About four years ago I attended a conference in Sao Paulo, Brazil where Michael F. Corbett, Chairman of the International Association of Outsourcing Professionals (IAOP), was speaking to an audience of CEOs about sourcing strategies.  He cited a 3-Question Test that can help guide senior executives in considering sourcing as a management strategy.  I give Michael all the credit for this vein of brilliance.

Question 1:    If you were starting your business from scratch today, would you do _____________ (fill in the blank… IT, back office, HR, procurement, etc.) yourself?
If you were able to start your business with a white sheet of paper, your first thought might be “what does the marketplace have to offer?”  Look at it this way – think of yourself as a venture capitalist who is evaluating an exciting new companies’ business plan and the plan calls for the company to build out a new data center to get their IT established (I know… I am exaggerating to make a point).  Is that where you’d want to invest and count on a big ROI?  I think not.

There is a broad range of capabilities that the marketplace offers today that can more often than not provide a service at less cost with more efficiency.  Where you’d want your venture capital dollars going is in the areas that are related to the unique idea that the new company is bringing to market.  In most cases their value proposition does not rely on doing their IT, HR or back office exceptionally well.  It is based on the new idea, not being Six Sigma black belt experts in running IT.

Question 2:    Would other companies hire you to do ___________ (fill in the blank… IT, back office, HR, procurement, etc.) for them?
This speaks to how good are you really at say IT, back office, HR or procurement, etc?  Are you world class and the cost benchmark for your industry?  Have you won industry awards for your “Excellence in _________ (again, fill in the blank)?  I don’t ever recall seeing a CEO in a company’s annual report or on their website stating that one of their “core objectives is to be the best in the industry” at HR.  Doesn’t exist unless you are Hewitt, Fidelity, Cigna or the like.  A different angle on this question would be, “Am I better than the marketplace of service providers?”  If you are not, you can count on your competitors leveraging the marketplace to their advantage by not doing it themselves.  So what about you?

And finally…
Question 3:    Is this area _________________ (fill in the blank… IT, back office, HR, procurement, etc.) where tomorrow’s leaders are going to come from in our company?

Is this a skill, knowledge set, area of my business that is so well-recognized for its value contribution to our company that it’s where our leaders come from and we groom to be our corporate leaders of tomorrow?  Is it where we invest in developing our very best people?

So… if you can’t answer a resounding “YES!” to all three questions, then it makes sense to at least explore the opportunity that outsourcing may be able to bring your company.  Have a good journey.

Randy Vetter
Director, Alsbridge, Inc.