Recession Focuses Outsourcing Decisions

by Dennis A. Adams

Outsourcing represents another way of managing the costs of an activity. Whether we outsource the mowing of our lawn to avoid the cost of owning and operating a lawn mower, or if we outsource the costs of developing an IT service, the result ends up in a net savings of direct and indirect costs. If an organization believes that the quality of service received from an outsourcer is adequate, research shows that it is in that organization's best interest to outsource that need. The difficult part of outsourcing is ensuring that the quality delivered will be adequate before the outsourcing arrangement has been consummated. The quality of a manufactured good falls broadly into two camps: physical quality and perceived quality. Physical quality is the quality inherent in the product and can often be independently tested. Perceived quality is the quality a consumer perceives in the product and is associated with price, brand, or company reputation. However, service quality doesn't have the same two dimensions. Service quality is measured as technical quality (what the consumer actually receives) and functional quality (the way the service is delivered). In measuring the quality of an outsourcing service, a great deal of effort must be spent to ensure that the technical quality is what the organization expects. However, the way the services are delivered can often affect the overall perception of the outsourced quality.