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« 2nd place in the (carrier) bag? | Main | The issues remain the same »

April 10, 2006

Comments

Colin Ravenhill

A few years back this was refered to as Right Sourcing, namely for a particular industry business identfying the operational components that did not contribute to the businesses core value proposition and then look to a "trusted" partner that could offer the service more efficiently sharing the productivity gains. You could argue that M&S were one of the first establishing their brand on this very basis with supplier partnerships for manufacturer and "just" strictly controlling the style & quality.

I'd offer the thought that with the maturing of the IT business model more businesses, not just retail, are recognising that they can share responsibility for their IT operations, without giving away the crown jewels and that this recognition is creating the current buzz, of identifying those trusted partners such as Xansa, to do more in the BPO and outsourced F&A space.

Hopefully we're all in for a busy time ahead.

Richard Newsome

Nigel,

Just a few outrageous generalisations about retailers and outsourcing which might go some way to explain the apparent inaction. I do think that the "do more" message and our track record in other sectors should give us a way in here.....

1. Retailers assume that, if they only ever got round to it, they could run their back office as tightly as their stores. So, "finally sorting out Finance" etc etc is always on next year's plan. (If it ever does make it onto this year's plan, it probably then gets cut in favour of investments at the sharper end of the business, or is just reduced to the next wave of headcount reductions.)

2. Retailers are not very process-literate, sometimes wilfully so, seeing "process" as constraining innovation, speed etc. I also still hear the old saying "don't outsource a mess" repeated. So, there's a dilemma. The key is to change the cliche to "outsource the mess and the pain away".

3. Retailers hate paying the middle man - margin to the service provider is always viewed as money down the drain. (In particular, giants like Walmart and Tesco are renowned for their control-freakery - they do relatively very little outsourcing, in Tesco's case even at the expense and distraction of establishing their own centre in Bangalore as we know.) Also, they find defining and then costing cross-functional processes very hard, where the cost of the supplier will be very obvious and painful.

Just a few deeply ingrained cultural norms to sort out then.....!

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