When I did the research for the work behind what became the Econsultancy Best Practice Guide to Insourcing and Outsourcing it became clear pretty quickly that the dynamic of what companies choose to do in-house and what they outsourced to third parties is a continually shifting one. There were disciplines that were increasingly being migrated towards being tasked out to third party agencies and suppliers, and there were others that were being brought in-house. The benefit of the former being improved specialist expertise, flexibility and/or scalability, and perhaps better cost efficiences. The advantage of the latter being potential gains in control, agility, efficiency, integration.
Technology is of-course impacting widely on this balance. As owned assets become more important many organisations are investing more in things like CRM, analytics, content management, conversion and optimisation tools.
One way in which we might position the relationship that organisations have with the insourcing and outsourcing of technology and capability is about value at the centre, and value at the edges. This is a concept that Hagel, Seeley and Brown talk about a lot in their book The Power Of Pull. The centre of the organisation is about efficiency, incremental gain, business as usual. The edges are where innovation happens, where connected employees bring fresh thinking and ideas into a company. Enterprise is porous, value comes increasingly from the edges, and from the flow of knwoledge rather than just the stocks of knowledge an organisation has.
I think this is a lot like the value in technology. At the centre this is all about efficiency, scalability, control, optimisation and automation (helping a company do what it currently does but better). But just as interesting is the role that technology can play at the edges - in creating and enabling new, emergent capability (so this is about set-up, design, creating, understanding and deriving value). A more sophistcated approach to insourcing and outsourcing takes account not only of what might be done to improve core capabilities, but what capabilities will be critical to success in the future, and helps build both whilst understanding that you should never outsource the future.
Clay Christesen gives the example of Dell in this context. In the early 90s they were a disruptive force in part because they able to outsource key capabilities to Asus in Taiwan. As time went on, and spurred on by Wall St who smelled greater efficiences, Dell expanded their outsourcing programme to more critical parts of their business including the management of its supply chain and the design of the computer. By 2005 Asus had got so good at so many parts of Dell's business that they were able to create their own brand of computer. Over the years, says Christensen, Dell had "slowly outsourced its way to mediocrity in the consumer business". Ouch.
Photo Credit: JEO Photography
