Your mess for less. You can’t outsource accountability…

Outsourcing is often confused with procurement or purchasing, because many of the same drivers influence these strategic decisions. Both involve efficiency planning, cost reduction, comparing the price of various suppliers. It’s easy to see how the two disciplines get confused. But they are very different.

If you are procuring post-it notes from another firm, you agree on the price, quality, and amount of items, then you procure them. That’s the end of the relationship, except for those annoying stationery catalogues that will be sent for evermore.

If you are outsourcing a business process your company presently performs to a supplier then you are effectively lifting up the boundary wall of your company and rebuilding it around the supplier. Yes, they are still a supplier and are just contracted to provide a service, but to all intents and purposes they become a part of your supply chain, and therefore, an integral part of the service you offer to your own customers.

So why is this subtle difference so important? Take a look at the environmental disaster now playing out off the southern coast of the USA. Oil giant BP is being blamed for allowing a rig explosion and subsequent oil leak to spiral out of control to the point where some are even questioning the viability of the company – regardless of their assets and heritage in the oil industry.

BP could turn around and blame the contractors they had working in the area at the time of the explosion, but would anyone listen? When a firm contracts another to deliver a service there is an operational transfer of responsibility for delivering that service, but the accountability for making sure it works is not transferred from the client to supplier.

Nobody cares if people on the BP payroll made the mistakes or not. If BP hired a supplier then the buck stops with BP. This is an important point to remember if you are considering the use of outsourcing as a way of sorting out a messy or disorganised business function. The supplier might sell ‘your mess for less’, but the mistakes will still be your problem when they occur – both in terms of actual liability and reputation.