Whether it's outsourcing or offshoring, the word sets the adrenaline pumping in seconds. To provide a real service to your organisation you'll need to understand the concepts and the impact they both have, says Alan Bellinger.

The issue on outsourcing has changed: it's not whether, but how, although in some extreme cases there's a debate on whether we should take operations back in-house again. One point is certain, though: outsourcing has had an enormous impact on your responsibilities as a learning and development manager.

There's both the impact on your own job - you have to make the insourcing/outsourcing decision on the learning interventions that you're organising - and the impact in terms of outsourced functions. There'll almost certainly be at least part of the IT function that has been outsourced, as well as other parts of the organisation, for example the call centre, the help desk, and some parts of the HR operations.

Let’s clear up one point - the difference between outsourcing and offshoring. It's surprising that these two words can invariably be used interchangeably when their meaning is so different. Outsourcing is the act of sourcing some of the services and capabilities they require to sustain the enterprise from an external provider. It may be a programme to outsource a process - the classic example is running the payroll - or a function, such as outsourcing the call centre.

In the broadest sense, that definition also applies to offshoring. But offshoring requires that the majority of the resources provided by the service partner are located offshore - typically in Asia - as a result of substantially lower operating costs. This could be described as offshored outsourcing.

Offshoring can also be used to refer to overseas staff employed by the mother company as an overseas subsidiary. This article will be looking at offshoring in the sense of offshored outsourcing, rather than the latter.

Bad reputation

In some situations, outsourcing has acquired a bad name, but any problem areas are almost certainly down to the outsourcing strategy that was adopted at the time, or the way in which it was monitored.

There are two scenarios when a decision to outsource an operation is taken: when the operation is functioning well, or it's a disaster. Management will invariably be keen to outsource disasters - 'We don't have the skills or the capacity internally, so let's give it to the experts to do.' And it’s in precisely those situations that disastrous outsourcing decisions can be taken.

Before any outsourcing is done it is important to benchmark the operation that is to be outsourced. Ideally, the benchmark should include cost and performance metrics (such as service levels and user satisfaction), investment levels, efficiency/effectiveness, and spending and performance trends.

These benchmark studies can be performed internally, or they can be outsourced to a third party benchmarking organisation. In either event, L&D should be involved in the benchmarking programme to determine the position on skills.

L&D role

And that point emphasises the key role that L&D should play in any outsourcing/offshoring programme - sort out the situation on skills, both where people are now and where you want them to be. But that's not easy.

When the L&D role is a tactical one in which you hit critical skill issues sequentially, you can afford to analyse the impacted job roles and figure out what the skills that are required ought to be. Just like building with Lego. However, in the outsourcing scenario you’ll be expected to define the competences that you’re looking for in each of the job roles that are to be outsourced - more like building a pre-fabricated building.

And that's not all; it’s not just an issue of defining the skills but also how you'll measure them. You'll need to include some metrics in the outsourcing scope of work that provides clarity on both these points.

Confronted with this task, it's very tempting to opt out and say 'it's for the outsourcer to determine the skills that people need to do the job'. But a position like that will almost certainly end in disaster as the outsourcer's view of the competences needed is likely to be much lower than yours.

One of the greatest problem areas within outsourcing situations is that of unmatched expectations between the client and the outsourcer. In any situation in which you don't define clearly what you want the outsourcer will invariably opt for a low cost solution that does not meet your (admittedly un-stated) needs.

So, whatever else you do, make sure you create that skills benchmark: especially when you're outsourcing a function as opposed to a process.

Impact of outsourcing

But for whom are you creating it? There are typically three areas of IT that are considered for outsourcing - operations, applications development, or virtually all of it. In a full-scale outsourcing scenario it's likely that vision, strategy and prioritisation will be retained as internal functions.

So now we can see the real difference that outsourcing has on the L&D function; whilst you are no longer responsible for managing the skills transfer programmes for the outsourced staff, you are still responsible for defining the skills they need (no doubt in conjunction with the outsourcer) and the metrics that measure them, so that they are included in the service level agreement (SLA).

If it's operations that you're outsourcing, the critical areas that you are looking for are capacity, resilience, security and troubleshooting. They will boil down to the different specialisations - but there will be some personal and business skills in there as well.

The development side is much more difficult to define as the optimum skills mix for these people is much wider - in terms of both technical and soft skills. And the technical skills will depend to a large extent on whether you’re looking for applications to be developed from scratch or implemented on the back of standard packages. In either event, the need for personal and business skills among developers is much greater than it is for operations.

Impact of offshoring

What difference does offshoring (as opposed to outsourcing) make to the L&D responsibilities we've identified here? The simple answer is none, but, as always, the devil's in the detail. It’s much more difficult to be specific about your expectations where different cultures and distance are involved. Culture won't affect technical skills specifically, but it will certainly impact personal and business skills. And the issue of distance is fundamentally one of how you inspect outcomes and measure the SLA.

It's best to keep things simple, and applying the same goals, and tests as you would for an onshore situation is a good starting point. You'll probably need to dialogue your requirements much more in an offshore service provider; and that's time that's well worth while. Don't be fooled by too quick an acceptance – check that you have a real meeting of minds, else you may find that the offshore service provider will take advantage of that distance issue that we referred to earlier.

Competency frameworks

Whatever the scenario, to make your contribution in an outsourced situation you’ll want to brush up your expertise in developing competency frameworks. So the starting point is to identify the roles that are being outsourced, and then to see how far you have defined the frameworks already. And even if you have them already, check that they are still up to date. Developing these frameworks is rather like painting the Forth Bridge - you have to keep going back over them.

What you're looking for is to identify those skills that really make a difference. What is it that separates a great performer from an average one? Typically we'll know what it is - intuitively. But capturing it either electronically or on a piece of paper isn't easy.

And for measurement, you could always rely on the certification programmes, but then you'll get pushback in terms of costs and risk of the individual leaving. So you could go for a phrase like 'equivalent to an MCSE'. That means they should take (and pass) a mock test rather than the exam for real.

Strategic role

In essence, therefore, the impact of an outsourcing role is to make the L&D role more strategic and demanding. But don't worry, at least you won't have to do the administration part.

Training admin on outsourcing hit list

KnowledgePool has just published the results of a survey it conducted on the outsourcing of training. One of its key findings was that 88 per cent of senior L&D practitioners believe that the function is being asked to take on a more strategic role. Given this demand, many of them identified that outsourcing would give them the ability to provide a more strategic service.

'Most L&D teams are not looking to downsize. They want to redeploy staff currently tied up with admin on to higher value tasks,' said Kevin Lovell, KnowledgePool’s learning strategy director. 'This confirms a trend we have observed for some time, reflecting the shift from L&D as a fulfilment-oriented operation to one that provides people development consultants for their business.'

In order to free up their time, L&D managers want to reduce their workload on low level tasks; the survey reveals that training administration is L&D's top priority for outsourcing, although only 3 per cent of large organisations currently outsource training administration, 31 per cent say they will consider outsourcing it within two years, an increase of 900 per cent on current levels.

Only 18 per cent of L&D managers saw improved supplier management as a benefit, implying that they feel that their sourcing strategy is effective already; and only 13 per cent felt that improved management information or evaluation was an influence upon a decision to outsource.

September 2007