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Mark Grossman

Outsourcing Business Technology

26 July 2001

If your technology company is like most (or if you're not a tech company, but use a lot of technology in your business), you've probably considered outsourcing technology as an effective, cost-cutting measure. How you begin the process of deciding to outsource can be just as important as the decision to outsource itself. To that end, a good exploratory team can mean the difference between enjoying a successful outsourcing endeavor and enduring a recurring corporate nightmare.

Without a doubt, one key to successful outsourcing is deciding which area of your business you want (or need) to outsource. Trust me, it's not easy and you shouldn't do this yourself. It's virtually impossible for you to know every aspect of your business, and be fully informed about which of your departments or internal business functions are ripe for outsourcing.

Building a Team

First create an exploratory team, and let the team conduct the initial investigation into the advantages and disadvantages of outsourcing a particular function.

Building an exploratory team is different from simply gathering your colleagues and setting an agenda. In a perfect world, you'd approach your colleagues and ask, "Hey, who wants to help me figure out a way to outsource some of our business functions and save this company some money?" Everyone would joyfully accept your offer, and the world would be a peaceful, happy place.

Hello. Wake up! Let's get back to reality.

If your company is like most, many of your employees will give you every conceivable excuse not to outsource. I predict that shortly after you make your request for volunteers, your e-mail inbox will begin to fill with messages like, "We don't need to outsource," or "Our work is too important to outsource."

Don't be discouraged when this happens. It's entirely understandable and completely predictable. After all, you may think you're saying the word "outsource," but what your employees really hear is "You're fired," or "We're looking into ways to get rid of you." To them, outsourcing is akin to supplying them with a company shovel and asking them to dig their own corporate graves. In other words, you should expect the team selection process to be a bit rocky.

Choosing a Leader

To begin, pick a team leader. The leader will be responsible for setting the tempo and direction of the team, and serve as the team's mouthpiece as well. It makes sense, therefore, to pick a leader who shares your vision and objective of outsourcing. Of course, this is easier said than done, because even the candidates for team leader might fear losing their jobs to outsourcers. In fact, it's often said that for a team leader to seriously (and impartially) consider outsourcing, she should be at least two levels above the area you're considering outsourcing. Once you've selected the team leader, you have to begin staffing your team with competent employees who understand the long and short-term goals of your company. Many companies limit membership of the team to supervisors and upper-level managers--this is a big mistake. Clearly, you'll need the input of upper-level management, because they're in the best position to analyze high-level issues and provide guidance in areas to which most employees are not regularly exposed. However, low-level employees can help the process too.

First, they often understand the day-to-day needs of your employees better than your managers. Second, by including them, your team will appear balanced and fair, instead of elitist and unresponsive. In any event, your goal should be to create a team that represents a cross section of your company.

Outside Advisors

Without question, your team should also include outside advisors, such as your company's attorney and accountant. Outside advisors can increase the efficiency of your team by providing objective advice, and make sure that the team's goals remain within the boundaries of practicality. Also, advisors can even the playing field when it comes time to draft and review requests for proposal, or negotiate outsourcing contracts. Often it's easier (read C-H-E-A-P-E-R) to include advisors at the initial decision-making level, rather than bring them in after the team has drawn its conclusions or, worse, has become deadlocked.

Further, if your tech lawyer brings legitimate experience in negotiating outsourcing agreements to the table, the earlier you involve him, the better. Early, he can do more to guide and nudge your deal in direction you'll want it to ultimately go. Later, agendas are set and the outline of the deal is established. Moving the deal in a material way after the parties have developed expectations is harder and in some cases may be impossible.

Bear in mind that your experience base in negotiating outsourcing deals may be small, but hopefully your tech lawyer has been there and done this before. Everybody makes more mistakes when their experience level is low. In these situations, it's usually wise to hire a professional to set the course in unfamiliar territory.

Picking an exploratory team and negotiating your deal isn't necessarily fun or easy. You'll have to make some hard decisions and, at least temporarily, you'll likely be the target of company paranoia, strife and criticism. Nonetheless, there is no better way to explore the advantages you may reap from outsourcing than to pick the right team and forge ahead.

Outsourcing Business Technology is republished from
Mark Grossman
Mark Grossman