March 16, 2006

"In the B2B sector, outsourcing has been very much in style for at least the past twenty years," says Allie Young, Research VP at Gartner.

Young adds "Yet we have 61 percent of respondents saying they are making decisions only on a case-by-case basis."

She is referring to a Gartner study and attendant research scheduled to be discussed in further detail at the company's Outsourcing Summit 2006, running from April 3-5 in Orlando, FL.

Line56 got an early preview of the data, and it looks pretty startling. As Young mentions, only 39 percent of respondents to the Gartner survey have a formal enterprise-wide outsourcing strategy.

The rest are essentially flying by the seat of their pants. The problem isn't restricted to one class of company.

Gartner balanced the survey between companies with less than 1,000 employees (401 respondents), companies with between 1,000 and 4,999 employees (243), 5,000 to 9,999 employees (84), and 10,000 or more employees (216).

These aren't outsourcing greenhorns either. Gartner chose companies that are already outsourcing or that have plans to outsource in the next 12 months.

Young explains what's going on. "Senior executives are responsible for some of this ad hoc outsourcing," she says.

"CEOs are saying 'outsource now' or 'go offshore to cut costs,' and companies kind of deem that a formal strategy."

If Young's gut instinct is right, the 39 percent number for companies with formal outsourcing strategies might actually be inflated, as, based on her comments, some companies are no doubt (wrongly) assuming that a CEO mandate is a strategy.

What's going on in outsourcing is quite remarkable. Young calls it a "big black hole...akin to buying your different supplies without having a procurement strategy."

The black hole has evolved, she says, because of a "lack of discipline" that is in itself probably generated by the rush to get aboard the offshore outsourcing express without giving much thought to the possibility that it isn't plug-and-play.

None of this means that outsourcing will lose steam. On the contrary, the economics of outsourcing point towards growth regardless of the disruption entailed for certain workers.

This makes it imperative for companies to get formal outsourcing processes in place. Right now, only about 52 percent of U.S. companies report satisfaction with outsourcing.

The rest are split between negative and neutral responses. If formal processes could turn even some of those negatives and neutrals into positives, they would have a big impact on the marketplace.

Source: Line 56