Summary: The Outsourcing Revolution

Review and Analysis of Corbett's Book

BusinessNews Publishing

• Publisher: Must Read Summaries
• Year: 2016
• eBook ISBN: 9782511020203
• Topic: Business
• Subtopic: Operations
• Index: Business

The must-read summary of Michael Corbett's book: `The Outsourcing Revolution: Why It Makes Sense and How to Do It Right`.

This complete summary of the ideas from Michael Corbett's book `The Outsourcing Revolution` deals with a highly controversial topic. Outsourcing tends to get blamed whenever jobs move from one country to another. However, outsourcing is currently a $6 trillion global industry, and within the next decade will grow appreciably as more and more organisations transform their operations to take advantage of everything outsourcing offers. In his book, the author explains how outsourcing helps make companies more productive and more competitive in the global marketplace and provides benefits for your business that should not be ignored. This summary is a must-read for anyone who wants to know more about the outsourcing process that will shape the world of tomorrow.

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To learn more, read `The Outsourcing Revolution` and discover the benefits of outsourcing and why you shouldn't ignore it.

Summary of The Outsourcing Revolution (Michael Corbett)

1. Where outsourcing is today

Traditional outsourcing focused primarily on reducing costs and improving productivity. Next-generation outsourcing will be focused instead on integrating world-class capabilities into every company’s essential and complex business processes to enhance performance. Instead of trying to improve what is, outsourcing will be used to build the future for most firms.

Historically, outsourcing was a reactive business decision. Many companies used outsourcing in the 1980s and 1990s to respond to the competitive pressures generated by globalization:

In a global economy, every firm must compete against customer choices from every where in the world. This leads to rapid commodization of productsand acompression of the investment cycle. To respond, firms become more knowledge-driven and respond by focusing on those areas where they have a unique competitive advantage. Outside firms or specialists are then brought in to perform those activities which are outside the firm’s own areas of specialization – its own core competencies.

As a result, over a period of time:

1. Service providers build their capabilities to such a high degree of performance that they are progressively more superior to anything a firm can provide for itself.
2. Technology means the service provider can be located anywhere and deliver products and services electronically.
3. The risk of investing in state-of-the-art technology shifts from the firm itself to the outside service provider who needs to stay at the cutting edge to remain competitive.
4. A firm must be able to perform a business processes better and cheaper than both its direct competitors and the best outsourcing service providers available. Otherwise, it risks handing an operational competitive advantage to its competitors who are able to use the best of breed.

Outsourcing is a complete restructuring of businesses away from a structure that made sense in the industrial age towards a different structure that is more appropriate for the information age. The top eight reasons for outsourcing – according to a recent survey of business managers – are:

1. To reduce costs (49-percent of respondents)
2. To improve the firm’s own focus (17-percent)
3. To access a variable cost structure (12-percent)
4. To access additional skills and expertise (9-percent)
5. To grow revenue (4-percent)
6. To improve quality (3-percent)
7. To conserve capital (3-percent)
8. To become more innovative (3-percent).

Most companies have traditionally been organized along hierarchal lines:

• Each department reports to a manager.
• The departments are grouped together into business units along geographical or functional lines.
• The managers of the various departments and business units report to executives who then report to the CEO.

First-generation outsourcing tended to align with these divisions as well. Generally, companies outsourced along departmental and functional lines. This model is now being replaced by a more process-oriented perspective, where the focus is more on what gets delivered to the customer rather than on which department does what tasks.

When service providers become more involved in delivering value to customers, impressive things can happen. For example, a speciality retailer, Manhattan Fruiter, makes great corporate gift baskets. It has made UPS an integral part of its operations by embedding UPS’s software and services into the company’s own Web site. That means Manhattan Fruiter doesn’t need to develop or maintain its own software systems and it can take full advantage of UPS’s logistics excellence. For this to work seamlessly:

1. There must be an understanding of what customers want and a commitment to deliver precisely that.
2. There must be no barriers between what is done internally and what’s carried out by service providers.
3. There must be a drive to work with service providers to achieve scale and efficiency.
4. There must be a commitment to create more customer value by offering lower prices, new revenue streams or even entirely new business ventures.

Outsourcing opens up new commercial opportunities for many firms. It enables firms to leverage their existing internal investments to create new commercial offerings, either on their own or through joint ventures. Outsourcing also allows firms to leverage their capabilities anywhere in the world since information-based work can be processed anywhere beneficially. Outsourcing is a global business activity and will continue to be so in the future.

For businesses to use outsourcing proactively rather than reactively, the...

Table of contents

• Title page
• Book Presentation
• Summary of The Outsourcing Revolution (Michael Corbett)
• About the Summary Publisher
• Copyright