By Deborah Kops
Outsourcing and Club Med in the same breadth—you’ve got to be kidding! Somehow sandy beaches, pina coladas and surfing don’t equate to 3000 man delivery centers, quarterly business reviews and dashboards. But hear me out.
When you enter into an outsourcing contract, the provider’s offering is not much different from an all-inclusive travel package. We call it a “solution” because it sounds client-centric and connotes that there’s a value proposition, but in truth the offering combines a number of services and resources just like that packaged trip to a Cancun resort.
Pushing the analogy, think about what describes both outsourcing and vacation packages—reasonable outcomes at a blockbuster (or at least at a good) price, with as little hassle as possible. Buying an all-inclusive package, there’s no need to book a hotel, hire a car, find a tour guide that speaks decent English, or look for a modestly priced restaurant each night. If your operator is reputable, you don’t have to worry about bedbugs, eating dodgy food, chasing down lost luggage, or missing a connection—it’s all done for you, tied up in one neat little package.
But think about what the vacation packager does to provide that vacation-of-a-lifetime at an attractive price point. Firstly, he figures out the size and price point of his market. Using his scale as buying power, he then manipulates all elements of cost to come up with a one price package that covers the basics—airfare, guide, transfers, hotels, meals, tours at a margin he can live with, to deliver at the lowest cost possible. You’re leaving the components, scope and quality of the tour to the operator. You’ve outsourced the holiday experience to someone else.
But there’s a catch. You get what you get, and nothing more. Three star hotel? Sure, but it’s not in the center of town because that drives up the cost for the operator. Air at the right fare? Transfer through Iceland, even though it takes an extra day. Drinks with meals? How about a glass of water?
All-inclusive, but the experience costs extra. Club Med invented the concept of ‘all-inclusive’ but anything at the bar costs extra. This includes alcoholic drinks, soda, tea; anything. Excursions and items from the boutique cost extra; horseback riding, golf, and scuba cost extra. Massage costs extra. Can a person visit Club Med, and have a good time, without incurring any extra costs?
You might say that outsourcing agreements are exactly like package deals. The outsourcer looks at what the market will bear in terms of cost and competition, engineers his scope to make an optimum margin,, manipulates the enablers—location, technology, resources– he controls, and ties it up in a solution. Finance and accounting staff cheaper in Pune? Let’s locate there. Dearth of supervisors? Sell the client on greater individual team member accountability. Prefer your workflow tool? Use mine—you can’t beat my licensing agreement.50 empty seats in Plant 10? Let’s match cheeks with seats. To get a deal, you have to let the outsourcer do the packaging, harnessing his scale and cost. Want anything more? Did someone say “change order?”
The challenge with taking a vacation is the quality of the experience. Certainly the basics—transport, hotel, meals– are included in a package but the memories cost extra The thrill of a deep dive, or the bliss of a good massage are not included in the price. The same is true for outsourcing; you get what you get, and then pay extra.
Many thanks to Steven Jo for his help with all-inclusive vacation packages. He’s obviously a gentil membre.