Consider the Outsourcing “Not” List

Most people in this industry, me included, tend to write about what outsourcing is, or should be.

That’s a natural and normal approach, especially as we develop concepts and systems and the right way to outsource—such as (ahem) the Vested Outsourcing way!

But sometimes looking through the other end of the lens can bring a useful new perspective, which is what Oliver Kirchner, senior legal counsel, global commercial transaction for Nokia Siemens Networks, did recently at the Arab Outsourcing Conference in Dubai. (I referred to Oliver in recent on outsourcing agreement T&Cs.)

In his presentation on “Why Outsourcing Deals Turn Sour,” he talked about what an outsourcing agreement is not:

  • It’s not an “insurance policy” because “outsourcing cannot take away all existing risks from a company’s business and shift it to the partner.”
  • It’s not a “blank check” because “outsourcing cannot remove financial discipline or need to re-prioritize work and budget from a company.”
  • It’s not a “financial cure-all” because “outsourcing is not intended to relieve a company of its existing financial obligations (e.g. asset depreciation, pre-existing third-party liabilities, etc.).”
  • It’s not an acquisition of service providers’ assets or intellectual property because “payments are for services, generally not for intellectual property used or developed to provide services.”

I’m sure there are more points that could be added to the “not” list—one that comes to mind is that outsourcing is not a way for companies to beat up service providers on product, service and labor costs to get the cheapest possible pricing.

It’s also not a way to brag about collaboration and innovation without really doing the work with the service provider to create a true collaborative and innovative ecosystem to produce the win-win.

Actually Oliver’s “not” list reminds me of the Ten Ailments that can plague and derail outsource deals. They are the starting point for determining what’s wrong with an outsource deal–basically how not to outsource–and then realizing the need for a change to the better Vested way.

That’s the way to untangle the annoying that comprise the not list!

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