By Doug Hudgeon
The Cost Reduction Tip
In the Eric Carle children’s story, The Mixed Up Chameleon, a chameleon attempts to become the perfect animal by adopting the best parts of different animals e.g. an elephant’s trunk, a giraffe’s long neck etc. At the end of the book, he’s so mixed up that he cannot catch flies for dinner.
As obvious as it is that an animal has evolved to work well only as a whole, when companies outsource their back office operations, they often try to keep favoured parts of their current operations.
For example, they may outsource payments but keep their approval processes or outsource claims but keep their task management system. This inevitably increases costs and regularly leads to the failure of the entire outsourcing project. Clients aren’t wholly to blame here.
Often outsourcing vendors, to close a sale, will pander to the requests of their clients to create a mixed-up chameleon and not properly recommend that they implement the complete chameleon.
If you are going to outsource a function at the lowest cost with the least change management then you need to find a vendor with a process that you can adopt completely.
Don’t select a vendor based on some other criteria (e.g. they are the market-leader) and ask them to implement only parts of their process.
If you cannot find a vendor whose process you can adopt completely then don’t outsource the function.
Doug Hudgeon who is lawyer and vendor management professional who has branched into finance and accounting shared services management.