It’s that time again; the earnings calls for CRM, ERP, hardware and services vendors are being scheduled, rehearsed and delivered to shareholders, industry and financial analysts. What’s common across the more than two dozen calls I’ve listened to that span CRM, ERP and SCM software, hardware and services companies is that every CEO is offering up a spin on how global outsourcing is making their business even more cost-competitive, responsive to global markets and stronger for the strategic long run.
With all this apparent success at both software and hardware outsourcing, I began to feel like myself as a golfer, sizing up and playing Phil Mickelsons. In short, he has a great long game, a great short game, and I play badly on a good day even on a miniature golf course. But every CEO cannot be the Phil Mickelson of outsourcing. I suspect there are some Cinderella stories in there, but for the vast majority of them, getting either software or hardware outsourcing right takes lots of time, many hours of practice, and the patience of Job to make it all work out.
In short, nothing valuable ever comes free, and all these CEOs on conference calls this quarter tell you about the strong successes at outsourcing, forgetting to mention the curve of pain they have ridden, in some cases for years, to get this strategy right.
For companies outsourcing manufacturing, the course has been especially unforgiving and even brutal for some of them. Like strong winds that whip across the front nine at Pebble Beach, any change in quality assurance, manufacturing engineering, and even the smallest wisp of an Engineering Change Order (ECO) can play havoc with the lay of the ball.
Jack Welch Doesn’t Give ‘Mulligans’
As the calls went on, I realized that CEOs are giving themselves outsourcing mulligans — a free shot sometimes given a golfer in informal play when the previous shot was poorly played — and the leaders of hardware companies are the biggest culprits. Jack Welch said in his autobiography that he does not give mulligans, but then again he had Six Sigma to guide outsourcing production efforts — in short, a great read of the course for manufacturing.
The real takeaways from earnings calls where outsourcing is proclaimed as the new success strategy are:
Experience Curve
Across the board this earnings season, no one knows how many outsourcing mulligans CEOs of software, hardware and services companies took. But there is one certainty: Come next quarter after another round, the CEOs will all be back, and some might tell us about the experience curve they have been down and lessons learned. But for most, it will be a description of how they got their outsourcing strategy pin high. Nothing comes for free, and, especially for manufacturing companies, the lessons can be costly and enduring.
Bottom line: Outsourcing’s allure is the same as golf: freedom to hit away and play the game as you specifically want to. Ironically both outsourcing and golf make you earn that freedom, and for hardware manufacturers, it’s better to own up to your handicap now, and don’t mulligan away the future. For software companies, outsourcing is like the course you always wanted to play — and in the case of CRM, the path is proven and worth a round.
Louis Columbus, a CRM Buyer columnist, is a former senior analyst with AMR Research and is founder of LWC Research, a firm specializing in CRM, sell-side e-commerce, sales and product configuration and guided selling.
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I understand, firsthand, the difficulties that are associated with outsourcing, and how difficult it can be to find a successful strategy involving it. For instance, when you wake up one morning and recieve a phone call, telling you that your companies new overseas operations have turned out to be successful and as a result, you’r $9 an hour assembly line position is no longer necessary, seeing as there are people in Malaysia now filling that same position at a quarter of the cost, you have to be very creative and find innovative ways to make adjustments and stay profitable. A good outsourcing strategy could lead to you finding a position in a different industry, that pays a similar wage. A bad stragey could lead to you being unable to pay bills on time, this can lead to some very expensive banks overdraft fees, repossession of automobiles (which leads to inability to perform jobs duties, if you do find a new job) and even the shutdown of basic utilities. This is why practice i important, nobody gets it right the first time, this is why so many young people are buried in debt today, they did not get it right the first time. But with practice and perseverance, anybody can find an outsourcing strategy that works for them. In a free market economy, all things work out in the end. A person who loses his factory job today, could become a waiter at an expensive restaurant tomorrow, serving food to the people who own that factory in Malaysia where people do what he used to do, for poverty wages. It can be difficult for some people to make the adjustment, but it’s a small price to pay for the great profits that come from it.