01 Sep 2004
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Outsourcing for Radical Change

by Laura Singleton

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As research director at the Accenture Institute for High Performance Business, Jane C. Linder (MBA ’76, DBA ’89) was asked to provide a managing director with new material for a speech on “transformational outsourcing” — the use of outsourcing as a tool for radical organizational change. Linder’s research led her to write her first book, Outsourcing for Radical Change: A Bold Approach to Enterprise Transformation (American Management Association, 2004).

What distinguishes transformational outsourcing from traditional outsourcing?

There are two distinctive aspects of transformational outsourcing. First, senior management has the explicit intention of transforming the organization, and secondly, the impact of the change is measurable at the enterprise level.

Why should HBS alumni read this book?

Those who are running organizations probably don’t think of using outsourcing in the way this book describes. If they confront the need to transform their enterprises, they should know about this tool. For consultants, this may be one of the solutions a client needs. For entrepreneurs, many of their highest-value opportunities to build an outsourcing business may be of this nature.

Many examples in your book come from outside the United States. Are other nations more advanced in using outsourcing for transformation?

The United Kingdom is definitely ahead in using outsourcing in the public sector. Cases where poorly performing companies were transformed by outsourcing were also more prevalent overseas. If I had to guess why, I would suggest that the approach to partnerships in other countries tends to be more collaborative and less adversarial. It may have as much to do with the company mindset as the provider mindset.

You suggest transformational outsourcing can be a positive for workers. How?

If a company can avoid radical change, it should. However, if what’s broken can’t be fixed any other way, it’s likely that workers have already felt an impact. Without an effective approach to change, all of them would lose their jobs. Since outsourcing works extremely well for this purpose, it provides a way for some to stay employed. The need for transformation isn’t usually a surprise, and when problems are addressed, there is a positive effect on worker attitudes.

What developments are on the horizon for outsourcing?

The transformational outsourcing approach may only account for 20 to 25 percent of the total number of outsourcing deals today, but I think it will grow as executives seeking dramatic change learn how effective it is. It’s going to change the nature of company boundaries.

Laura Singleton (MBA ’88)

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Class of MBA 1976, Section E

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