Leslie Budd on... outsourcing

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Outsourcing is seen by many organisations as the business model to develop and sustain competitive advantage. It supposedly generates positive cost efficiencies, leads to a focus on core activities and enables labour flexibility. But the issue with outsourcing is really that it’s a throwback to debates in economics about markets and hierarchies. Should you run an integrated operation, for example GEC, by managing nearly all functions in-house, or should the firm be treated as a market in which functions compete with each other through being outsourced to a third party? Well it depends on your market, the sector and the countries you operate in. For every operational efficiency there are increased transaction costs of ensuring consistent quality and as the management’s span of control widens.

Let’s look at publishing. Outsourcing has been a feature of publishing for many years. Publishing is a huge global industry which produces and disseminates information to a range of mediums and media. For many in publishing, particularly book and press publishing, the internet threatens the end of the printed word because of digital production and outsourcing. But this doomsday since the publication of Gutenberg’s bible has never come. And, for example, the appearance of the iPad has not made that day come any nearer, despite claims made for it and other related electronic devices.

The bottom line, it seems to me, that for publishing and many other industries to rely solely on some silver bullet like the internet or outsourcing will not ensure their future. There are many business models, some old, some new, the crucial point is that is their content and their utility in context.

That’s my view, join the debate with the Open University.