Outsourcing Or Not: My Business Function Assessment Approach with Checklists

AT Kearney is continuously looking for opportunities to help their customers survive the economic turmoil. This time they revisited the make vs. buy option. Their findings can help you to make decisions on outsourcing possibilities. Hans Lodder presents his assessment approach and some checklists.

The discussion regarding make or buy is quite old. Late management consultant Peter Drucker wrote in the late fifties of the previous century that every function in an organization is a candidate for outsourcing, except marketing (create customers today) and innovation (create customers tomorrow). Since then many have invented and re-invented the make or buy option to reduce costs and increase Return On Investment (ROI).

Let I start with presenting again the table with advantages and disadvantages of make or buy.

This is a well tread territory, so I leave out clarifications. The interesting question is when the balance goes from make to buy, with as minimum make situation that you cannot outsource the creation of customers. I shall sketch an approach for an outsourcing assessment with checklists, so you can start immediately.

What you need is an organization assessment to check whether a function is worth keeping, or that it can (should?) be outsourced. AT Kearney sees 4 assessment criteria:

• Strategic value
• Performance
• Technology
• Technology per logical unit

Strategic value and performance are logical choices. Technology also, because technology enables opportunities. Technology per logical unit determines whether all units have the same technology maturity level. This is often not the case.

The assessment should decide on the question whether we have a core or support function, as defined in the next table:

This table does not say how you should perform this assessment. This is where 'regular' work comes in. You need answers to questions as:

• Who are my customers?
• In what product/market combination do I work?
• How can I perform a little bit better than my competitors?

You will find detailed discussions and answers on these questions in many of our Results2Match Community blogs. Some examples:

• Re-assess your Key Business Requirements (KBRs).
  This is where you should start. Which business are we in? What are our important high level requirements?
• Re-assess per KBR your Key Performance Indicators (KPIs).
  Once you decided on your KBR's, you need one or more KPIs per KBR.
• Design your quality approach.
  One level deeper you need to define your product differentiation indicators.
• Reduce your business complexity.
  By eliminating not longer used processes, and by critically comparing your product differentiators to the actual product you save costs.
• Integrate all perspectives into a solid business design.
  Validating your business design from all perspectives makes sure your business operation will be aligned, and run smooth.

How do you decide on make or buy? We like to hear from you. Share your experiences with the Results2Match Community!

Are you looking for cost reduction alternatives that enable sustainable growth? Do you want your options validated by an independent management consultant? Have you ever considered a business strategy round table that let you inspect your business from a complete new perspective? Contact Hans Lodder now, and invite him to help you!

Do you prefer your own employees to be capable of guiding strategic sessions? Did they have the appropriate training? Are they guided and coached? Let Hans Lodder run your business competence improvement program!