Outsourcing on the scale at which any professional services supplier is involved is usually a complex, politically charged 'business.' It is not only that the immediate principals, i.e., the responsible decision makers and their staff who plan and prepare outsourcing contracts, need to be convinced of benefits for themselves. Often more importantly in a complex organization, they must feel confident that the stakeholders they represent support the arrangement whereby close operational dependence exists on the external supplier.
As the services supplier does not enjoy contacts with all those stakeholders, it must provide arguments to its direct counterparts who can then build a strong case of benefits for stakeholders.
A customer cannot 'outsource' his benefits.
It is crucially important that the supplier applies the distinction between arguments and benefits. Ultimately, every customer stakeholder decides for her- or himself what counts, or doesn't count, as a benefit. (S)he cannot accept that a supplier determines benefits. A supplier should therefore 'only' argue for something to be considered a benefit.
Another vital distinction is that between change and state. Outsourcing is a change process. By definition of change, it should transfer the customer organization from one state to another.
The change is rightly called outsourcing when the organization in its new state has fewer sources in its own statutory domain than it had engaged with a particular purpose before. When the continued relevance of that purpose requires their continued application, such sources must be provided by an outside party, i.e., by an external supplier. It leaves the customer with the options of reducing its 'own' sources, or deploying them for different purposes, i.e., usually strengthening its core competences.
Outsourcing is therefore re-sourcing. They idea is that sources are restructured for additional benefits.
Outsourcing as a restucturing effort is a transitional concept. With the effort completed, (re)sources can be applied according to their new structure, or state. From a structural perspective it is not productive to continue to speak of outsourcing. For in any state an organization has some (re)sources 'out.'
No organization is completely self-contained regarding its sources. In fact, the prefix re in the noun resource strongly suggests that 'something' is brought 'in' from the 'outside.'
A common 'source' of miscommunication is that customer and supplier follow different perspectives. Confusion is easy to arise when these are not recognized, and dealt with.
A supplier tends to emphasize the new state. From the assumption that the new state he proposes to help realize is desirable, the supplier is biased to consider the change toward it as a priori acceptable to stakeholders. As such, it deserves no special attention. Even less attention is required, still according to the habitual supplier perspective, for the old state. Usually, a supplier (mostly) argues exclusively for the benefits the new state will bring.
The preoccupation of most customer stakeholders, however, is with their current state rather than with change, not to mention any promise of a new state. Confronted with outsourcing as a change process, they often have difficulties seeing beyond even the earliest stages of change. Their emphasis will be on problems they expect from it.
The implications for the supplier and the arguments he should offer are nontrivial. Many customer stakeholders will especially experience as benefits what does not disrupt the old state. A supplier who doesn't adequately provide sufficient arguments for reassurance creates an obstacle to successfull communication.
This points to three specific classes of arguments: (1) maintain what stakeholders value in their old state, (2) conduct change as unproblematic for stakeholders as possible, and (3) support in the new state what the stakeholders find of additional value.
A professional services supplier may rightfully pride itself for its technological leadership. That is probably also how its discussion partners with the customer organization will openly declare their interest in the particular company as their favored supplier. But the services supplier is well advised to realize that its image of respecting continuity and handling change with minimum hassle is often even more highly valued by stakeholders. The attention such aspects requires also explains to a large extent why the supplier sets it prices at the level it does. With the proper arguments, the supplier supports as rational a comparison as possible with competitors' offers.
The concept of value is too general to be of help in generating arguments related to 'the structure of sources.' Other concepts that are often brought to bear on supporting outsourcing are strategy and core competences. However, there is something wrong about a supplier who elaborates on strategy, etcetera. Why? The customer rightly feels strongly that it exclusively is her or his own business. A supplier who tries to suggest otherwise does so at the risk of losing long-term credibility.
A customer stakeholder should therefore even be encouraged to express her or his own values, strategy, and so on. Where the supplier comes in is that, for example, a strategy needs activities for its achievement.
The key assumption from the perspective of communicating arguments about outsourcing is that every stakeholder wants optimal control over the activities required for attaining her or his goals.
The communication idea contained in the previous paragraph can now be restated. Regarding control, a stakeholder is really not only interested in gaining more control. (S)he is also, and often intensely, interested in not losing the control (s)he currently exercises. It should be noted that arguments in classes (1) and (2) above are mainly about maintaining control, i.e., about not losing it, whereas class (3) arguments promise a gain in control.
A stakeholder who experiences balanced support for the control (s)he exercises will feel that (s)he is being taken seriously in just the right way by an external supplier.
Every stakeholder is unique. Their differences may determine how one and the same argument is interpreted across a wide range of potential benefits. What one stakeholder may find in support of his control need may even be viewed by another stakeholder as distracting from it. The arguments that a supplier offers must reflect a sensitivity to particulars over as wide a range of interpretations as possible.
As a corollary, the dimensions or aspects of (re)sources that are used to 'score' how stakeholder control might be influenced by a different arrangement of (re)sources should be framed in as neutral terms as possible. Any judgement should be expressed in the score, rather than a priori in how an aspect is named. A trivial example is that 'low purchasing price' must be avoided as an aspect. Instead, the aspect could be 'purchasing price' which could be scored along a range of values, on of those being 'low' or a specific amount.
Neutral formulations for aspects also make it easier to compare proposals. And when one proposal is found lacking acceptance, development of alternatives is easier without the obstacle of intrinsic value judgements.
