Startgic outsourcing


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Startgic outsourcing

  1. 1. What is Outsourcing? Outsourcing is the act of transferring some of an organization’s recurring internal activities and decision rights to outside providers, as set forth in a contract.
  2. 2. What is Outsourcing? Outsourcing -  “the strategic use of outside resources to perform activities traditionally handled by internal staff and resources” Dave Griffiths Why Outsource?  Provide services that are scalable, secure, and efficient, while improving overall service and reducing costs
  3. 3. Why do Companies Outsource?
  4. 4. Reasons for Outsourcing Traditional role - reaction to problem  Reduction and control of costs  Avoid large capital investment costs  Insufficient resources available Modern role – business strategy  Allows company to focus on their core competencies  Keeping up with cutting-edge technology  Creating value for the organization and
  5. 5. What Can be Outsourced? system integration data network mainframe data center voice network, internet/intranet maintenance/repair applications development e-commerce end-user support system
  6. 6. Reasons and Benefits Organizationally - focus, flexible, transformation, customer service Improvement - performance, manage & control, risk manage, new ideas, image Financially - reduce investment, generate cash Revenue - gain market access, expand Cost - reduce cost, from fixed to variable cost Employee – incentive, motivate.
  7. 7. Levels of Outsourcing Individual – moving specific positions out of the organization. Functional – having specialized knowledge and responsibilities. Process – how products or services actually flow through the organization.
  8. 8. Michael Porter’s “value chain” Page 6Processes and Functions Functions Processes Purchasing Receiving Accounts Payable Inventory Control Inventory DistributionInbound logistics X X X XOperations X XProcurement X X XTechnology development X X X X XHuman resources management X X X X XInfrastructure X
  9. 9. How to Implement Outsourcing Program initiation  Opinions and ideas shared to form draft contract Program implementation  Transferring staff  Service Level Agreement (SLA)  Establish communications between partners  Actual transfer of the service  Establish management procedures Contract agreement
  10. 10. Problems With Outsourcing Loss of Control Increased cash outflow Confidentiality and security Selection of supplier Too dependent on service provider Loss of staff or moral problems Time consuming Provider may not understand business environment Provider slow to react to changes in strategy
  11. 11. Problems With Outsourcing
  12. 12. Types of Outsourcing Tactical Strategic -future vision consideration -current and future core competencies -structure -costs -performance -competitive advantages.
  13. 13. History, Trend, and Growth To describe the growing trend of large companies transferring their information systems to providers (WWII). Trend in larger organizations is to outsource entire processes. Expected to grow at double-digit rates over the coming decade.
  14. 14. 7 Steps to Successful Outsourcing1. Planning initiatives2. Exploring strategic implications3. Analyzing costs/performance4. Selecting providers5. Negotiating terms6. Transitioning resources7. Managing relationships
  15. 15. Risks Related to… Risks relating to Project Design Risks relating to Managing the Project Risks relating to the Transition to the Provider’s Services Risks relating to Managing the Provider’s Services.
  16. 16. Why Outside Advisers are Needed? Because they :  help manage risks  level the playing field with provider expertise  assist the project manager in focusing on outsourcing issues  act as a paradigm buster (challenge established thinking)  offer independent observations on the outsourcing environment.
  17. 17. Reasons Not To Outsource If there are reasons to Outsource, there are reasons NOT to Outsource: Uncertainty Loss of Control Conflict Employee Unhappiness Financial Excuses