It’s that time again; the earnings calls for CRM, ERP, hardware and services vendors are being scheduled, rehearsed and delivered to shareholders, industry and financial analysts. What’s common across the more than two dozen calls I’ve listened to that span CRM, ERP and SCM software, hardware and services companies is that every CEO is offering up a spin on how global outsourcing is making their business even more cost-competitive, responsive to global markets and stronger for the strategic long run.
With all this apparent success at both software and hardware outsourcing, I began to feel like myself as a golfer, sizing up and playing Phil Mickelsons. In short, he has a great long game, a great short game, and I play badly on a good day even on a miniature golf course. But every CEO cannot be the Phil Mickelson of outsourcing. I suspect there are some Cinderella stories in there, but for the vast majority of them, getting either software or hardware outsourcing right takes lots of time, many hours of practice, and the patience of Job to make it all work out.
In short, nothing valuable ever comes free, and all these CEOs on conference calls this quarter tell you about the strong successes at outsourcing, forgetting to mention the curve of pain they have ridden, in some cases for years, to get this strategy right.
For companies outsourcing manufacturing, the course has been especially unforgiving and even brutal for some of them. Like strong winds that whip across the front nine at Pebble Beach, any change in quality assurance, manufacturing engineering, and even the smallest wisp of an Engineering Change Order (ECO) can play havoc with the lay of the ball.
Jack Welch Doesn’t Give ‘Mulligans’
As the calls went on, I realized that CEOs are giving themselves outsourcing mulligans — a free shot sometimes given a golfer in informal play when the previous shot was poorly played — and the leaders of hardware companies are the biggest culprits. Jack Welch said in his autobiography that he does not give mulligans, but then again he had Six Sigma to guide outsourcing production efforts — in short, a great read of the course for manufacturing.
The real takeaways from earnings calls where outsourcing is proclaimed as the new success strategy are:
Across the board this earnings season, no one knows how many outsourcing mulligans CEOs of software, hardware and services companies took. But there is one certainty: Come next quarter after another round, the CEOs will all be back, and some might tell us about the experience curve they have been down and lessons learned. But for most, it will be a description of how they got their outsourcing strategy pin high. Nothing comes for free, and, especially for manufacturing companies, the lessons can be costly and enduring.
Bottom line: Outsourcing’s allure is the same as golf: freedom to hit away and play the game as you specifically want to. Ironically both outsourcing and golf make you earn that freedom, and for hardware manufacturers, it’s better to own up to your handicap now, and don’t mulligan away the future. For software companies, outsourcing is like the course you always wanted to play — and in the case of CRM, the path is proven and worth a round.
Louis Columbus, a CRM Buyer columnist, is a former senior analyst with AMR Research and is founder of LWC Research, a firm specializing in CRM, sell-side e-commerce, sales and product configuration and guided selling.