More about the Horses for Sources Debate on the “Outsourcing” Definition

We discussed last week the soul-searching going on at Horses for Sources, the outsourcing advisory firm, around the very use and definition of the term “outsourcing”. As we pointed out, that term often covers services that have never been “insourced”, which does bring into question the basic terminology.

So if “outsourcing” is simply the buying of complex business services, doesn’t that look pretty much like procurement? And if so, why isn’t Horses for Sources seen as a procurement advisory and blogging outfit – in which case apart from anything else they would be Spend Matters competitors!

I believe the explanation of why we’ve never seen HfS in that light tells us something interesting about the role and future of procurement.

Because, while HfS do talk about sourcing regularly, their main focus is on the senior managers, decision makers and budget holders who are responsible for the delivery of the services that are or might be provided by third parties. So in the case of IT outsourcing, HfS will address the CEO, CIO or perhaps the senior delivery managers who rely on that IT service. In the case of HR outsourcing, it is the HR Director. And so on. To HfS, the procurement community are a fairly small part of the overall picture. Procurement may not be involved in the outsourcing decision or even in the contracting process at all.

Or if they are, they may be perceived as a blocker or nuisance. I got into a bit of a fight a while back when HfS published an article that advised readers that they shouldn’t involve procurement, because all we were interested in was process and price. Unfair to many in the profession – but a grain of truth in that accusation at times!

So, the excellent HfS content focuses strongly on aspects such as:

- the insource / outsource decision and all the issues around that

- understanding and engaging with the appropriate market to develop the best proposition

- the competitive process itself in terms of selecting the supplier (if indeed there is one)

- managing the contract and the supplier, including risk, change, development etc.

Looking at it like this, we can see how narrowly focused some procurement people and functions are. Even assuming they have involvement with the process at all, they probably focus on merely step 3, which to the budget holder or senior sponsor is just one part of a much more extensive process.

So there’s an interesting dilemma for procurement. Do we acknowledge that our expertise is in the core supplier selection and contracting process, and offer our services in that limited but important area, in terms of supporting those with line or budgetary responsibility?

Or should we have an offering that spans the whole process, so we can demonstrate to other stakeholders that we are aligned with how they see the wider “outsourcing” aims and objectives? Bear in mind as well that we’re most unlikely to ever “own” the entire process, as it isn’t going to be us who is responsible for service delivery. It’s going to be the CIO, CMO, HR Director, COO of a business unit… etc.

I don’t have a clear answer to that question, I’m afraid. But through the Autumn, we’re going to get deeply into the future of procurement, and we’ll come back to this particular issue I’m sure.

But as a prelude to that wider debate, we will have a look later this week at another aspect of what the HfS debate on outsourcing tells us about possible future challenges for the procurement individual and function.

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