Discrete Manufacturing – a better metaphor for Project Based Outsourcing

Drawing upon age old concepts such as discrete manufacturing versus process manufacturing for IT outsourcing may seem farstretched, but if you examine closely, it reflects the current trends in outsourcing. Discrete manufacturing varies from process manufacturing. Wikepedia defines discrete manufacturing as building something for a specifc order. Examples include cars. The resulting products are easily identifiable and can be scaled up or down and the processes tailored to match the complexity. In process manufacturing, the products are undifferentiated, for example oil.

Traditional outsourcing was initially very successful as outsourcers learned to deliver IT solutions with the appropriate Service Level Agreements (SLAs) using attractive pricing models.  It was all about negotiating intricate, multi-party agreements which were very time consuming.   This was based on the process manufacturing model – keep producing quality software at low cost.  However, as the use of IT became more distributed in the organization, and the role of IT transformed from just the back-office to being strategically important to the organization, the need for specific niche solutions has become more relevant.  As organizations desire more niche and project oriented outsourcing, discrete manufactring serves as a better paradigm for IT outsourcing.

The emerging markets have many Tier-2 and Tier-3 outsourcers who specialize in niche-solutions.  An example of a nice-player would be a firm in developing social networks to enhance customer base for home healthcare software companies.  Such niche players embrace the principles of discrete manufacturing where they clearly develop a customized solution to meet a specific outsourcing project request.  These niche players are increasingly gaining importance in Small to Mid-Sized Businesses (SMBs) seeking project-based sourcing help.  Deploying processes that are specific to each niche-solution, these credentialed service providers reduce the risk of outsourcing. After all, apart from cost savings, risk-free sourcing is the most important tenet of IT outsourcing. 

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