Three Things To Consider Before Outsourcing

Tripp Babbitt

I spoke to a reporter from India (Reed Business Information) recently regarding IT and call center outsourcing, and, more specifically, the impact on Infosys. He informed me my view was "different" than everyone else and I could only reply that I was used to that comment. Most Americans want "in-sourcing" because they want to bring jobs back to North America, I want service organizations to realize it is a poor financial decision to take this call center or IT outsourcing strategy.

Decisions are made in command and control fashion from the financials without knowledge of the work and/or based on scientific management theory that has long proven . . . outdated. So here are three things to consider before you outsource your call center or IT services.

1. The Work of Developers and Call Centers

What is the type and frequency of demand for a call center? More importantly is the demand value or failure? Most call centers have between 25 to 75 percent failure demand in their call centers and after outsourced lock in the costs of this failure demand. For software development it is the realization that software is not developed in a production line, software is developed from knowledge about the work that occurs. When developers are separated from the work it almost guarantees a poor outcome in what is coded leading to multiple rounds of rework that quickly lose their "cost advantage."

2. IT Services, Call Centers and Economies of Flow

Economies of scale drive American business. Few understand that "economies of flow" are the real driver of costs. Trapped in this wrong paradigm service organizations separate functions of IT and call center services, outsourcing pieces leading to sub-optimization (improving the cost of one area at the expense of all others increasing total costs).

3. The Ancillary Costs of IT and Call Center Outsourcing

There are technology costs, contracting costs, turnover costs, training costs, meeting costs, customer impact costs, etc. associated with IT and call center outsourcing. Look hard at what really is involved in IT services and call center outsourcing and you will probably find other hidden costs.

Evaluating these three areas before outsourcing IT services or call centers can lead you to better decision-making about what your service organization should do when considering an outsourcing strategy or even an in-sourcing strategy with regard to IT and call centers.

First published on New Systems Thinking Blog.