Large companies are often relying on a few key people, who have some sort of critical knowledge. This is mostly (as far as I can see) knowledge on how the company works, and with it the knowledge of what has been tried before and why it failed. Often these key people are some sort of managers.
If one of these persons quit (as managers do quite often), the company will make the same mistakes as it did, maybe 10 years ago (I have experience from relatively stable industries).
My question is, therefore, whether there are any examples of outsourcing of such key people to low-cost countries? As this is something radically different, I can think of a number of disadvantages, so I will list the advantages:
- Loyal employees (pay a person in a low-cost country double the normal salary and he/she will be more loyal than any western employees)
- Less risk of the employee going to the competitor (as they do not have the network)
- Replicated key personell. If the knowledge can be sent to low cost countries, it can be sent to many employees, which means that the critical knowledge can be sent to 10 people, not just one. This should be an enormous value for the company.
If you want to, I am willing to discuss ideas that arise from this thought. Just send a mail to firstname.lastname@example.org
Two key functions that are growing in outsourcing popularity (albeit domestic outsourcing) are the finance and accounting functions (outsourced CFO, and outsourced Controller). You mentioned that a key goal for an international outsourcing strategy is cost reduction, which can also be achieved via a domestic outsourcing arrangement. Here are other reasons that companies choose to outsource, all of which lead to cost reduction and better overall efficiency and effectiveness:
My company, SmartFinancials.net, provides complete outsourced accounting solutions for small to medium size companies. I’d be happy to share any other outsourcing knowledge with you. I can be reached at email@example.com.
Money is not everything, plus someone can always offer triple salary to your best people.
Some alternatives I can think of:
I think you have answered it yourself...
... few key people, who have some sort of critical knowledge ...This all boils down to "human psychology", if you distribute knowledge it simply means you are expendable any time. This means the company can replace you with a Turk and as a manager you think your first job is to keep your job (that is until you find another! :-)
Companies through different stages of development will go back-and-forth with hiring their own experts and outsourcing.
Some growing companies may not be able to afford upper-level managers, so they outsource during the transition stage. An example would be instead of hiring a Head of HR, find consultant or service to handle benefits management, payroll, and definitely employee searches.
37Signals.com is not afraid to let customers "outgrow" them. This could force companies to bring applications in-house. Sometimes they hire their own experts in the process.
I think the key is not to let the knowledge that is core to your business get away. Clean toilets are important to a 5 Star Hotel, so they have managers who are in charge of maintaining the staff to make things spotless. The local bank can just hire a cleaning service since clean toilets don't really give them a competitive advantage.