To offshore or not to offshore – that is the question

In these increasingly turbulent times how do you guarantee you can maintain the critical edge on your competitors? One way of doing this is to focus on what matters most to your end customer and plan to outsource the rest – but this then sets the very real challenge of how to outsource – and where.

It is essential that any outsourcing relationship is based on working in close collaboration with suppliers that are capable of hitting the mark.

And if you are going to outsource, do you outsource within the UK or do you take your collaboration offshore?

Many organisations consider off-shoring partnerships cynically as other organisations can gain access to the same services. But this is a very static, simplified view – it is in the way you transfer your business requirements, innovations and opportunities to these new suppliers and how fast you achieve this transfer that will enable your suppliers to develop their competencies and knowledge. The better and quicker this happens will be the basis of your competitive advantage.

Businesses that are unable to do this successfully and to meet key associated targets, such as reducing organisational or product costs, will be weakened by transferring their business offshore and will ultimately be at risk from their competitors.

You should be careful that you take full advantage of the opportunities open to you by transferring business offshore. You should harness any and all the distinctive capabilities and markets available, rather than squandering the opportunity by simply transplanting existing operating models offshore. You should work with your suppliers in an open and transparent way, with joint incentives and targets. Ultimately you want your suppliers to do the best they can as this will directly benefit and support you – but even with this scenario you should be aware of the possible outcomes.

Boeing outsourced various parts of their manufacturing activities to Japanese companies and these in turn became such experts in their areas that they grew beyond the ability of Boeing to control them. IBM too made a crucial decision to outsource the micro processing needs to Intel and operating system to Microsoft. These suppliers went on to produce the lions share of the profits and became much more important to their customers and more widely recognised as brands then IBM ever was.

Every project that is undertaken to outsource or offshore business activities alters the organisations internal capabilities and impacts on available skills and knowledge that will be available for future projects. The key is to concentrate on the elements of your business that maximise your competitive advantage, to focus on keeping these in-house and doing them to the best of your ability. And to assemble your supply and competence chain accordingly.