Outsourcing

9 Key excerpts on "Outsourcing"

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  eBook - PDF

  Outsourcing -- Insourcing

  Can vendors make money from the new relationship opportunities?

  • Per V. Jenster, Henrik Stener Pedersen, Patricia Plackett, David Hussey(Authors)
  • 2005(Publication Date)
  • Wiley

    (Publisher)

  In this chapter we look at the historical devel- opment of Outsourcing and current trends. We also introduce our classification system for four key types of Outsourcing activities. The decision drivers for each are presented both from the perspective of the seller of the outsourced solution and from the perspective of the buyer of the solution. What is Outsourcing? Outsourcing is now high on the list of the things that many savants believe well-run organizations must consider, so that it is now as much a management fad as a reasoned decision, offering important augmentation to the current organizational design, or even giving rise to new enterprise designs. It can offer great opportunities to 2 Understanding the opportunities both the buyer and supplier when used wisely. However, when it becomes a mantra, used without thought, it can do great damage to both parties. According to the Wall Street Journal, Indian labour in banking costs about one-tenth as much as comparable banking personnel in Europe and the U.S. However, employing someone in back office processing in India is only about 50% less expensive once other costs are factored in. Wages in India are also rising rapidly each year, a factor that could make the savings short-lived. 1 What is Outsourcing? One definition is the market procurement of formerly in-house produced goods and services from legally independent supplier firms (Semlinger, 1991). Like all definitions, it gives the scope of the topic but conceals the infinite variety of Outsourcing possibilities. It makes it clear that there are two parties to an Outsourcing arrangement, but is really a definition from the buyer viewpoint. The supplier may have decisions to make that are as tough as any faced by the organization taking a decision to out- source. In fact, Outsourcing can be an opportunity for both parties, but it may also do damage to one or both of the parties.

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  eBook - ePub

  Outsourcing and Insourcing in an International Context

  • Marc J Schniederjans, Ashlyn M Schniederjans, Dara G Schniederjans(Authors)
  • 2015(Publication Date)
  • Routledge

    (Publisher)

  Part 1 Introduction to Outsourcing-Insourcing in an International Context Passage contains an image

  1 Introduction to Outsourcing-Insourcing

  DOI: 10.4324/9781315701936-2

  Learning Objectives After completing this chapter you should be able to:

  • Describe Outsourcing and insourcing.
  • Describe what is meant by an international context in Outsourcing and insourcing.
  • Explain the relationship between subcontracting and Outsourcing.
  • Describe various types of Outsourcing-insourcing.
  • Explain why businesses use Outsourcing-insourcing as a balancing strategy.
  • Explain the relationship between core competencies and Outsourcing-insourcing.
  • Describe theories used to justify Outsourcing-insourcing.
  • Describe Outsourcing trends.
  • Describe risks in the Outsourcing-insourcing process.
  • Explain the importance of considering risk in an Outsourcing-insourcing decision.

  What Is Outsourcing-Insourcing?

  Outsourcing is defined by Chase et al. (2004 , 372) as an “act of moving some of a firm’s internal activities and decision responsibilities to outside providers.” Lankford and Parsa (1999) similarly state “Outsourcing is defined as the procurement of products or services from sources that are external to the organization.” These and other definitions agree that Outsourcing involves allocating or reallocating business activities (both service and/or manufacturing activities) from an internal source to an external source. Conversely, insourcing

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  The Black Book of Outsourcing

  How to Manage the Changes, Challenges, and Opportunities

  • Douglas Brown, Scott Wilson(Authors)
  • 2005(Publication Date)
  • Wiley

    (Publisher)

  Twenty years later, these organizations have learned important lessons that are driving the adoption of what’s called strategic sourcing, an Outsourcing approach that focuses on long-term business needs and strengthens competitive advan- tage by selectively Outsourcing specific functions. Certainly, one-time arrangements can achieve specific results, but the buyer organization does not maintain its focus on continuous improvement that generates maxi- mum return on investment, which is possible in an ongoing relationship. Employing strategic sourcing makes it possible to leverage expertise and technology, with greater and continuous benefit the end result. Strategic sourcing is defined as the dynamic delivery of internal and ex- ternal business-oriented resources and services to ensure that business ob- jectives are met. The objective is to more effectively align internal core functionalities with changing business needs, which is particularly impor- tant in light of the vital role that technology-enabled processes play today in the ongoing success of the enterprise. Early in their Outsourcing efforts, many pioneering managers found that the cost savings that initially justified comprehensive Outsourcing What You Need to Know before You Start 61 quickly vanished if the business evolved and the service became ineffec- tive. Sometimes, they found, they ended up paying more to retrofit. The valuable business principle these managers learned was: Alignment with the organization’s business goals should be the top priority for all opera- tions and all Outsourcing. These managers also learned three subsequent lessons for applying that principle to their organizations. 1. Most outsourced services are not commodity services. Cutting costs should not always be the primary consideration. Very few services meet the definition of a real commodity, since technology or service components become “decommoditized” when applied in unique ways to meet specific business goals.

