What do we mean by “outsourcing maturity?”
Now it’s one thing to use “mature” to indicate experience. A couple of months ago I quoted a client who referred to himself and his peers “growing up” as sourcing practitioners. However, the word can also imply stasis, or as my dictionary defines it, “Having reached full natural growth or development.” I have a problem with applying this definition to the global sourcing market.
In the interest of full disclosure, I’ve been receiving unsolicited communications from the American Association of Retired Persons (AARP) for more years than I care to count. One might say that I’m a bit oversensitive. Still, I question how or even whether or not the accepted meaning of maturity applies to a continually evolving industry.
In the early days of “offshore outsourcing” the focus was on reducing labor costs. Nearly twenty years have gone by, however, and many companies still approach it in the same way. These companies are mature in the sense that they’re good at reducing headcount and leveraging offshore labor rates. But, their thinking about global sourcing has hardly matured at all.
The clients I work with, on the other hand, have moved or are in the process of moving beyond this ostensibly mature phase of development. For example, a client I’ve known for four years recently took the number two position in the IS organization of a Fortune 500 company.
This person has been involved in global sourcing for more than a decade. His new company, too, has long experience in outsourcing, and by all accounts has done well at leveraging offshore labor rates. Using the accepted definition one could stay that both have reached a high level of sourcing maturity. But that’s not how he sees things.
As part of his new role the client inherited a large well established vendor management group, which is another indicator of sourcing maturity. However, his view of the group was that it was stuck in a procurement mind-set – IT labor as offices supplies.
As he puts it, some of the staff members were “paper pushers” who lacked the necessary skills for what he has in mind. That is, to reduce the current number of vendors and create strategic partnerships with a small but select group of Tier-1 companies with deep industry experience.
To this end he is eliminating positions, hiring new staff, and introducing vendor management training. He’s looking to develop individuals with an understanding of technology and how it applies to the business. Above all he wants people who can manage relationships, and he’s creating a career path for them in the process.
Interestingly, in moving the global sourcing model forward he understands that higher costs are part of the equation – “…so that vendor partners can meet their margin goals.” He is also exploring risk/reward opportunities – initiatives where there is measurable impact on the bottom line.
The point of all this is that here is an “experienced” outsourcing practitioner who is redefining what it means to be “mature” in the best sense of the word, i.e., experience. As one matures one learns, as one learns one gets better at what one does, and so it goes. There is no end state, instead there is continuous evolution.
Being at an age where maturity often means that things start going downhill, I prefer this definition.
Comments
Outsourcing maturity is a highly relative term. As the author points out, the evolution is still happening and might reach such a space, which we can't imagine right now. I feel, what the buyer set out to achieve financially and the governance ease with which they managed the whole arrangement determines the maturity level of outsourcing. Obviously, therefore it takes the level of both parties involved [Supplier and Buyer] to determine the maturity of the overall deal. Some Suppliers are able to leverage their higher exp in bringing up the level of the buyer. Such players could probably boast of a higher maturity just within their organisation, provided they do it consistently. Net, I don't think the maturity definition should be rattled to such levels.
Posted by: Vinay Nair | April 14, 2008 11:22 PM
Stephen Lane’s article on “Outsourcing Maturity” is highly relevant. Maturity has become the most vital aspect on either side of the client-vendor equation. Embracing the fact that outsourcing is strategic to an organization, the sweeping changes being made by the referenced client in the article, no doubt would have executive approval at the highest level.
Whilst a handful of leading Outsourcing Advisory firms are thriving on building the outsourcing maturity levels at client organizations, the Tier 1 vendors too, have kept pace and climbed up the maturity curve as this has become a business imperative for them. A larger cross section of vendors have gained maturity in managing their operational aspects that are relatively easier as they are internal to the vendor, but only a few select vendors have understood the importance and taken the leap to gain maturity beyond internal process optimization and focus on aspects that provide maximum “Business Impact” to their clients. This ability to create a positive business outcome is not easy to build as it puts to test the vendors ability for continuous innovation, assuming that vendors already have a good grip on the clients business domain, industry dynamics and challenges. In other words, successful vendors help their clients ‘run their businesses’ – This means that vendors should focus not just on their clients per se, but on their client’s clients, market share, and other stakeholders that make the client successful.
All this means that clients are increasingly looking for vendors who already have this high level of maturity before deciding to invest their time, resources and money in building a strategic partnership. Clients will continue to raise the bar and be increasingly demanding and selective, thus, requiring vendors to make competitively differentiated offerings by leveraging the scale of their maturity. So It Is All About “Outsourcing Maturity”.
Posted by: Venkat Gopalakrishnan | April 21, 2008 08:52 PM
Lane has lent us with a highly effective understanding of "maturity" which indeed turns us mature in grasping the concept of "maturity".
Posted by: Prasenjit Das | May 11, 2008 12:23 AM