The low costs and low risk of outsourcing will accelerate the flow of jobs offshore, force companies to look differently at their strategies, and change the basis of competition. Eventually these costs and benefits will be so visible to buyers that outsourced processes will become a commodity, and prices will fall dramatically. Such standards will also make it easier to compare service providers and evaluate the costs versus the benefits of outsourcing. A broad set of process standards will soon make it easy to determine whether a business capability can be improved by outsourcing it. However, a new world is coming, and it will lead to dramatic changes in the shape and structure of corporations. The lack of standards may also explain why, in the few broad studies of satisfaction with outsourcing, many companiesup to half in some studiesare dissatisfied with their outsourcing relationships. Given the lack of comparability, it's almost surprising that cost is by far the primary criterion that companies apply in evaluating outsourcers, and that cost reduction is their primary objective. As a result, firms that choose to outsource their capabilities have to proceed on two criteria: faith that the external provider will do a good job and cost. With the exception of IT system development, there is generally no clear basis by which companies can compare the capabilities provided by external organizations with those offered in-house, or to compare services among multiple outside providers. (Huge multinationals are the most likely to take advantage of outsourcing, but even then, only for highly transactional and administrative activities.) Because of a paucity of process standards, it would be risky to do otherwise. ĭespite the trend toward outsourcing, however, most companies have remained in do-it-yourself mode for most processes.
Sometimes they were done well, sometimes they were done badlybut since a company had no way of determining how well an outside business might perform these processes, they were kept in-house. Whether the processes involved were critical to the organization's strategy or incidental to it, they were generally performed by people within the organization. Throughout the history of business, most firms have built their own processes for almost everything that needed to be done.