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  Outsourcing Success

  The Management Imperative

  • Alpesh B. Patel, Hemendra Aran(Authors)
  • 2005(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Outsourcing: an economic imperative Roughly 68 years ago, a 21-year-old professor by the name of Ronald H. Coase gave a lecture to students of the School of Economics and Commerce in Dundee, Scotland. He explained why businesses exist as they do — why, for instance, they choose to produce some goods themselves and contract with outside companies to provide the rest. What business process Outsourcing means 9 Which of the following typical attributes of a finance Outsourcing arrangement would be – or have been – most sucessful for your own organization? Please choose as many as apply. Outsources routine, transaction-intense tasks Use of performance-based pricing Transfers own people and assets to provider Uses a solution customized to its needs Uses single Outsourcing provider for all functions Use of fee-for-service pricing Uses provider’s own assets and people Uses multiple Outsourcing providers for different functions Uses a standardized solution from the provider Outsources areas of more strategic value Shares a standardized solution with other customers of the service provider Uses multiple providers for overlapping functions Other 68% 62% 43% 39% 37% 33% 33% 33% 31% 20% 26% 25% 25% 25% 23% 28% 17% 21% 17% 10% 14% 15% 7% 7% 2% 2% In your own organization, what are the primary barriers that stand – or have stood – in the way of a decision to outsource finance and accounting functions? Choose the top three.

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  Technology and Offshore Outsourcing Strategies

  • P. Brudenall(Author)
  • 2005(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Part III Understanding Business Process Outsourcing 5 Business Process Outsourcing: A Manager’s Guide to Understanding the Market Phenomenon Ashok C. Devata, Rachna Kumar and Theophanis Stratopoulos 1 Introduction Faster, cheaper, better has become the mantra for business success in today’s economy and business process Outsourcing (BPO) has become one of the means by which this goal may be achieved. BPO is defined as the long-term contracting out of information technology enabled business processes to an outside provider to help achieve increased shareholder value (Devata and Stratopoulos, 2004). With market analysts and researchers reporting significant benefits in terms of cost reduction, quality improvement as well as gains in flexibility and ability to focus more on the company’s core com- petencies, companies of all sizes are contemplating the pros and cons of the global Outsourcing of business processes. The global BPO market grew by 13 per cent between 1999 and 2000 to $119 billion and is estimated to reach $234 billion by 2005 (Whinston, 2004). The Americas lead in terms of BPO spending, with the US accounting for over 59 per cent of total worldwide expenditure. Europe is the second largest market for Outsourcing services, accounting for 22 per cent of the market. As with any market, the BPO market has a product, demand, supply, and business strategies. The product, which is any IT enabled business pro- cesses or any part of it, covers a wide spectrum, from customer relationship management to research and design projects. The demand for Outsourcing is mostly from companies in developed nations or high-cost geographic areas such as North America, countries in Northern Europe and Japan. Whilst cost reduction is the most frequently sought after benefit through Outsourcing, other benefits such as increased focus on core activities con- tribute to the growth of this demand. The supply side of Outsourcing consists of a wide variety of players.

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  No longer available |Learn more

  Outsourcing Professional Body of Knowledge - OPBOK Version 9

  • Jane Chittenden(Author)
  • 1970(Publication Date)
  • Van Haren Publishing

    (Publisher)

  Outsourcing is here to stay. It is inextricably linked to the globalization of business. As this globalization continues to connect the world’s economies, few if any companies will be able to meet the challenges they will face by relying solely on their own internal resources. As a result, companies will increasingly turn to partners, often through Outsourcing, to help them better leverage what they are best at, gain greater flexibility and reach, and drive down their overall business costs and risks. But this increased reliance on Outsourcing brings with it its own challenges. Many studies point to less than desirable and certainly less than consistent Outsourcing results. The reason is that in today’s world, companies need more than simple cost savings and contractually-based service levels from Outsourcing. What they need is a way to build a dynamic network of global partners able to adapt to and even anticipate ever-changing business realities. 24 24 Outsourcing Professional Body of Knowledge As the use of Outsourcing goes up, companies also need to lower the total cost of Outsourcing. Customers and providers alike are beginning to struggle with the burden of managing increasingly complex Outsourcing relationships across multiple organizations with multifaceted interfaces. Most importantly, for Outsourcing to continue to grow, the success rate has to go up even faster than the growth rate. If it does not, then the sheer weight of the number of ‘failed’ contracts may ultimately make Outsourcing seem too expensive, at any price. It is against this backdrop that companies are increasingly turning to Outsourcing professionals to take charge of their emerging global corporate ecosystems. Outsourcing professionals are fast becoming the experts with the strategic vision it takes to determine the right sourcing approach and the execution skills it takes to put the right relationships in place and make them work.

