This is the first of what I intend to make a regular installment on this blog: "Jargon Watch," where I look at a word or phrase we use in this supply chain business and try to figure out what it really means. This sounds pretty simple, but actually, after years of using terms we are all used to, their meanings tend to get skewed.

I think this concept can be best summed up in a word made popular by comedian Stephen Colbert of The Colbert Report on Comedy Central: "Truthiness," which is actually in the dictionary now.

"Truthiness" describes something that someone intuitively believes to be true, but that is not actually based in fact, or it could mean choosing certain facts but ignoring others that don't agree with one's preferred idea of truth. Often, "truthiness" is based on someone's passion or emotional feelings.

For example, the Dot-com bubble of about 10 years ago, and its subsequent bust, started because people really wanted to believe that they could make money with an Internet business, to the point of ignoring the creation of an actual business model that would stand up to the facts of the market. In a remarkably "truth-y" moment, people went with their emotions instead of facts, which resulted in a lot of failed business models later on.

So, for this first jargon-spotlight post, I chose the word "outsourcing." I can see little alarm bells going off in people's heads now as they read this word. For many, it definitely has moved from its true meaning to the business world's dirtiest word.

To avoid being "truthy" myself about the word, we should look at why outsourcing has a bad reputation. Outsourcing conjures up images of Americans losing jobs to countries overseas and other negative connotations. It's important to remember though that offshoring and outsourcing do not always go hand-in-hand. Bringing up offshoring reminds me of the wider topic of globalization. I believe that globalization and its effects are inevitable and not going away. I've written more about globalization in this article if you would like more in-depth thoughts on the subject.

With outsourcing, it's also true that some organizations have had major difficulties -- ranging from annoying to nightmarish – after outsourcing an operation to a third party. It is risky business, and I would be the first to tell that to someone considering it. Tread carefully!

However, knowledgeable businesspeople understand that outsourcing can be a positive part of a company's strategy and offers great competitive advantage, which in turn, creates sustainable future growth. Failure is avoidable if the approach is right.

I have written a lot about outsourcing tactics and risks, and I even published a book on the subject. But here, I don't intend to go into great detail on the whole concept of outsourcing. I only want to make you think about the meaning of the word.

When I think of outsourcing, the next thing I think of is core competencies. You should outsource non-core functions; that is, functions that if they are not done well, will not create any problems for your customer or hurt your business in a significant way.

If you aren't sure what part of your business is a core competency versus a non-core process, ask yourself one simple question that operates like Occam's Razor on the confusion you might have: How does the function affect your customers? The answer to this question tells you what would happen to those customers if the function were outsourced and how they might be affected. If any negative effects are possible, well yes, then it's a core function and should not be outsourced. It's too important to the success of your business and what it is that you do.

For example, if you outsource landscaping to another company, and they inadvertently kill all of the trees on your property, that probably won't affect your customers. But if a retail store outsources its logistics operations, and all of its shipments get sent to the wrong customers weeks late, then your customers are severely affected. Don't expect them to order anything from you again soon, if ever.

I could write much more on this subject, but if you were to ask me to define outsourcing, this is what I would tell you: Outsourcing is one of today's most unique business challenges because it is both a solution to other business challenges and a challenge in its own right. But the real beauty of outsourcing, when done properly, is that it reduces the work required of organizations and improves efficiency and effectiveness.

Then I would probably also hand you a stack of materials as tall as you are, because if you are thinking of outsourcing, the first thing you need to do is to get educated! I will spare you that mountain of materials for now.

I do hope this post has given you pause to consider the meaning of the word the next time you hear it or talk about it. If you have a definition for the word "outsourcing," share it in the comments. Also if you have a suggestion for future posts exploring the meaning of business jargon we use all the time, please leave me a comment, and I'll give it some thought.

Jim