With the growth of outsourcing at the strategic level, there is more at stake. This includes profitability, market position, sensitive intellectual property (IP), vendor relationships and talent. Determining the right approach to outsourcing is therefore becoming a challenging task.
As outsourcing grows in importance as a strategic pillar, executives and facility management managers will have to undertake pragmatic self-evaluation to determine the sourcing approach that best meets their organisational needs.
The increasingly integral role of facility management necessitates a more nuanced look at the risks and values associated with outsourcing for any given process or activity.
Hence, organisations should think about where their competencies lie and where their potential for differentiation resides when considering outsourcing.
Outsourcing is an undertaking that must be aligned and embedded within an organisation’s vision and must contribute to the strategic, management and operational objectives derived from said vision, within a given time horizon.
The graphic below illustrates three angles that organisations and decision-makers must consider when they want to use outsourcing.
Outsourcing as a strategic tool
Here outsourcing is focused on supporting and actively contributing to the company’s long term strategies through alliance-type arrangements. Outsourcing primarily resides at the organisational level.
Outsourcing as a management tool
Using outsourcing as a management tool, moves the organisation away from vertical integration and self-sufficiency towards a business structure that allows for more focused investments in areas that offer competitive advantages. Contrary to using outsourcing as a strategic tool, it primarily resides at the business process level.
Outsourcing as a tactical-operational tool
As a tactical-operational tool, outsourcing Is driven by a desire to solve a practical problem in order to achieve a net gain in operational efficiency. Here, outsourcing primarily resides at the functional activity level.
Today, many businesses still lack recognizing the immense value of outsourcing as a strategy to change the shape of a business. In many instances, outsourcing is therefore still seen as a mere tactical transaction with a myopic view of its benefit.
Hence, the decision to outsource or not necessitates an internal audit in order to maximise value, especially when employing outsourcing as a strategic tool.
Outlined in our graphic below we have illustrated the three main tiers of business outsourcing.
In this context, functional activities can refer to cleaning, catering or recruitment whilst business processes can refer to facilities management or human resources management. Organizational strategy refers to business-specific strategic objectives such as vision, mission, partnerships and investments.
Think about differentiation
Organisations should not think about core or non-core activities and process, but rather where their competencies lie as well as where their potential for differentiation resides. Businesses must consider what they have the ability to do in-house and what renders a potential competitive advantage as well as competitive disadvantage.
Organisations also need to figure out how they really can differentiate themselves, no matter if it concerns a core activity or not.
In some cases, simply owing to scale or expertise, partners can do a better job than they themselves can, even if it is essential to their business.
Learn more about Outsourcing. Read our blog post: How Outsourcing relationships will change towards 2020 or Download our Vision 2020 White Book: Future of Outsourcing and Perspectives for Facility Management.