NEW DEMANDS ON
OUTSOURCING:
THE LONG-RUN
PERSPECTIVE

World-class transformations are strongly
dependent on the new management
structural innovation: use of outsourcers
to give technology problem solving in
place of insider staff.
Critical to improved competitiveness, but
most neglected !

Create and maintain a pattern of creative
teamwork so that the insider/user’s
intimate knowledge of the business, its
present and future needs, gets integrated
with the expert technology capabilities of
the outsourcer.
Critical to improved competitiveness, but
most neglected !

Image and develop systems which can be
“works in progress,” i.e., they have
dynamic capabilities to evolve with the
inevitable changes the business will
confront.
Critical to improved competitiveness, but
most neglected !

Use a technology development process
that empowers line managers to exploit
the flexibility and adaptability inherent in
these new line technologies by initiating
customized enhancements.
To meet these challenges, executives need
both view on outsourcing as a process and
guidelines to facilitate its use.
Everyone Now Outsources

Record shows lots of client complaining about
prolonged suffering & disagreements w/
outsourcers in development and completed of
new IS & operation. Paradoxically, IS become
crucial to the functioning of most companies &
the day-to-day work of their managers, these
companies are turning to outsiders to develop
and often manage those critical systems.
Everyone Now Outsources
The impact :
 Technology costs and skill requirements
keep increased
 Greater use of outsourcing
 Internal staffs tired and unable keep up
with new demands
 More outsource making up in absence of
internal resources.
Everyone Now Outsources
Two not-so-hidden dilemmas:

IS tech may not represent a core tech,
but it supports & is an essential
component of what coy are about.

Outsider systems can’t be built or
operate without continuous,
knowledgeable inputs from insiders.
The Needed Leadership Skills
Most companies place little emphasis on
leadership skills in the management of
outsourced technology.
 Managers must make the technology their
business.
 Managers need to understand the
underlying technology well enough to
make critical choices.
The Needed Leadership Skills
Outsourcing does not eliminate the need to
manage IS. Routine decisions can be
made by the outsourcer, but not those
that relate to business strategy and
customer service.
Partnering – More Than a
Mantra/Song

There are lots unanticipated discovery,
trial & error and the need for creative
problem solving – IS success depends on
intimate collaboration between client &
outsourcer. Their people & tasks are
highly interdependent.
Partnering – More Than a
Mantra/Song



Creative partnerships: continuing give & take,
mutual challenges and joint exploration.
Partnerships required marrying technical &
technology knowledge with business knowledge.
A good deal of continuous monitoring is required
and coordination interactions need to be
frequent.
Seductive Traps to Avoid :
1. Mgt must be careful when sponsoring
very large leaps forward that seek to push
the company in one giant step into a
technologically sophisticated future.
2. Senior executives must aware to the
tough strategic issues in needs to balance
specialization & integration.
Seductive Traps to Avoid :
3. Given the centrality of information and
communication, the “product” of computer
systems, substantial managerial effort
(time and money) must be devoted to
continuously reintegrating the work of the
outsider into the everyday routines and
decision making of the line, of the
business managers.
Big Leaps
VS
Continuous Learning & Improvement
Lessons to be learned:
 It’s difficult for outsourcer to implement
spectacularly complex programs & high
frequency of failure.
 Even experienced & smart managers
difficult to image how using a new system
will change how they doing jobs. There’s
big gap between visionary plan & reality.
Big Leaps
VS
Continuous Learning & Improvement
Lessons to be learned:
 The speed in this technology moves almost
guarantees that the system will be obsolete
when it’s completed.
 Best systems allow business managers &
users to fully absorb changes and to keep
improving, adding, fine-tuning & responding
to new marketing & production challenges.
Big Leaps
VS
Continuous Learning & Improvement
Lessons to be learned:

Managers should insist that new systems be
designed to promote feedback to users and
flexibility.
The managerial issues in outsourcing IS is really
the “how to” of balancing business management
goals of tight coordination among functions and
adaptability with the need for expertise in new
technologies (specialization).
Predicting the Future


50 years ago, American mgt required to
“outsource” its people mgt. It required
experts, trained in new technology:
human resources.
Now, they didn’t actually outsource this
people mgt function. Instead, they
thought it could be handled completely by
staff personnel specialists.
Predicting the Future

In coming years, there’ll be more frequent
contact between line managers and
outsourcing contractors.
In effect, the outsourcer won’t be further
away for communications purposes 
Virtual organization.
Predicting the Future

New project/outsourced operation should be
evaluate by the terms of how easy it will be to
change, update & make continuously responsive
to current business demands.
Not: how much are we getting today for what price.

Outsourcers and their plans must be chosen on
the basis of how much they will contribute to the
abilities of business managers to manage their
businesses.