This week we covered the topic of knowledge, something important in the context of outsourcing/offshoring because it involves leaking knowledge out of the core of your company, needing to have the knowledge to understand how to manage and maintain a relationship with an outsourcing supplier and suppliers using the combined knowledge they gain from working with multiple clients across many different areas. There is an assumption that knowledge is a commodity that is available to all, but it’s actually a very social thing that resides in our brains and can be difficult to codify and share. If we think about organisations, particularly in digital technology, the company’s main asset is the knowledge that resides in it’s employees brains. So if you are thinking about outsourcing you need to know what impact loosing this asset will have on your company and it’s core business.
In addition to this, it was highlighted that in digital technology companies, many parts of the entire system rely on each other and so loosing the competency in one part may have an unforeseen effect on another part. One of the examples was where start ups will decide to focus on their innovative new application and will outsource things like email, HR, and things like that only to find as they grow they need to bring them back in-house to solve unforeseen issues. This reminded me of the debacle involving Parse. Parse was a platform that allowed mobile application developers to focus on developing the app for the phones and not have to worry about backend infrastructure such as servers or databases, so it was software-as-a-service and not true outsourcing but I think the lesson is the same. They were reported to be powering over 500,000 mobile apps at one point, but were bought out by Facebook and shut down at the start of 2017. This left these 500,000 mobile apps with no backend service and no knowledge within their companies on how to develop them. This over reliance on someone else for expertise without knowing about it yourself within your own company is effectively buying off the shelf anyway and can leave you in the precarious situation as per the Parse case.
We also learned that it is important to really understand and maintain the relationship between a client and a supplier. It’s important from a client perspective to have the knowledge in the area being outsourced so that they can apply and understand metrics to ensure they are getting quality work back from the supplier. For a supplier it is important to have the right structure for working with the client, for example having a business relationship manager as the bottleneck between the two is not likely to be efficient.
Metaphors for describing an organisation where touched upon, for example, the organisation as a brain or as an organism. These come from Garth Morgan’s metaphors of organisation. Something I plan to look into a bit more as it is very interesting to me to try to understand the type of organisations I have experience with in terms as metaphor. One of Morgan’s metaphors is the organisation as “A Psychic Prison” for example, an interesting concept that requires a more in depth understanding on my part.
We focused on a key part of the outsourcing plan too, the transition phase. This is where knowledge and the work is transitioned from the client to the supplier and it is clearly going to be key to the success of the outsourcing of a project. Many issues that occur down the line can be traced back to poor planning and execution of the transition phase. There should be a gradual change that can be measured, showing the client spending less on the outsourced activity and the supplier spending more, showing an inflection point as the two crossover. We covered some key metrics and advice from Cullen, Seddon and Willcocks (2005) that I am not going to cover in this blog but is important to search for if you are interested.
A couple of great quotes ended this weeks lecture:
- “Someone had to spend a hundred million to put that knowledge in my head. It didn’t come free.”
- “Take away the people and organisations are nothing”