Over the last decade, outsourcing has grown from a fuzzy business buzzword into a clear success story, spawning an alphabet soup of service choices -- ERP, BPO, ASP, SLA and BSP. While the terms can be confusing, the business principles involved remain classic and immutable they are all about basic economics and maximizing shareholder value. Companies outsource to reduce operating costs, improve company focus, reduce risk, improve quality and gain flexibility.
The right outsourcing decisions recognize two prosaic economic concepts: specialization of labor and economy of scale. All businesses have core capabilities that are the true engines of shareholder value, and their non-core functions are best left to those who can perform those tasks with a high degree of quality and efficiency. This is true because outsourcing suppliers can bring many levers to bear upon such functions -- such as access, scale and expertise and those fulcrums produce added value to both the supplier and the buyer. As a rule, expertise is greatly enhanced by investments in technology.
Technology and the Web have vastly increased the forces that have helped outsourcing become so popular. Companies such as Sara Lee Corp. and Nike Inc. have become famous for outsourcing some or all of their non-core functions, including the actual manufacturing of their products. Many other companies have outsourced everything from IT itself, to human resources, finance and accounting, and customer relationship management. So, what's next?
Tangible assets have long been the forgotten stepchild on the balance sheet. CFOs and their staffs spend considerable time managing cash, credit relationships, equity and accounts receivable. But it seems to be the rare company that efficiently manages its property, plant and equipment. Leases disappear into musty file rooms, maintenance is a chore left to those least able to avoid it and facilities managers sometimes seem to occupy a Siberian outpost on the organization chart.
Ironically, whether real estate is reflected on the balance sheet or not, it remains a critical factor of production for almost all businesses. Yet, many CFOs rely upon inadequate technology...