The variety of stakeholders causes a straightforward set of exhaustive arguments in favor of outsourcing to be ineffective. Instead, arguments must be developed for each and every customer, perhaps even at each and every occasion. Enabling custom-made arguments is a so-called repository of stakeholder control dimensions. At this stage, it is an open-ended classification. Items may be added and removed. Or they may be rearranged. Each item represents a dimension that could be relevant for the purposes of control.
When particular arguments must be prepared, an assumption of stakeholders and their control interests serves to select a subset of relevant control dimensions from the repository. An argument originates when the supplier proposes his scores for the selected dimensions. A benefit is only experienced when a customer stakeholder, either accepting the supplier-given scores or submitting her or his own scores, indeed experiences a credible promise of not-loss and/or gain in control.
A customer organization applies many internal and external (re)sources. In its communication with customers, the supplier limits itself to ... what it wants to supply. When services are involved, it follows to call relevant sources: service elements.
The aim is to offer arguments which can fruitfully be interpreted as benefits by customer stakeholders. Again, the variety of stakeholders precludes service elements being simply classified from the single, uniform perspective of the supplier. An effort must be undertaken to classify service elements as a customer stakeholder might logically preceive them.
It would surely help to ask customers directly about their perceptions. At the same time, a customer may not (yet) be knowledgeable enough to position service elements optimally all by himself.
The supplier should therefore construct its own classification of service elements. Which elements are relevant, which ones should be adjusted, added, etcetera, then becomes subject of discussion. It will help to establish a healthy relationship between customer and supplier. The result is a subset, taken from the overall classification of service elements, that is relevant for a particular customer against the background of a particular - possible - set of services supplied.
As a professional services firm usually deals with a large variety of (potential) customers, the overall classification becomes a general base from which to select service elements as relevant for particular requirements. It is then inevitable to revert to a hierarchical scheme. The requisite variety can be respected by considering a sequence of items as the context for the next-mentioned item in the classification. For example, helpdesk services in the context of payroll management 'mean' something different from helpdesk dervices in the context of desktop productivity tools. Essentially different service elements can continue to be labeled similarly because their explicit contexts support unambiguous differentation.
What has been called control dimensions in part 1 are here renamed as value aspects. It should be clear, however, that such aspects must reflect the control need of customer stakeholders, that is, not to lose control and/or gaining control in pursuit of their objectives.
For the overall classification of value aspects it is essential that the items reflect reason and sentiments as customer stakeholders apply them for interpretation of service elements. As customer involvement is already necessary for classifying service elements, their controbutions are absolutely vital for creating an inventory of value aspects.
As with service elements, the classification of value aspects should be developed from the start as a hierarchical scheme. The principle of context-dependent meaning allows for both a wide range and flexibility.
Both classifications need to be understood as practical tools. Their comprehensivess is required up to the level that is relevant for customer stakeholders. And no special effort should be made to make items mutually exclusive. They are not an exercise in theoretical science. What counts is their utility in helping customer stakeholders shape benefits from the supplier's offerings.
In theory, the complete classifications of service elements and value aspects may be combined, yielding a comprehensive matrix.
It only seems practical, though, to construct matrices for specific business occasions. Given such an occasion, the relevant matrix is then determined by a selection from the overall classification of service elements (the rows of the matrix) and a selection from the overall classification of value aspects (the columns of the matrix).
The matrix elements provide space to score value aspects against service elements. The underlying assumption is that adequate measures exist.
Once again, such measures should first of all serve the practical purposes of communicating arguments with customer stakeholders. What complicates matters, of course, is that every stakeholder may (1) apply her/his particular measures and/or (2) score differently from other stakeholders. What the supplier should propose, therefore, is a universal scale of, say, ten. What entries actually mean, can then be determined as the business occasion requires.
A single row from the matrix can easily be visualized. Given a specific service element, the relevant value aspects can be spread out along a horizontal axis. And for every value aspect, a vertical bar may be erected that corresponds with the score.
When service elements are sufficiently comparable, such charts may be superimposed. Actually, that is where their main utility lies. Comparing charts emphasizes how different scores relate to each other. As benefits will mostly be concluded at from relative measures, it becomes less important how 'valuable' scores in isolation are.
A disadvantage of visualization is that it may suggest relationships which do not deserve any emphasis. For this reason, it has already been proposed to represent every score by a bar. When a point would represent the score, it is impossible to resist the temptation to connect neighboring points with a line. The next step is to start wondering what that line might possibly mean. But it must be recognized that what lines appear is predetermined by the placement of the value aspects besides each other.
Yet again, it is too far-fetched to even try to design something of an optimal sequence of value aspects. It might help discussions with the customer representatives to keep the value aspects grouped according to the argument classes indicated in paragraph 1.3. Any more, or different, structuring could be the result of the professional services supplier concentrating on arguments with the customer stakeholders actively involved in shaping their benefits.
This paper was originally written, in 2000, in response to a problem statement initiated by J.A. Koster, who continued to provide critical insights to the development of ideas. Mr Koster is a project executive for IBM Nederland, administering outsourcing accounts on behalf of IBM Global Services. Here, the text appears without any reference to a specific services firm. A Dutch translation is included in Stijlbreuk in bestuur (Information Dynamics, 2001).
© 2000, web edition 2002.