5 REASONS WHY Outsourcing Must Move Up the CEO Agenda Why should CEOs focus on outsourcing? Because a substantial amount of most large organizations’ cost base is already with outsourcing service providers. Because getting it wrong can seriously damage the business. Because, from now on, outsourcing is part of any future strategy. By: Leslie Willcocks, Professor of Technology Work and Globalization and Director of The Outsourcing Unit, Department of Management, London School of Economics and Political Science Why should hard-pressed CEOs devote attention to outsourcing? Because a substantial, and rapidly rising, amount of most large organisations’ cost base is already with outsourcing service providers. Because getting large-scale outsourcing wrong can seriously damage the business. Because, from now on, outsourcing is part of any future strategy. In our experience, the announcement of a large-scale outsourcing deal regularly has a positive effect on share price that can last between three and ten months. That said, the opposite can occur if the market perceives outsourcing to be an inadequate measure, given the scale of difficulties involved; where the deal seems to be flawed or hastily contrived; or where the CEO and organisations ultimately fail to deliver the financial results stated or implied in the initial announcement. More positively, the evidence from our LSE Outsourcing Unit research shows clearly that outsourcing -- properly planned, resourced and managed -- can deliver significant competitive advantage to companies and organisations in all sectors. But only when the CEO plays a key role -- taking crucial strategic decisions, creating vital capabilities, putting in place integrated management processes and applying effective monitoring and evaluating mechanisms. The Outsourcing Unit’s research points to five main reasons why outsourcing must now move up the CEO agenda. Let us look at these issues in more detail. REASON 1: Outsourcing Impacts on Market Value Share price is a fundamental barometer of corporate performance. Previous research, as well as our own case histories, have identified a significant correlation
5 REASONS WHY Outsourcing Must Move Up the CEO Agenda Why should CEOs focus on outsourcing? Because a substantial amount of most large organizations’ cost base is already with outsourcing service providers. Because getting it wrong can seriously damage the business. Because, from now on, outsourcing is part of any future strategy. By: Leslie Willcocks, Professor of Technology Work and Globalization and Director of The Outsourcing Unit, Department of Management, London School of Economics and Political Science Why should hard-pressed CEOs devote attention to outsourcing? Because a substantial, and rapidly rising, amount of most large organisations’ cost base is already with outsourcing service providers. Because getting large-scale outsourcing wrong can seriously damage the business. Because, from now on, outsourcing is part of any future strategy. In our experience, the announcement of a large-scale outsourcing deal regularly has a positive effect on share price that can last between three and ten months. That said, the opposite can occur if the market perceives outsourcing to be an inadequate measure, given the scale of difficulties involved; where the deal seems to be flawed or hastily contrived; or where the CEO and organisations ultimately fail to deliver the financial results stated or implied in the initial announcement. More positively, the evidence from our LSE Outsourcing Unit research shows clearly that outsourcing -- properly planned, resourced and managed -- can deliver significant competitive advantage to companies and organisations in all sectors. But only when the CEO plays a key role -- taking crucial strategic decisions, creating vital capabilities, putting in place integrated management processes and applying effective monitoring and evaluating mechanisms. The Outsourcing Unit’s research points to five main reasons why outsourcing must now move up the CEO agenda. Let us look at these issues in more detail. REASON 1: Outsourcing Impacts on Market Value Share price is a fundamental barometer of corporate performance. Previous research, as well as our own case histories, have identified a significant correlation
5%20REASONS%20WHY%20Outsourcing%20Must%20Move%20Up%20the%20CEO%20Agenda.docx