Onsourcing also alleviates the high cost of continuous investment in low-cost locations to retain delivery economics. With a rapidly globalizing services landscape, most corporations cannot afford such ongoing investment in program-management property, infrastructure, recruitment, etc.
Successful outsourcing implementation requires a change in the capabilities of management. And good shared-services managers have moved part of the way down that path as the corporation moves from vertical process delivery to consolidated services delivery through shared services. Onsourcing represents the next step in evolving the capabilities of a retained team. Onsourcing managers become the “switching station,” managing the expectations of the business by fitting the rightly made or bought delivery solution.
Flexibility to adjust the speed of implementation of outsourcing is a key benefit of an onsourcing approach. If business conditions change, making transfer of specific process delivery to a third party more risky, the onsourcing strategy can be adapted. Alternatively, if the complexity of transactions increases, onsourcing becomes a flexible delivery mechanism.
Core to the premise of onsourcing is the concept of gating. If a transfer and delivery of selected processes does not meet service levels as targeted, the parties have the opportunity to cure in a constructive way before proceeding with the next phase of transition. As a result, the relationship has the opportunity to get on the right footing with a contained number of issues to cure.
And who can argue with transitioning quickly and containing the cost of implementation? A full-scale outsourcing requires a substantial investment in business-case development, sourcing and transition. Onsourcing can be implemented under a task-order framework, based on the preparation of incremental business cases, which can be developed and implemented quickly. Onsourcing keeps the SSC competitive, and rate card increases static. More expensive, risky, or complex processes can continue to be delivered by the SSC while onsourcing can offset increases in costs, reducing the inevitable noise that comes from the annual contract or transfer pricing exercise.
Not all outsourcing providers may be equipped to onsource. For those who require considerable scale and process scope in order to deliver a value proposition to the client, onsourcing may not present the requisite economics. And for those providers whose proposition is dependent upon concurrent process delivery and systems implementation, onsourcing is not attractive.
Best way to design an onsourcing program. The SSC should begin by laying out the principles — transparent to the end customer and/or will most benefit from the advantages of further consolidation, standardization or labor arbitrage — by which processes will be selected for onsourcing.
Onsourcing could encompass processes, which are not highly language dependent or subject to regulatory requirements. It should represent an opportunity to leverage an outsourcer’s process-improvement expertise in situations where the expertise is thin on the ground in the operation.
Is onsourcing a new idea? Not at all. It is a simple, descriptive term for the way in which many organizations would like to outsource business processes. Many SSCs have seen the virtues of incorporating selective
or phased outsourcing into their delivery strategies. It’s time to give the trend a name. The outsourcing of services can be structured within a framework contract and “gated” according to the SSC’s ability to manage the velocity of change. Business conditions can be more closely factored into the transformation strategy; transition of processes can be easily modified depending on the implications of corporate events such as merger and acquisition activity, or regulatory changes.
