The best books on how to get outsourcing right

The way power plays out in an age of globalization has important lessons for outsourcing relationships. This is because, as Friedman says, globalization is not a trend, but an “international system.” This system is complex and has “its own rules and logic that today directly or indirectly influence the politics, environment, geopolitics, and economics of virtually every country in the world.” Companies looking to outsource should study the evolving, globalized world order as described in this book and then seek to explore the rules they need to outsource in today’s new economy.

Business Process Outsourcing (BPO) is a $300 billion-plus industry with many deals running into the multiple millions of dollars. With so much at stake, it is important to get outsourcing right. I am a fan of this book because it complements the work we are doing at the University of Tennessee on Vested outsourcing. Lacity and Willcocks share a series of best practices (“Nine Keys”) that can help organizations succeed in outsourcing. Tips include assigning great leadership pairs; focusing on business and strategic benefits beyond cost efficiencies; and resolving issues together while prioritizing and incentivizing innovation. The overriding themes of these tips are collaboration, alignment, and flexible governance frameworks—all music to my ears for creating a successful outsourcing relationship.

The Servant as Leader may be one of the most influential business books ever published! But how does it apply to outsourcing? Creating a servant/leader mindset is essential to prevent what I call the outsourcing paradox—where you outsource the expert and then tell them how to do the work. It also prevents another common outsourcing ailment I call the Junkyard Dog Factor where a company outsourcing keeps a shadow organization that creates redundancies and limits the cost saving a company can get through outsourcing. Greenleaf’s basic message is simple: manage the business with the supplier as opposed to managing the supplier. Organizations that follow Greenleaf’s advice will most certainly benefit with healthier outsourcing relationships. 

When an organization chooses to outsource it almost always creates massive change within a company. Business processes are now performed by the supplier and often a company's employees shift to work for the supplier, move to another department, or are let go as part of downsizing. All of this can create fear and resistance and result in a failing outsourcing effort. In this classic book Spencer Johnson underscores the importance of change management and looking at change from the perspective of those who are getting their cheese moved. Who Moved My Cheese will help equip you with how to think about the necessary change management you will need to succeed in your outsourcing initiative. 

Levitt and Dubner’s entertaining bestseller explores hidden and perverse incentives that color our personal and business lives. They share real examples of how perverse incentives can affect (and taint) our decisions. My research at the University of Tennessee has identified 12 perverse incentives of outsourcing (Ailments of Outsourcing) that can plague and derail an outsourcing relationship. I like this book because it helps make the concept of perverse incentives very real and puts empirical evidence around the craziness that can happen if you don’t overlook inherent perverse incentivizes. Simply put, this book will not only make you laugh, it will help you be more aware of perverse incentives.