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Outsourcing: Single Source vs. Best of Breed

by John Bostick

Psychologist Philip Zimbardo once said, "Situational variables can exert powerful influences over human behavior, more so than we recognize or acknowledge." That certainly appears to be true when we look at how we work with people who provide services to us in our personal lives versus those who do it in the business world.

In our personal lives, we tend to hire specialists. We look for people who have an expertise in a particular area, and count on them to do that one thing. You wouldn't ask the company that takes care of your lawn to provide daycare services for your children. You don't ask the plumber to build custom kitchen cabinets. You wouldn't think to ask the person who fixes your car to tailor your suit or clean your house.

Yet, in the business world we always seem to want to take the "holistic" route; i.e., find that one supplier who can do everything for us. We're hoping that a three- or four-letter company will come in, get to know our business, and then start solving problems or removing burdens for us.

At first, bringing in that big company works because they're hired to perform a specific task or function. When we initially hire an outside supplier, we carefully vet several contenders until we finally select the one we believe has the greatest expertise in whatever it is we need done.

Once the supplier is on board and solving the problem we hired it to solve, either we start asking the team to do other things for us, or the team starts looking for other things to do for us to expand their "web of influence," or both. It doesn't take long before we've strayed far from their core area of expertise and are now settling for less than optimum solutions - often merely for the sake of convenience. Proximity, or already being on the approved vendor list, becomes one of those "situational variables" Zimbardo mentioned. And that's just not right.

In today's business world with all its complexities and nuances, specialization in operational tasks is really the better way to go. Every operation requires so much specific knowledge that it's impossible for any one person or even one organization to possess it. While taking a holistic approach may sound good in theory, in practice it tends to lead more to frustration and disappointment than success. When that happens, the business almost always suffers - and often a very good supplier for certain things winds up getting judged more for what it can't do very well than what it can.

The other negative that comes out of trying to adopt a holistic approach in an era that requires specialization is that organizations become fatigued trying to get more out of a supplier than that supplier is capable of providing. The result is the enterprise gives up on demanding excellence and instead ultimately settles for mediocrity.

Hiring specialized suppliers of operational tasks and services avoids putting organizations in a state of "supplier fatigue." The specialists tend to yield a higher level of performance across the board, because their knowledge is an inch wide and a mile deep rather than the other way around. Specialized suppliers have the time, interest and resources to become experts in their specific area, and as long as they stay within that area they can provide a higher level of continuous service. Bringing in as many of them as is needed tends to raise the organization's expectations the way a rising tide raises all boats. It sets a standard of excellence across the entire organization. And if the need arises to find a different supplier due to performance issues, that one segment can be excised without affecting the entire operation.

It's really about portfolio management. Think of it this way: It is without doubt easier to manage a single stock than a diverse portfolio. But it's also a lot riskier. In addition, a single stock only answers part of a savvy investor's needs. It can be aggressive, conservative, poised for growth, capable of protecting gains, etc. - but it can't be all of them. Smart investors select the best stocks to accomplish all of their investing goals. That's what smart organizations do, too - select their suppliers based on specialties and required outcomes, then manage that portfolio scrupulously.

A holistic approach to outsourced services may seem solid on the surface, but when you dig deeper you'll see it's really laden with holes. Creating a tightly managed network of specialty suppliers assures you get the best each has to offer rather than having to settle for both good and bad.

Don't get psyched out. Avoid allowing situational variables to dictate your behavior. Instead, use the same approach to hiring business suppliers as you do with suppliers in your personal life. You'll find your results greatly surpass your expectations.


About the Author
John Bostick is president and CEO of dbaDIRECT, which provides data infrastructure management services to Fortune 1000 and Private 500 firms. He can be reached at mark.vorholt@dbadirect.com.


© Copyright 2008 dbaDIRECT

 
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