A couple of years ago, as part of our ongoing Top Ten series we published a collection of some of the finest, most cutting terms of abuse ever heard in a professional environment (soon to be followed by a second): along with transforming the global business landscape, members of the outsourcing community certainly appear to possess world-class talents in the fields of invective, calumny and scorn…
The Commercial Court ruling in BT Cornwall Limited v Cornwall Council and Others is a sharp reminder that if an outsourced service provider does not provide the service it has promised to provide, to the standard it has promised, it should not expect the customer to allow the contract, however large and multi-faceted, to continue. Put another way, the customer is almost always right.
The traditional view of outsourcing has tended to see cost reduction as one of the primary drivers for any customer. The idea that the ‘total cost of ownership’ of a particular business function over the term of the outsourcing contract should be lower is very often part of the business case. Similarly, seeing outsourcing as a means of transforming a collection of assets on the balance sheet into a recurring service charge, and reducing (or at least apparently reducing) capital costs is another common refrain at the outset of deals.
I hope you have enjoyed the last columns focusing on the “economics of outsourcing.” I promised to explore other scholars and how we can learn from their leading work. For the next several columns I’ll be featuring the most influential “Big Thinker” psychologists that have directly or indirectly influenced the development of modern outsourcing.
This week’s column focuses on big thinker Ronald Coase. Coase, a giant of modern economic science and 1991 Nobel laureate helps us understand a key fundamental of business: that business (and outsourcing decisions) are a math problem.
While outsourcing has been in the limelight for some 20 years, various threads of economic thought and research stretching for more than 80 years planted the seeds of modern outsourcing, centering on growth theory, transaction costs, game theory, property rights, deregulation and the nature of the firm.
Over the last five years I have been privileged to have funded research in partnership with the University of Tennessee and the United States Air Force to study outsourcing with the challenge to find a better way to outsource.