By Bill Huber, Director,
CPO Services, TPI
Captive vs. Outsource:
DuPont’s Frank
Conway co-presented with our own Brian Smith on the considerations between captive and outsourced
solutions, which they compared to “seeing in a sandstorm.”
As Frank
pointed out, the decision is often a journey that reflects executives’ mindsets.
Having a captive can have a strong psychological benefit, but when times get
tough, executives can often swing from not wanting to outsource to trying to
outsource too much.
- Frank
also pointed out that whether outsourcing or managing a captive, you never
give up your ultimate accountability. The buck stops with you.
Whether it is outsourced, internal, onshore or offshore, the CEO expects
it to work. - Brian
Smith noted that the most efficient captives and service providers achieve
a fairly similar cost level, with the best captives operating at a 2%-4%
lower cost than the best service providers. However, median service
provider costs amount to 79% of median captive costs. Two reasons for
this are that captives tend to have a significantly higher percentage of
support staff, and a lower span of control (Apparently there are a
number of captives that are currently “for sale”).
Former Speaker of the House Newt
Gingrich provided the keynote at today’s lunch, covering an encyclopedic range
of issues. Equally critical of both U.S. political parties, he emphasized
more changes in technology in the next 25 years than in the previous 125. He pointed
out that no bureaucracy could possibly grasp, plan for, or react to this level
of change and that only the private sector, reacting to the market, often
through trial and error will be able to take our economy through this
change.
His key challenge to the sourcing
audiences:
Define
what conditions would be required for the U.S. to be the preferred
sourcing destination for more business activities, and become a force to
advocate for those changes. He mentioned taxes, regulation,
education, and energy among those key issues.
Newt
also pointed out that those countries that become protectionist,
ultimately lag in technology, become more expensive and ultimately become
backwaters on the global stage.
The audience appeared to like Gingrich’s messages. Stay
tuned for some more from day 2…
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