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  Outsourcing Global Services

  Knowledge, Innovation and Social Capital

  • I. Oshri, J. Kotlarsky, L. Willcocks(Authors)
  • 2008(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  From an IT perspective, outsourced IT activities include: office automation, business applications, software development, and IT infrastructure. Due to the broad approach several similarities and differences can be analyzed. During our interviews with the respondents we observed that all the client organizations applied a selective Outsourcing strategy. The choice of selective Outsourcing mitigates the risks for the client, while at the same time encouraging competition between the suppliers. While it is not yet possible to draw definitive conclusions from the investigated client organizations, the variations in the categories across the different industry sectors will yield some interesting observations. The results that are discussed in this chapter are indicative of the challenges and developments that both clients and suppliers have to go through. Table 3.1 Case studies Case studies Industry Sourcing strategy Start of the deal Length of the deal Total size of the deal (million) Number FTE trans- ferred Interviews with CIO Vendor man. IT man. Company A Banking Selective 2002 5 years Euro 1.800 2000 1 1 2 Company B Retail Selective 2002 5 years Euro 467 800 1 2 1 Company C Chemicals Selective 1999 5 years Euro 100 80 2 2 Company D Telecomm- unications Selective 2001 5 years Euro 1.400 950 1 2 2 Company E Manufac- turing Selective 2001 5 years Dollar 1. 000 500 1 1 2 Outsourcing global services 78 Findings As the selected client organizations are acting in a competitive climate within their industry, the different constructs give a rich overview of impor- tant developments. During this research we found different motivations for the client organizations to outsource their IT activities. On the one hand, some of them (e.g., banking, manufacturing) have started to define which activities are core and which are not from a business perspective. The strategic choice for Outsourcing was therefore considered well.

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  The Outsourcing Enterprise

  From Cost Management to Collaborative Innovation

  • L. Willcocks, S. Cullen, A. Craig(Authors)
  • 2016(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Outsourcing into the Future 267 CHAPTER 10 Conclusion: Steering a course Introduction As this book has made clear, Outsourcing is concerned with leveraging the distinctive and evolving capabilities provided by the external services market to achieve business advantage. This concept of Outsourcing as a strategic sourcing tool applies in a downturn, and in recessionary times, as much as in periods of economic growth. This is an important point because during the 2007–10 global economic downturn, many organiza- tions found themselves, initially at least, at a loss as to what to do. Many then decided to pass their pain on to incumbent or new suppliers. One lesson is that clients need to learn much better on how to shape and use Outsourcing arrangements to ride business cycles, and deal with economic crises. Another lesson is that they should do this in ways that enable the parties to be prepared to take advantage of any economic upturn that then materializes. In the 2000–03 downturn, Outsourcing growth did not slow significantly. Corporates got lucky. Just as IT expenditures had to slow after the heady over-investing of the e-business bubble years, and as business slowed too in most sectors, the global services market produced two genuine safety valves to the downward pressure on costs in the form of increased offshor- ing (either as outsourced or captive) and the growth of business process Outsourcing. And these standbys were still with us, though more matured, more globalized, and facing much more straightened circumstances in the 2007–10 period. Our view is that the wise executive will leverage off- shoring and business process Outsourcing vigorously in the next few years (through to 2015), not least as ways of managing through a recession that was likely to be with us until at least early 2011.

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  The Practice of Outsourcing

  From Information Systems to BPO and Offshoring

  • Mary C. Lacity, Leslie P. Willcocks(Authors)
  • 2009(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Part III Studies 2000–2008: From IT to Business Process and Offshore Outsourcing 11 IT Outsourcing Configuration: Defining and Designing Outsourcing Arrangements Sara Cullen, Peter Seddon and Leslie Willcocks Introduction In this chapter, we introduce the concept of information technology out- sourcing (ITO) “configuration”, defined as: a high-level description of the set of choices the organization makes in crafting its IT Outsourcing portfolio. From research into 49 ITO arrangements studied over time, we identify seven attributes – Scope Grouping, Supplier Grouping, Financial Scale, Duration, Pricing, Resource Ownership, and Commercial Relationship – as key descriptors of an organization’s ITO configuration. Seven further cases tested the relevance of the attributes. The contribution of this chapter is its articulation of the concept of configuration as a taxonomy of ITO struc- tural characteristics, the key attributes, and demonstration that configura- tion is an important concept for understanding, comparing, and managing ITO arrangements. In particular we detail the rationales for 31 different options in Outsourcing, the risks and management issues emerging for each, and how these play out in different combinations in selected, illustra- tive case studies. Pervasive adoption of IT has made information technology Outsourcing (ITO) a growing multi-billion dollar industry (Cullen and Willcocks, 2003; Lacity and Willcocks, 2009). The market is ever maturing, suppliers and their offerings ever expanding, and technology advancements increasingly enable the separation of management, implementation and operations (Feeny et al., 2005). With “offshoring” attracting increasing attention, the level of ITO activity seems set to grow even larger (Lacity and Rottman, 2007; Rottman and Lacity, 2005 – see also Chapters 14 and 15).

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