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December 4, 2013

The View is Worth the Climb – Part 7

by NIIT Managed Training Services

Smoke Screens about Outsourcing

Let me just call up smoke screens, again, about outsourcing and I’ll tell you why—this is an interesting one that has dual smoke screens. The next one is that “I lose control.” I talked about this earlier but let me be just a little bit more specific.

The argument goes like this. If I outsource parts of training to an outsourcing provider or a third-party provider, I will lose control. And that’s as stated by senior training leaders. I take there’s a real issue with that.

• First off, in most training organizations, what we know is that there’s more training going on outside than inside the training organization. That does not sound like control to me. The opportunity is to get one’s arms around the total spend, direct and indirect, and manage the total spend, which we often find is not going on. There’s a hidden spend in training that’s 2-4 times more than the direct spend, and it’s an issue because it’s unmanaged. I have said for many years that training inside an organization is the largest unmanaged spend companies have, particularly big companies. If you think it’s a $1,000 per employee/ year, it’s actually $4,000 per employee/year. So, that’s the real spend, that’s what you ought to be managing, and that’s what nobody’s managing. So, lack of control is an argument. What in fact we know from outsourcing experience, and we can see this across multiple outsourcing providers and multiple outsourcing relationships, is that outsourcers bring formal processes for service level agreements, people accountability, monthly meeting and reports, and rigorous process control and variance management—all the things that companies demand of a third-party provider that they really don’t demand of themselves. So, when you put all those things in place, you have a governing structure that oversees it all and is engaged with it. I would argue that it doesn’t allow you to lose control, but in fact, improves the control you get. So, that’s an argument that, I think, again is a smoke screen.

• Let me move to the last one that I’ll talk about. This is an interesting one because it comes from both the buyers, or the internal training organizations, and the providers. And the argument goes something like this: “A company should not outsource the strategic elements of training.” So what do we mean by “strategic elements”? We mean the business linkage process of understanding the needs of the business and having dialogues with the business to determine visual learning solutions. It could make a difference for the business and, in fact, for designing that learning solution, and for all those sorts of things that are business connected and more strategic in orientation. And so, the internal learning organizations argue that that’s their role and you can’t outsource it. The providers, interestingly, at least a bunch of providers, argue the same thing, that they don’t believe those activities are outsourcable nor should they be outsourced And I think they do that for this reason:

They don’t have the capability to do those strategic things or they’re more transaction oriented in their approach to outsourcing. So, in my past life, the outsourcing relationships that I’ve created included the strategic elements. We performed that really well. My provider performed that really well when I outsourced my training in DuPont years ago. Subsequently, when I led outsourcing processes with a number of other companies, we performed very well and delivered immense value. From the outsourcers’ side, unless you’re responsible for the processes for understanding needs and determining solutions, it’s hard to be held accountable for the value. In the absence of those things, the most that you can hold an outsourcer accountable for is:

• Quality processes
• Cost reduction
• Consistency
• Responsiveness
• Cycle time

Those sorts of things on the transaction related elements and quality of content that you purchase if you’re purchasing from a third party content provider.

So, those are the three arguments. The last one crosses the barrier between internal and provider organizations. So, when I look at outsourcing today, there’s been a pretty significant change in how we do outsourcing today in the marketplace. The marketplace has evolved from comprehensive outsourcing to outsourcing of specific elements or specific services and the research says that the things that are being outsourced the most are custom content development, training administration primarily in large companies, not in small companies, and some delivery. And, of course, organizations are moving more toward software as a service hosted, learning technology model, where they don’t require resources to support systems and those sorts of things. And sometimes you’ll see organizations outsourcing combinations of those things. And while those are good things to outsource and, in fact, they offer the opportunity to reduce cost, they also limit the ability for the outsourcing provider to make a huge impact on the value side of the equation.

So, as organizations do this work and outsource these kinds of things, they must take the next step, which is to improve their internal processes for:

• Linking to the business
• Understanding needs
• Engaging with customers
• Understanding customer expectations
• Ensuring that the work they do is relevant and linked to something important and that they understand and can document the value being delivered for the work they do

If we do this well, it will eliminate a lot of objections that we hear from organizations as they think about or talk about outsourcing and it will hopefully move them from the side of “I’m not interested in this” to the side of “I actually should consider it because there’s sufficient experience in the marketplace to say that organizations that do outsourcing, at some level, do get some benefit.”

So, why don’t I stop here and welcome all your comments, inputs, critiques, support, and all the things that go along with these blogs. I look forward to hearing from you. And I have two more blogs to do to end this series on “The View is Worth the Climb.” This last one on outsourcing is one of those things that I say along the road, “This is one of the things that if you do well, makes the view worth the climb.”

Click on the link below for the podcast version of this blog post.

Thank you.
Edward Trolley

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