Evolution of sourcing models during the last decade: hands on experience of a 20 year old outsourcing company

June 11, 2015 White Papers

The presentation provides historical overview of evolution of outsourcing service models from internal service departments, to shared service organizations, to service contracts with companies inside and outside of their own countries, to dedicated teams, to offshore production centers, to SLAs in service delivery in BPO and ITO, to a blended model of on-/off-shore delivery, and to remote in-sourcing.

Why (out)Sourcing?

Let’s answer two questions: What is outsourcing and Why Outsourcing exists? From my viewpoint outsourcing is international transition from trading by goods only to trading by services. Technology development, primarily invention of Internet, allowed to utilize international labor on variety of service applications and, for the stake of business effectiveness, it was immediately done. So, outsourcing and globalization are modern “piece drivers” if to believe to baron de Montesquieu. And I think he was right.

For Why Outsourcing, there are 2 primary reasons. The first one is shortage of expertise or specialists that posses certain expertise. In various researches on reasons for outsourcing this same shortage may be called Talent shortage, Getting strategic flexibility, concentrating on Core focus, etc. But this is all sound like synonyms for the same: lack of certain expertise and people. The second reason is obvious, Cost. Businesses not only want to get expertise but want it in a cost efficient manner. Everything of course is expected to be done with already achieved internally or better quality.

I would say that if there was no shortage of expertise, people most probably would not do outsourcing. And there are a lot of organizations that are in position to in-source everything. For example Google, sitting on an advertising money machine, maintains large scale development in-house and I know a couple of similar organizations. Even one of our clients who developed the initial product offshore, now employ programmers in Hamburg, no matter at what cost.

So, the expertise is certainly available on any market and any business can hire, or in-source it, locally. Of course, if you have budget to hire those local expensive specialists and manage them. Then there is a whole bunch of different situations, as usual normally distributed, with tendency to outsource more and more in attempt to get maximum efficiency and competitive edge.

As usual, in this process 3rd party engagement, everybody tries to get all services Fast, Good and Cheap, despite a project management law that you can get just two of three. You see, it’s not possible to get into this little white triangle. But nonetheless, usually client organizations still insist on this.

Outsourcing engagement are driven by the same desire – getting Fast, Good & Cheap at the same time, no matter what.


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