23DeloitteResearch–InsideOutsourcingADeloitteResearchOutsourcingStudyThewhat,who,andhowofoutsourcingIT-intensiveprocessesINSIDEOUTSOURCINGDeloitteResearchWhat?Who?How?WhenitcomestooutsourcingIT-intensiveprocesses—oranythingelseforthatmatter—thesearethethreequestions,inorder,thatcount.Thismonographdescribesaframeworkwecall“ValueChainDynamics”thatanswersthesequestionsinarigorous,practicalway.Implementedproperly,ValueChainDynamicswillcontributedirectlytoafirm’ssustainedcompetitivenessandtoitsabilitytocreateandsustainshareholdervalue.TABLEOFCONTENTSExecutiveSummary..................................................2Introduction...........................................................4ThreeLittleQuestions............................................6The“What”............................................................9The“Who”...........................................................12The“How”...........................................................16Conclusion:ThreeLittleAnswers.........................18InsetsTheEvolutionoftheComputerIndustryandValueChainDynamics..................................8WhyIT,WhyNow.............................................11WhyYouShouldNotMakeOutsourcingDecisionsUsingCoreCompetenceThinking.........14Endnotes...............................................................19AboutDeloitteResearch.......................................202DeloitteResearch–InsideOutsourcingGettingtherightanswerstothesequestionscantransformyouroutsourcinginitiativesintowhatyouhavealwaysthoughttheyshouldbe:powerfulcomponentsofyourfirm’soverallcompetitivestrategy.Manycompaniestodayoutsourcethewrongprocessestothewrongvendorsindealswiththewrongstructure.TheresultingchaosandrancorthathascometotypifymuchoftheIT-outsourcingmarketisaclearindicationoftheneedforasimplifyingbutrigorousframeworkthatprovidespracticalguidance.Makingtherightoutsourcingdecisionsrequiresansweringthreequestions:1.Whattooutsource2.Whomtooutsourceitto3.HowtostructuretheoutsourcingdealGettingtherightanswerstothesequestionscantransformyouroutsourcinginitiativesintowhatyouhavealwaysthoughttheyshouldbe:powerfulcomponentsofyourfirm’soverallcompetitivestrategy.Outsourcecorrectly,andyoucanpositionyourcompanytospringstrategicsurprisesthatwilldefeatyourcompetitorsanddelightyourinvestors.Getitwrong,andpreparefordecliningmarketshare,decreasingmargins,andafallingstockprice.Howdoyougettheanswerright?Useanapproachwecall“ValueChainDynamics.”ValueChainDynamicsbeginsbyaskingwhatyoushouldoutsourceandwhatyoushouldkeepin-house.Conventionalwisdomsaystohangontoanythingthatiscoreandoutsourcetherest—functionstypicallyderidedas“backoffice”or“infrastructure.”Yetmanysuccessfulcompaniesdonotfollowtheserules,andthosethathavearenowtryingtoundosomeofthosesamelong-termdeals.Oneofthereasonsfocusingonthecorecanleadtosuchproblemsisthatitencouragesnavelgazing:youendupbasingoutsourcingdecisionsonwhatyouthinkyouaregoodat,insteadofwhatyoushouldbegoodat.Sowerecommendbeginningbyidentifyingyourfirm’scompetitiverequirementsasdefinedbythemarketsyouserve.Then,useoutsourcingtoconfigureyourvaluechainandthatofyouroutsourcingvendorinordertooptimizeyourcompetitiveposition.Inotherwords,corecompetencethinkingcanbetoo“insideout,”whencompetitivesuccesscanrequirelookingfromthe“outsidein.”Identifyingthecompetitiverequirementsofa...
