In today's world of global competition, businesses are trying desperately to boost, or at least maintain, profits and market share and reduce spending costs. Management teams within companies of every size, industry and profit position are looking seriously at downsizing, rightsizing, re-sizing, etc. At the root of many of these sizing initiatives is one of the most prevalent terms being used today-outsourcing.

This article addresses outsourcing as a process, not as a specific solution to a specific problem. One of the lessons we always learn when embracing new theories, approaches or practices is not to lose sight of the "big picture." When employing an outsourcing process as an approach to solving problems within an organization, there is a big picture to be considered. In this article, we will explore that picture from a couple of different perspectives.

The Big Picture
The outsourcing process today is usually considered in light of services being provided to an organization-either by in-house staff or an outside supplier or consultant. Examples of such services include mail, travel, security, maintenance, records management, design and project management. There are five factors which should always be addressed in an integrative manner, as they have cross-functional implications. The factors are:

• Cost of providing the service
• Quality level of the service provided
• Impact on corporate culture
• How to measure the results
• How to manage the service provider

These factors embody a broad range of information which must be considered prior to the decision on whether to outsource or "insource" a specific function or activity. In many cases, this information is unknown, difficult or impossible to obtain, inaccurate or incomplete when obtained, considered confidential by somebody, and so on. For our purposes, assume that we need the information and we will get it and use it in our decision-making process.

Cost of Providing the Service
The main issue here is to have a clear understanding of the type and amount of all costs associated with the function or activity as currently being provided. Typically, many times everything else is hurriedly considered and momentum is generated to make a decision based primarily on perceived large-dollar savings from decreased labor costs. In this haste, such things as the resultant level of service and impact on corporate culture are not considered. Similarly, real estate costs such as space, utilities, taxes and insurance are ignored.

Quality Level of the Service Provided
There are two issues here. One is having a clear understanding and qualification of the type and level of service being experienced with the current provider. The second is developing a clear understanding of the type and level of service which will be acceptable for the function when provided in the future. There is usually an expectation that any change in service provision will result in higher quality.

Impact on the Corporate Culture
This is the elusive one. From an outsourcing perspective, the elusiveness comes from the inability to quantify the cultural impact of a process change. Could an outsourced service produce a negative cultural impact? Most likely yes if the service is an integral component of the organization, such as the accounting department. Probably not if it's something like food service. When there is a negative impact, it's insidious at first, then overwhelming. Needless to say, outsourcing decisions can impact corporate culture, especially when they represent a departure from the way things have been done traditionally.

How to Measure the Results
The first challenge here appears if no process is in place to measure the existing service provision. The second challenge arises if there is no defined level of performance expectation for the services currently provided. With no historical reference, the measurement approach for a change in service provider often becomes "hit or miss."

How to Manage the Provider
There are many ways the service provider can be managed. Regardless of how it is currently being done, if service providers change, they must be managed differently, requiring different management skills. It is the author's opinion that, in most cases, service provider management should remain in-house. Competitive organizations embrace change as a necessity for being able to respond to market demands. External management of these services can present problems when dramatic changes are needed.

The Bigger Picture
We have covered the five factors relative to the way things are done prior to any change in the service provision. If a new approach is being considered for providing a service, it is assumed that management has determined there is a problem with the present approach. Usually the problem stems from one or more of our first three factors:

• Cost of providing the service
• Quality level of the service
• Impact on corporate culture

If the outsourcing process is to be employed, and a different approach to providing the service is to be explored, we must now look at the five factors from a new perspective-the way and by whom things will be done if there is a new service provider. The same questions will have to be asked and answered from the perspective of the potential new provider. It's now clear that the ability to select a new service provider that can solve your problems depends primarily on the quality of information that was gathered about the initial way the service was provided, monitored and managed.

When considering the outsourcing process as an alternative, it's important to remember that one size does not fit all. Whether the functions are eventually outsourced or insourced, the associated costs, expected performance levels, cultural implications and management requirements are not the same in all organizations, or even within an industry. There is an additional but often overlooked consideration. Many times the needed expertise is "under foot," it just requires proper guidance and management. This guidance is most effective when practiced in a non-adversarial, partnering environment. Available under-foot expertise can contribute to this type of environment.

The outsourcing process should be applied with the understanding that it is an exercise to determine how to best source a function or service under scrutiny. The best solution may be to outsource the service, insource it, or a combination of both. Outsourced functions require a different management approach. Once services are sourced externally, their integration with internal functions requires a higher level of attention.

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