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The problem with outsourcing isn't what we can or can't outsource. It's the constant friction of vendor relationships. Outsource a function that requires a gro

The problem with outsourcing isn't what we can or can't outsource. It's the constant friction of vendor relationships. Outsource a function that requires a group of skilled people? The vendor you picked will gradually reduce the quality/availability of the staff you work with. Until eventually you're paying a vendor to train their new hires. Outsource a software service? Expect them to use vendor lock-in to their advantage. The price will increase 10%+ annually. Changes will become exorbitant. Outsource a department? Watch their scope become narrower over time, and their demands on anything outside the department increase. Eventually you need massive forms filled out 'just so' to get anything out of them. Errors become rife, and require a lot of effort for an outside party to fix. Emergencies for the business are not emergencies for the outsourced department. As someone who makes these sorts of decisions regularly, it's rarely a question of what we want outsourced. It's a question of how we can package the function in a way that is conducive to a vendor relationship. Not a rant against outsourcing. There are other structural risks with in-sourcing.

welcome_dragon 9y ago
Wow. Great answer! Sounds like you also have experience with crappy outsourcing s well
rb808 9y ago
That is perfect description of what happens. The other quote I had was every 5-10 years management gets the idea to either outsource or insource to save money. Just switch back and forth every time you get a new CEO.
- arethuza 9y ago
  I have heard of management consultances generating revenue by simply recommending as "best practise" as whatever the opposite of what their customer/victim is currently doing.
- ebiester 9y ago
  I wonder if that has to do with the scar tissue that arise around the interactions of a given system. Sometimes, abrupt change is the answer not because the people are the issue ("too expensive") but rather because the system doesn't work as a whole.
- goldfeld 9y ago
  Every six months or so I rotate my room's furniture layout among a couple arrangements to increase efficient use of space and feel better.
mbesto 9y ago
I deal with a lot of investors who want to know insourcing vs outsourcing for their portfolio companies. Here's the thing about outsourcing, the people (FTE's) managing the vendors have to be just as deadly or smarter than their outsourcing peers, otherwise service providers pretty much walk over them. Marketing tech service companies are notorious for this. I'm looking at you PPC, SEO and Ad buying companies...you're the worst.
stevenj 9y ago
Is there a way to solve these issues - perhaps even via a startup?
thisisit 9y ago
As someone who was worked both in and with an outsourcing firm here's my take on it - An outsourcing company wants to have a steady stream of income. So, they give you the best pricing for your project. During the negotiations they also see if you have some form of in-house expertise. If yes, they will provide us the best available people. If no, they try hard to sell you few duds - people with bloated resumes but not enough knowledge. You end up paying for their training. Then it comes to actual implementations. If you hired duds, good luck with that. You will be constantly be on the hook for some unreasonable demands. If your hires are good, then everything should be smooth sailing. Once the project is over the outsourcing firm, wanting a steady stream, will try negotiate a support contract. If you do then the best guys in the outsourcing team will start leaving. Then you end up paying for a lot of duds. My take is as a technology company, never outsource some new technology. Need someone to work on say Airflow? Build your team and train them. Yes there is a training cost required but would you rather train FTEs or pay an outsourcing cost and training fees as well.
gaius 9y ago
It's a matter of alignment of incentives. Within the company Department X knows that the company's success is their success, one team, one dream. On the outside their success comes from extracting as much as they can from the host entity, without killing it. You can't fault people for acting as they are incentivised to do of course. You can only set up a system of incentives to shepherd people towards the outcomes you want. Emergencies for the business are not emergencies for the outsourced department. Well of course not. If someone wanted to work for company Y, it's because, for whatever reason, they wanted to work for Y. If Y stabs them in the back, TUPEs them over to an outsourcing company, why would they go the extra mile? Good people whose goodwill has been wantonly squandered, and who know where all the skeletons are buried...

welcome_dragon 9y ago

Wow. Great answer! Sounds like you also have experience with crappy outsourcing s well

rb808 9y ago

That is perfect description of what happens. The other quote I had was every 5-10 years management gets the idea to either outsource or insource to save money. Just switch back and forth every time you get a new CEO.

arethuza 9y ago
I have heard of management consultances generating revenue by simply recommending as "best practise" as whatever the opposite of what their customer/victim is currently doing.
ebiester 9y ago
I wonder if that has to do with the scar tissue that arise around the interactions of a given system. Sometimes, abrupt change is the answer not because the people are the issue ("too expensive") but rather because the system doesn't work as a whole.
goldfeld 9y ago
Every six months or so I rotate my room's furniture layout among a couple arrangements to increase efficient use of space and feel better.

mbesto 9y ago

I deal with a lot of investors who want to know insourcing vs outsourcing for their portfolio companies. Here's the thing about outsourcing, the people (FTE's) managing the vendors have to be just as deadly or smarter than their outsourcing peers, otherwise service providers pretty much walk over them. Marketing tech service companies are notorious for this. I'm looking at you PPC, SEO and Ad buying companies...you're the worst.

stevenj 9y ago

Is there a way to solve these issues - perhaps even via a startup?

thisisit 9y ago

As someone who was worked both in and with an outsourcing firm here's my take on it - An outsourcing company wants to have a steady stream of income. So, they give you the best pricing for your project. During the negotiations they also see if you have some form of in-house expertise. If yes, they will provide us the best available people. If no, they try hard to sell you few duds - people with bloated resumes but not enough knowledge. You end up paying for their training. Then it comes to actual implementations. If you hired duds, good luck with that. You will be constantly be on the hook for some unreasonable demands. If your hires are good, then everything should be smooth sailing. Once the project is over the outsourcing firm, wanting a steady stream, will try negotiate a support contract. If you do then the best guys in the outsourcing team will start leaving. Then you end up paying for a lot of duds. My take is as a technology company, never outsource some new technology. Need someone to work on say Airflow? Build your team and train them. Yes there is a training cost required but would you rather train FTEs or pay an outsourcing cost and training fees as well.

gaius 9y ago

It's a matter of alignment of incentives. Within the company Department X knows that the company's success is their success, one team, one dream. On the outside their success comes from extracting as much as they can from the host entity, without killing it. You can't fault people for acting as they are incentivised to do of course. You can only set up a system of incentives to shepherd people towards the outcomes you want. Emergencies for the business are not emergencies for the outsourced department. Well of course not. If someone wanted to work for company Y, it's because, for whatever reason, they wanted to work for Y. If Y stabs them in the back, TUPEs them over to an outsourcing company, why would they go the extra mile? Good people whose goodwill has been wantonly squandered, and who know where all the skeletons are buried...