Seeing that many companies are repatriating their previously outsourced processes (I am talking specifically about outsourcing, not offshoring), I wonder where the outsourcing pendulum is going to swing next.

The “outsource-repatriate” exercise is an expensive one. First, there are obvious costs to just executing the transition, twice (and coming back is often very difficult). Second, there are likely even higher costs as a result of revenues and customers lost in the process and inability to address strategic projects while being engaged in the outsourcing hopscotch.

There is one key question that must be answered to save you from this hassle:

Does the outsourced function have strategic value or not?

If the function is not strategic, like facility management, as an example, it is a good candidate for outsourcing. Would Customer Service be a good candidate? It depends. If the responsibilities of the Customer Service department are trivial, such as providing product information and recording service calls, it may work well. If these folks are empowered to make decisions, if your company sees excellent Customer Service as the area of competitive advantage, if you strive to innovate in this area, than no, it won’t work.

The strategic vs.  not  consideration is especially critical in IT outsourcing. Organizations which hastily outsourced their development, found that every project, however small, now came with a hard cost. Innovation became replaced with a rigid contractual arrangement, the progress became convoluted and slow.

Outsourcing allows organizations to concentrate on key strategic activities. Knowing what can be outsourced and what mustn’t is the key decision factor.