One company’s multitower contract is another’s bundled deal. Are process and functional outsourcing synonymous? What’s the difference between shared services and captives? Why can’t the industry use the same terminology? Are we destined to cope with a veritable Tower of (global services) Babel?
I live and breathe the outsourcing industry, and yet even I am sometimes confused when in conversation with another industry aficionado. We just don’t seem to speak the same language. Every statement seems to require some level of translation merely to level-set.
No one would debate that English is a marvelous language. It is colorful, exacting, and the lingua franca for business and entertainment. Depending on the source referenced, English is said to have between 4.7 million and 10 million terms, as opposed to German’s 1.9 million and a measly 1 million in French. But does the outsourcing industry have to drive up the number of terms in order to top a few million? Must we live with a disparity in definition similar to the way we tolerate the words for the back end of a car — the English boot and the American trunk? Is the terminology a product of sometimes not so clever marketing spin to differentiate one provider’s proposition from the pack?
I recently reviewed the Web after one of those crazy conversations where definitions got in the way of rational discourse. And, unfortunately, as a result of my search, I found no terms of art other than that of outsourcing — which we all generally agree means that some defined set of business tasks are given to an external third party to perform to a specification for a certain period in exchange for agreed compensation.
My research levied perplexity upon complexity on what should have yielded a common series of definitions. See if you can sort through my findings.
SINCE WHEN DID OUTSOURCING BECOME “TRADITIONAL?”
Well, the world is moving fast if an industry less than 25 years old by the most extravagant of antiquarians can be termed “traditional.” Yet, according to some definitions on the Web, “traditional” means lift and shift, and is defined by some pundits as “slightly better, slightly cheaper, and slightly faster,” for which the major agent of change is to take work offshore. So if there is such a term as traditional outsourcing, it begs the question: What is “contemporary” outsourcing? I could not find that term, as hard as I tried. Go figure. It seems that traditional outsourcing is used as the antonym for “transformational” outsourcing, which, according to my research, is the outsourcing version of tofu — absorbs whatever spin the proponent cares to give it.
WILL SOMEONE PLEASE DEFINE TRANSFORMATIONAL SOURCING?
I was taught that transformation means change — any kind of change. Yet, in the industry’s rush to greater sophistication, transformation outsourcing starts to morph into a range of meanings. According to a brief search, the commonly used explanations of the term are as varied as they come. Check one option per category depending on your point of view.
Strategy: (a) Does transformational outsourcing take a company to a new level of world dominance by moving to a new target operating model, gaining strategic competitive advantage? Or (b) Do we mean that we are changing the way delivery, operations, functions, workflow are meant to work?
Benefit: (a) Does transformational outsourcing result in agreed business outcomes? Or (b) Does it provide continuous strategic change and innovation?
Technology: (a) Does transformational outsourcing mandate an ERP implementation? Or (b) Does it merely mean the installation of new enabling systems?
Approach: (a) Does transformational outsourcing mean working together in a collaborative partnership? Or (b) Does it mean giving one body — namely the consultant cum outsourcer — the power to manage all the changes?
Pricing: (a) Is pricing structured to speed change? Or (b) Are contracts “consulting led,” changing the economics of the deal for the provider (author’s interpretation)?
Based upon the plethora of commonly traded definitions, I am confused. Is transformational outsourcing a term used by providers to add class, tone and fee to standard “lift and drop” (or do you prefer the term traditional) approaches, or is it “fix,” deploying cadres of consultants and internal team members, and then “shift,” taking the new processes to a remote location for cost arbitrage? Enquiring minds want to know.
ARE TOWER, FUNCTION AND PROCESS (PREFIXED BY MULTI) SYNONYMOUS?
The industry uses the nouns interchangeably. Multi is easy; it means more than one. But tower? Since when do companies organize by tower? Every organization chart I’ve seen aligns by business units or functions, not by tall structures. According to my training, functions are made up of a number of processes. So when we speak of multiprocess outsourcing, are we speaking about a number of interconnected tasks within a single function such as HR, or more than one corporate function? I’ve seen the terminology used both ways.
WHAT ABOUT “BUNDLED DEALS?”
Is this a specially coined marketing term to distinguish a provider of multitower, multiprocess or multifunction outsourcing, or something completely different? Does the client obtain a distinctive value proposition when bundling versus committing to one of the multis? And how big is a bundle? One, two, three functions?
WILL THE INDUSTRY PUT ME OUT OF THIS MISERY?
Let’s agree on a glossary that clearly and succinctly describes the arsenal of global services tools, and what is likely to be the result.
SINGLE–PROCESS AND COMMODITY ARE USED INTERCHANGEABLY
Commodity outsourcing is defined as a smaller, component-like deal, while single process could pertain to one discrete process or function. Having used process and function interchangeably, is a single-process deal also a commodity deal? According to Wikipedia, the new authority on absolutely everything, a commodity is something for which there is demand, but which is supplied without qualitative differentiation.
A review of history (five years ago) indicates the interchangeability of the terminologies single-process, commodity and point service, as a way to describe outsourcing services that could be easily procured. Does this mean that this type of deal can be ordered out of a Sears Roebuck catalogue of outsourcing?
THE TERMINOLOGY FOR INTERNAL DELIVERY IS CONFUSING
The terms shared services center and captive are sometimes used interchangeably. Is consolidation of operation by one corporation to an internal set of customers, not shared services centers or captives? Yet there appears to be a dichotomy in their usage…shared-services centers, which are located offshore, seem to be captive, yet those on/or nearshore are simply… shared services centers. And to further confuse the issue: What transpires in a shared services center cum captive? In some corporate parlance, shared services centers are a consolidation of one function only (comprising multiple processes), while in other’s definition, shared services centers encompass multiple functions.
There is some movement to create parity with the commercial arrangements commensurate with third-party outsourcing, calling shared services/captives “internal” outsourcing. So processes or functions that are consolidated in one or more locations in either shared services centers or captives are also known as internal outsourcings.
Think I am hallucinating? I kid you not; spend even ten minutes cruising the Web and your head, too, will spin.
Would the world be a better place with an official dictionary of services globalization? Certainly, the pursuits of world peace or slowing global warming are far more worthy preoccupations. But wouldn’t it be nice if we all spoke the same language?