Afterwards, I began to wonder if the scenario the client presented was just an example of a company failing to follow established staffing best practices or if current assumptions about “outsourcing maturity” were a bit premature. Curious, I contacted an Infosys colleague who is involved in large-deal pursuits and asked him if the prospects and clients he works with are as focused on headcount numbers as the caller’s company. He said that invariably one of the first questions asked in kick-off meetings is “how many internal jobs do you think we can cut?”
Cutting costs by reducing staff and transferring work offshore is and always has been one of the chief motivations of global sourcing. From an HR perspective, however, the most important questions for a company entering the field are “what will be the role of our internal organization and what should it look like?”
Focusing on headcount cuts and raw numbers at the outset is like putting the proverbial cart before the horse. Still, many companies start out that way, usually by assuming that if it takes N number of internal resources to perform a task, then an equal or greater number of vendor FTEs will be needed to do the same work.

One outcome of this approach is that companies delay achieving or even fail to achieve the desired cost-reduction targets. Worse still, sometimes the staff cuts are so severe that the baby (institutional knowledge) is thrown out with the bath water. Inappropriately large cuts are also the result of failure to take into account the need to manage outsourced tasks and/or service provider staff.

Headcount reduction or to put it more positively, optimizing resources to not only cut costs but also focus on core activities and gain flexibility requires an understanding of and planning for both external and internal factors and contingencies.

At the minimum a successful sourcing strategy requires a retention plan that takes into account the need for internal knowledge to plan for and execute knowledge transfer and transition activities, manage vendor relationships and projects, and ensure that processes and knowledge developed by vendors are transferred back to the company.

There are enough HR challenges in outsourcing without adding another one, i.e., failure to develop a positive resource retention plan. It may be that the client’s call and my colleague’s experience are outside current norms and most companies have acknowledged the need to balance both internal and external resources. I’d be interested in hearing about what others are experiencing.

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 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.