I spoke last week at an event on transformational outsourcing hosted by KPIT Cummins at the Institute of Directors.

The focus of my talk was on outsourcing trends. At least it meant I could look back at my own blog to see what I had been talking about recently.

I was particularly interested to hear a presentation by Marcus East, the former chief executive of Breathe Internet and these days working on the music technology platforms being promoted by Peter “Sledgehammer” Gabriel.

Marcus came into Breathe when the company was almost falling apart. Multiple acquisitions and fast expansion meant it had infrastructure all over the place, a very expensive billing platform, and customer service was a disaster.

He saw outsourcing as a tool that could potentially save the business, and it was that threat of going to the wall – after all those expensive ads had been filmed – that focused minds at the company.

Marcus took four initial steps:

1. Win new customers and clients;
2. Service those existing clients;
3. Evaluate and optimise the present offerings;
4. Implement and improve the marketing plan.

These might sound obvious when listed like this, but his description of the company at the time he arrived made it sound like someone frantically running up the down escalator; just running to stand still.

Marcus found that by outsourcing to a pool of suppliers, he could get best practice in each different area, along with other benefits such as the increased control over what is delivered. He said: “If you have a big internal team then there is always a culture of it not being their fault when things go wrong. There is always an issue beyond their control so it’s hard to pin down where issues really exist. Once you outsource, there are stiff financial penalties on your supplier and everything is clearly documented.”

Marcus said that Breathe also managed to reduce its headcount because of the outsourcing programme, though it was not an explicit target that drove the strategy. He said that it was more of a bonus that costs were reduced as they tried sorting through the mess.

The most important advantage was that Breathe could start responding to what clients really wanted. He said: “We could start responding to client needs immediately because we had better, more flexible, systems. And importantly, there was far less requirement for capital expenditure. We used to need new routers, switches, and hardware all the time. Once we had outsourced the network, the hardware being used was the problem of the supplier. We only worried that the network was serving our customers well.”

The case was an interesting example of how outsourcing can be used to transform a business, particularly in a crisis. Cost is often cited as the number one reason to outsource, so it’s always fascinating to hear an example where the company had to outsource – or they would be no more.