Inside Business: The future of outsourcing could lie within the firm

Management fads come and go. But it is becoming increasingly clear that one of the more enduring is going to be outsourcing, the process by which organisations consign all but their most "core" activities to specialists to run on their behalf.

It started with support services such as cleaning and catering - thereby playing a significant part in the growth of the likes of Rentokil-Initial and Compass. But it really took off when information technology took business by the scruff of the neck.

Perhaps oddly, given that outsourcing is supposed to happen to activities that are deemed peripheral to the main business, this seemed to begin when IT ceased to be a small support function that helped a few clerical staff keep on top of things and became what is now termed a "key business driver". It was almost as if it had grown too important to be left to the companies' managers and had to be hived off to people who at least claimed to know what they were doing.

Though some might argue that mastery of IT - and of the market intelligence it produces - is too central to be left to outsiders, it appears that organisations from investment banks to international oil companies see the benefits of having specialists run that side of things; the companies are then left free to extract the so-called competitive advantage from what results.

It is on such an attitude that the rapid expansion in recent years of outsourcing specialists, such as Andersen Consulting and EDS, has largely been founded.

What gives outsourcing its staying power is its seemingly constant capacity to produce new twists. The latest stems from signs of a desire on the part of organisations to get rid of responsibility for the premises from which they operate. Regus, the fast-growing provider of managed offices around the world, expects much of its future expansion to be fuelled by the desire of businesses to improve their earnings capacity by ceasing to own the properties from which they operate.

The company sees a particularly ready market in professional services firms on the grounds, according to one executive, that they recognise the importance for their reputations of having administrative and reception staff meeting the standards that they expect of the fee earners but do not always have the ability or motivation to achieve.

Such an approach can be seen to fit in with the general thinking about core and support activities. But consultants at Booz-Allen & Hamilton have spotted signs of a trend that perhaps strikes at the heart of the core/non-core debate even more than IT did.

In the latest edition of their firm's quarterly journal Strategy & Business, Charles E Lucier and Janet D Torsilieri suggest that a new division of labour is needed to achieve the improvements in productivity that initiatives such as re-engineering and quality improvement have often failed to deliver.

Their article, entitled "The End of Overhead", calls for companies to cast out those workers many would term invaluable - those at the top of their fields. Challenging the orthodoxy in the way consultants love, Mr Lucier and Ms Torsilieri claim that in most companies a good deal of work does not properly tax those who are most expert at it. Far better, they say, to allow more junior people - or even the customer or client - to do this, freeing the true experts to concentrate on the complex things.

The problem? Most organisations do not have enough really taxing things to keep these people occupied, so they become too expensive to hang on to.

The solution? Hive them of into super specialist organisations where they can spend all their time selling the benefits of their expertise and honing it in ways that would not have been possible within the confines of their more conventional employers.

In this way, say the authors, "Companies will both eliminate expertise- driven overhead and better manage the productivity of knowledge workers." Sounds like great news for professional firms, especially the management consultancies, which must have been the main beneficiaries of the outsourcing boom.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Reach Volunteering: Trustees with Finance, Fundraising and IT skills

Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent