Is This Future Shock?

musings on how technology is changing my business environment

So, how's your outsourcing going?

with 2 comments

If you look back, perhaps you can occasionally learn what the road ahead may bring.

JP Rangaswami, MD of BT Design used to work at Dresdner Kleinwort Benson, and was a believer in outsourcing – as are we all in this day and age.

He had some useful warnings, listed here:

http://www.watersonline.com/public/showPage.html?page=129216 

But what about outsourcing, which has become Wall Street’s cost-saving darling? Isn’t this one way banks can rid themselves of routine tasks? Rangaswami warns investment firms of the seduction of supposed cost savings. “What I lose with offshoring is far more than I gain,” he says of DrKW’s own experience, which was “focused on the war for talent rather than wage arbitrage. With outsourcing I may reduce the core execution cost but I pay for it by increased coordination and training costs.” DrKW found in some cases that the local offshoring staff had to be spoon fed and that the typical attrition rates of 40 to 50 percent meant they were often training staff to ultimately benefit others.

Rangaswami also urges firms who do embark on outsourcing contracts to “clean up their garbage first,” rather than dumping it onto the vendor, who will most likely charge a considerable premium for the cleansing. “In the current climate, we cannot afford to feed the mouths of outsourcers. The focus has to be on getting rid of the layer of fat and then parceling it off neatly to someone who has the critical mass to provide economies of scale,” he says.

Sensible really. Work out what you’re outsourcing; why; and what the likely true return is.

Written by SteveEllwood

November 23rd, 2007 at 10:37 pm

Posted in JP,Management