Many people, when they hear ‘outsource’, have in mind the concept of laying off employees and contracting with an outside firm to perform their work. That’s certainly one approach, but many gradations are actually available, from off-loading some work to consultants all the way to replacing teams or departments. It’s not an ‘all or nothing’ proposition. In the context of EDI, it could mean things like moving your mapping work to a group of offshore consultants, using a 3rd party do supplier testing or even hiring a company to act as your level 1 help desk. Those are all valid and relatively common ways to ‘outsource EDI’ we’ve seen.
Companies generally look to outsource when the work isn’t a ‘core’ competency, when there’s a cost advantage, or to address a spike in workload that is temporary. As have many companies, my previous employer outsourced landscaping work and food services a long time ago. Those weren’t core competencies of a large industrial distributor. We offshore-outsourced some programming work a few years back in IT due to a temporary workload spike and a perceived cost differential, and we’ve gradually added contracts across the business to address tasks in recruiting, marketing, help desk, benefits administration, and many other areas. When you look around at your own firm, you’d be surprised at how much ‘outsourcing’ is really going on.
We ‘outsourced EDI’ in a number of situations. Our most successful foray happened a few years back when a decision was made to vastly increase the company’s supplier base, all of whom were required to do EDI with us. My eBusiness Ops team had no budget flexibility at the time, and although testing each new supplier with EDI was a relatively minor task, the sheer number was overwhelming. We worked with a 3rd party to assume that process, established a good statement of work and a service level agreement, and voila, it was ‘outsourced’. The small testing fee was paid by each new supplier and was not a surprise to them since it was disclosed in their on-boarding process. The huge spike in new suppliers became a non-issue to us from both a workload and cost standpoint. We likewise outsourced mapping, support, and some technical functions on occasion to address temporary business conditions. For us, and for many companies, outsourcing is a solid tactical approach that usually pays off if done for the right reasons.
So, what are the caveats related to outsourcing in the EDI area? From our experience, here were some limitations:
• Cost. Depending on the resource, it could run you $50-$100 or more an hour for ‘temporary’ situations. Outsourcing an entire team on a permanent basis would, of course, be priced differently and may appear competitive with your current internal costs at a high level. However, I’d warn you to be absolutely sure in determining your current costs that everything is included and that in the post-outsourced world you ensure that costs that won’t ‘go away’ when outsourcing is complete are included.
• Communication. Without a doubt, communication between the players in an outsourced relationship is understandably crucial. Overall direction from you is needed, a clear understanding of requirements by your partner is key, and a well-designed feedback loop is a must. If outsourcing overseas, be sure to consider time zone differences and language issues.
• Quality. You should realize the true cost of outsourcing may be higher than the price you’re being charged if re-work is constantly required or if your company brand is being compromised by poor work. This is the difference between ‘nominal’ and ‘real’ cost.
• Value add. In our shop, what we did with our customer-side program was very partner-specific, SAP-centric, and communication-driven. Certain aspects of the process, such as gathering both business and technical requirements and overall project design, were so dependent upon the analysts’ knowledge of our business and technical capabilities that we were hesitant to consider outsourcing them. Map development, once requirements were defined, was another matter. Even though ‘doing EDI’ isn’t something you’d think would be a core competency for a distributor, providing excellent customer service was and our process had to be air tight.
So, not so fast with that book burning party. Outsourcing is indeed a viable option to address issues related to staffing and support of your EDI team in some situations. However, it’s not a panacea and it can’t succeed without a thorough analysis of its true costs, benefits, and limitations.Last modified on Wednesday, 18 April 2012