Food for thought: Internal outsourcing

The strategic "make-or-buy" decision has led many companies to outsource some of their processes to specialists, while others choose to retain functions in-house to avoid losing knowledge or control. A third option has emerged of late: that of "internal outsourcing".

Rather than bringing in an outside organisation, take the existing internal resource and turn it into a separate business in its own right. The parent organisation frees itself from non-core activities and overheads, while still retaining privileged access to the new company.

But internal outsourcing brings its own challenges, as Elevation Learning's Calvert Markham explains. "Internal outsourcing is a bit like a corporate version of privatisation," he says. "Like privatisation, it can appear very threatening to the people involved. They now have to compete for the business that previously had been theirs of right."

If they are to be successful, people in the new business will need to acquire confidence and new skills to sell themselves externally. According to Markham , this is very similar to the challenge faced by senior managers who become management consultants.

"The first thing you discover in a professional services organisation is that to make any sort of career progression you have to sell - you've got to become a 'rainmaker'," he says. "The problem for specialists is that in making a career decision they mostly avoided anything to do with selling. Now they find they have to become salesmen! So when we give consultants basic sales training the first thing we have to do is 'detox' them as far as their attitude to sales is concerned. They need to realise that you don't need a personality transplant to be a successful salesperson."

Although the newly outsourced service organisation will be guaranteed a certain amount of work from the parent company, the key step toward independence will be developing external sources of business. This requires taking the skills and resources that were developed as an internal department and developing them into a market proposition.

"You can look at your relationship with the market at three levels: internal skills, market propositions and client predicaments," says Markham . "Some people sell their skills, some people are simply terrific at handling client predicaments. An internal organisation

will obviously have skills; what they need to learn is to be more like consultants: to take those skills and embody them in a proposition which can then be applied to client predicaments and taken to the market."