negotiation. It was the classical chicken-and-egg.
The customer wanted to pay on the number of activities per unit of time, but nobody really knew how to identify those two critical numbers- activities and their duration.
What I proposed? To divide time in “slots” of a certain length (say, 15 minutes), and sell the slots.
And to identify with the customer some new services that they wanted to add and test, that would use any unused slots; the slots and budget were for a 3 year contract, and reviewed periodically.
The contract was signed.
I did the same before than and also even more recently for other outsourcing activities, but there is an element that most forget: communicating.
ITIL and other approaches talk about SLA (Service Level Agreements) and other ways to measure and structure- and sometimes people get carried away with the numbers.
And forget that, despite the quantitative issue, you have to constantly reinforce the reason for the outsourcing, by making it evolve.
Otherwise, the customer will see it as a fixed cost. And cut as soon as feasible
Where does this discussion lead to? (a.k.a. “conclusions”)
If you follow my blog, you know that I have been doing some research over the last few years to apply my concepts on knowledge management and other issues.
Few years ago I applied my three-layer approach to some experimental activities on e-commerce.
From 2005 I decided to test all these ideas and concept, and expand with other issues connected with community building, online and offline.
To have more freedom, I did all these activities pro bono, in preparation of a book due originally in January 2009.
I am currently revising the material that I was supposed to publish this year, and I had postponed to prepare in 2008 two separate drafts.
One on the general issues concerning Social Networking online, and another on security (an outline), to be published with third parties (partially done in April 2009).
If you are interested, I can post online the two draft documents (approx. 70 pages overall), including an extended survey, analysis, and checklist of the benefits, risks, and features, before producing the reviewed edition.
I started applying all these concepts organically (online+offline), to help develop from scratch the corporate identity and integrated communication.
From January 2007 I went online to test few more ideas on community-building and online publishing, first under a nickname (aleph123, on stage6.divx.com), then with my own name.
The most recent case is a non-profit that I supported from December 2008, where I used all the bits-and-pieces, online and offline, for profit, non-profit, outsourcing, to help build a coherent view, and I am currently .
(Dis)integrate your corporate communication
I have been preparing a new service not the technological part, but to enable any organization that has a potential audience beyond its own location.
Enable to what? To integrate the online channels (twitter, facebook, website, blog, etc) with other communication activities (e.g. newsletter, events, campaigns, “old” media).
Without the need to have on staff technology-oriented employees or consultants, and, if you want, also using just free sources online.
This service will be first tested here locally (if I found enough interested parties to share the activity) and online, to identify further potential issues and potential new software bits and pieces needed.
Then, I will either transfer it to somebody else or develop a new company around this and associated services (of course, with extensive use of outsourcing).
The choice? Well, it is really based on two issues: financing available, and if I will start working for some organization that would absorb my time.
And if you are wondering if I walk the talk… I did outsource all my online “virtual infrastructure” and offices since 1998, using from early 1990s electronic channels whenever available
Actually, in early 1990s, I had to convince my bank in Italy to let me try use they electronic banking system on a portable computer, and defined with them some ways to identify different types of transactions via fax.
It was pre-Internet and pre-email: at the time, adapting the system required almost a degree in engineering, and designing processes and forms
So, have a look at your activities
What really needs to be done in your office, and what could be done somewhere else?
Meetings? Well… all the pro-bono that I started supporting after 2007 are supported only via e-mail and skype video/audio conferencing, with occasional phone calls.
No more meetings in hotels, offices, airports, and associated stress and cost
Think. It requires but a tiny leap of faith.
But I will publish later this week an article on how to make your computer “virtual”.
R
Tags: corporate, culture, identity, networking, non-profit, online, outsourcing, service announces, social, software