The next phase in the evolution of outsourcing
Please take a look the new book by our Board President Lazaro A. Mederos that provides a new evolutionary perspective on outsourcing. It covers real world business case studies at top Fortune companies and models to help you succeed!
Backsourcing
“The first step in the rise to regain control of our essential capabilities, let’s unite behind the right terminology”
The current Coronavirus pandemic has shined a light on the global risks associated with outsourcing and offshoring. The main risk was highlighted with the immense power that China has over the entire world’s supply of products, influence and specifically our newfound awakening dependence on them. I feel like we have just woken up dizzy and confused in a bank vault after hours to realize that we are hostages in a secret bank heist. However, to our surprise, we are actually accomplices and were lured in with the promise of discounted prices. Yes, we are in trouble.
Not only did we empower China, but we have praised them throughout. Most consumers saw their purchasing power increase dramatically, but we still continued to feed the dragon. However, this came crashing down to an immediate halt when the world’s access to key equipment and medical supplies stopped. From one day to the next, the world found itself scrambling to make domestic survival and/or subsistence equipment. We saw breweries turned into hand sanitizer distributors, car manufacturers forced to create ventilators and even your grandma may have pulled out that old dusty sewing machine and started making face masks for the family and local community. This global supply chain disaster will have severe implications on outsourcing as we gave away our domestic success factors for a discount. Yes, we are in trouble.
The Coronavirus not only shook the world and brought it to its knees, but also shook outsourcing to its core. Outsourcing will transform and no longer be a cost driven objective seeking immediate returns. The cost benefits should remain, but organizations will now be forced to develop strategies that combine the cost-effective outsourcing benefits with backsourcing strategies. Yes, backsourcing is the key. But what is backsourcing?
Backsourcing is defined when an organization brings back a previously outsourced process.
Although backsourcing is key to the success of a complete outsourcing strategy, we have seen a recent rise in various terms attempting to describe it. The industry is at such an early stage that most of us are not fully aligned using the correct terminology. As with any new industry, there is a formation stage that includes the creation of terms and relevant applications. Some of the terms that have been used to describe “backsourcing” include “insourcing” plus a couple others that have now lost popularity.
The term “insourcing” seems reasonable at first, but it is defined by the creation of goods or services in-house regardless if they were ever outsourced. This unfortunately misses the objective of “bringing back” previously outsourced processes. Researchers studying outsourcing are also rallying around the term backsourcing as it fully captures the “bringing back” of previously outsourced processes.
We have now stepped into the future and organizations that take advantage of backsourcing as part of their overall outsourcing strategy will thrive by reducing external risks and gain a competitive advantage.
As the first step in the rise to regain control of our essential and domestic capabilities, let’s unite behind the right terminology. Backsourcing. Yes, we have the first step of the solution.
Laz Mederos
President
The Backsourcing Advisory
Backsourcing is defined when an organization brings back a previously outsourced process.
Subcontracting evolved into outsourcing when it added the strategic partnership element along with the ownership of processes. The first outsourcing engagement credited with implementing such a strategic partnership was between IBM and Kodak through their revolutionary deal.
Services, Manufacturing and your Business.
Let us help you design a profit maximization strategy where you regain control of your success.
The key factor in common was that both organizations had a problem-solving objective that led to a more strategic partnership than that of a typical subcontractor/service provider relationship. The strategic partnership model birthed the multi billion dollar outsourcing industry which grew so much due to its cost take out benefits. However, organizations have began to over-outsource and many companies are beginning to bring back services to the home country.
Backsourcing is defined as a company process which was previously handled externally and has now been reassigned for internal ownership (Mederos 2018). Although often misused, it is not “insourcing” as that term could refer to a process that was never outsourced.
Laz Mederos
President
The Backsourcing Advisory