Sourcing Strategy Drivers: Fix Before Ship?

By Peter Allen, Partner & Managing Director, TPI

Previously, I brought up some common questions that arise in sourcing strategy (see: Sourcing Strategy Drivers: Three Big Questions). The first of which was, “Should you fix and ship or ship and fix?” This question related to the adequacy of a business process’ operation and whether that process should be remediated prior to altering its delivery model is important for many companies considering offshoring or outsourcing and has been frowned upon lately (see: Fix and Mix Approach to Outsourcing, Network World and 7 Sins of Offshore Outsourcing, Baseline).

In days past, I was a strong advocate for fix before ship.  It made little sense to hand a broken business process – whether it was a BPO function such as invoice processing, or an IT process such as server administration – over to a different service delivery model until it was running at an adequate level of performance.

Why?

The prevailing arguments were twofold.  First, in the era of “lift-and-shift” sourcing there was a tendency to merely sustain that broken process into the future.  One client coined the phrase “same mess for less.”  The means of contracting for transformation of a business process were inadequate and the industry simply working on the basis of achieving cost benefits by sustaining the status quo at a lower price of operation.

The second argument said that the client should harvest the “low hanging fruit” of benefits prior to giving  the opportunity to a third party.  

While both of these examples depict an outsourcing scenario, the same issues existed in moving processes to captive offshore operations.  Only mature/stable processes were candidates.

I must say that my thinking has evolved on this point.  I think that the abilities of the outsourcing service providers to tackle difficult transformation processes have matured incredibly.  In fact, most of the providers I speak with are not very excited about lift-and-shift opportunities.  Intuitively, they know that the expectations of their clients, over time, will be for process improvement.

Now, it’s dangerous to generalize and there are certainly cases where fix-and-ship should prevail, but I am guiding the executives I speak with to think seriously about their own abilities to do the fix work themselves.  Maybe their captive center has a better idea?  Maybe their outsourcing provider is making its own investments in new approaches.

One of the cornerstone questions on sourcing strategies is this one, and the answer is increasingly coming down on the side of ship-then-fix.