Whoever staffs an area completely with externals buys delivery and loses control. Organizational debt grows like technical debt: quietly, until the next negotiation makes it due.
In the 2000s and early 2010s a huge relocation wave was running. For leaders it is convenient to answer a lack of strategic breadth with cost cutting. These are familiar recipes: they shift the problem onto expensive employees and unwilling suppliers. Outsourcing was especially popular in high-wage countries, because it seemed to cast into a contract what is hard to enforce internally, namely to make labor the object of permanent price negotiation.
The hidden bill sat elsewhere: with the steering complexity. And it was more expensive than almost everyone involved thought, the providers included.
Why my rebuild was short
I brought an outsourced area back in, and rebuilding the steering competence went surprisingly fast. The reason: we had never fully given the competence away. A core team, a mirror in the house, kept running the whole time, for exactly this reason. Most of the time went into the decision and securing resources, not into retraining. But before that came the bitter pill: admitting that our optimistic assumptions about near- and offshoring had not worked out and that we had to realign.
Whoever gives it away completely has a different, bigger problem. He first has to see and gauge the problem at all before he can plan countermeasures. Paradoxically, the most sensible path is then to bring in temporary external know-how for the insourcing. The rule of ten strikes mercilessly here: what you do not keep at the start, you pay for later many times over.
How to spot it early
Organizational debt accrues quietly, so you have to measure it where it hurts: at the satisfaction of clients and employees (churn, surveys, the departure of knowledge carriers), at controlling, at process quality, at the availability and maturity of the systems. Not everyone measures this. But without these symptoms you notice the imbalance only when it can no longer be corrected.
Before you outsource an area completely: keep at least the core of the steering in house. Otherwise you notice the damage only when you can no longer assess it yourself.