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BPO Journal

Saturday, December 03, 2005

Paradox Revisited

A few months ago, I had posted on the nature of the "outsourcing paradox" - the growth in outsourcing investments despite the increased failure of these investments to deliver value. Several studies, including surveys by consulting firms (of course, one might point to a hidden agenda in such studies) such as Deloitte and Bain point to dissatisfaction of firms with their outsourcing arrangements.

In response to that post, owners of outsourcing relationships wrote in saying that firms were not off-base in the value that they expected to realize from outsourcing; the dissatisfaction arose from a failure to capture that value. They suggested that while firms devote significant attention to whether to outsource, concomitant attention is not paid to how to outsource. Yet, there were others who said that their firms displayed herd behavior and followed the competition when it came to outsourcing. This failure to evaluate the applicability of outsourcing to their unique business context resulted in . In either case, it seemed that firms were unprepared for the transformation that outsourcing entailed. One reader also pointed out that his firm did not have a plan to backsource the outsourced process when the outsourcing arrangement failed. Although the contract specified exit conditions, the firm did not have a plan that specified routines and procedures to transfer the process in-house, exacerbating failure.

While I am researching these independent effects on outsourcing efficiency, I'd like to gain more insights into the decision process that is followed in outsourcing firms. Why does your firm outsource? In your experience, what are some of the reasons that outsourcing relationships fail?

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