2. What is Outsourcing.. ?
Outsourcing is the strategic use of outside resources to perform activities
traditionally handled by internal staff and resources – Dave Griffiths
Outsourcing provide services that are scalable, secure and efficient while
improving overall service and reducing costs
3. Key areas of outsourcing:
Information technology / IT solutions
Call Centres
Finance and Accounting Outsourcing
Textiles
Manufacturing
Human Resource Management
4. Key Drivers Of Outsourcing:
Lack of resources
Resource optimization
Economic factors: COST
Quality
Lack of skills / knowledge(skilled
experts)
Time
Technology issues
Distribution of risk
Legal
Asset restructuring: to let go off or
lease
Increase productivity and
efficiency
Improving customer service
Geographical presence / expansion
5. Issues in Outsourcing:
Dependency: Contracts management, SLAs
Time:
1. Initial time investment is very high
2. Initial processing issues : Shift Timing
Quality: Quality culture in organization are
different. It’s a culture issue
Delivery: Strong agreement, SLAs, proactive
audit, process alignment
Legal: legal advises, experts
Technology issues: keep looking at technology
and align your partners
Communication: understanding language
better, no language barrier, level of
understanding very high
Management and control issues
Increase in business risk
Compromise
Loss of business reputation
Leakage of business ideas
Communication
Threat to intellectual property:
Laws, audits, checks
Alignment
6. Managing Outsourcing Towards
Successful Relationship:
Agreements- SLAs
Define scope, work allocation, role and responsibility
Documentation- process, policies, standards, guidelines
Knowledge transfer
Point of contact- POC
Feedback mechanism
Audit and reviews
Strategy and vision alignment
7. Kinds of relationship possible in
outsourcing:
Project based / Task based (fixed
payment)
Charging:
1. Per hour basis
2. Per deliverable(cost per action)
3. Per resources
4. Per usage
Profit sharing (formula pre defined)
Build transfer(BT)
Build operate transfer(BOT)
Build operate lease transfer(BOLT)
Time based contracts
Investment sharing
8. Types Of Models:
Fixed price model
Fixed price model with economic
parameters
Fixed price plus incentive model
Fixed price plus incentive based on
successive target model
Cost reimbursement model (cost
can be fixed or variable)
Cost plus fixed fee model
Cost plus incentive model
Time plus material model
Consumption based price model
Incentive model
Shared risk and reward model
Management services
Global Delivery or Blended
Outsourcing Model: This kind of
model allows the service provider
to provide its outsourcing services
globally. This is the preferred
choice for large companies
9. Types Of Models:
Global Shared Services
Centres: This is a model that
combines onshore shared services
and offshore captive centres. The
global centre can be run separately
with its own budget and
responsibilities.
Offshore Multi-Sourcing
Model: This is the practice of
using several outsourcing firms and
service providers. The advantage
of this model is that it is more
flexible and provides a solution for
business continuity plans.
Joint Venture (between organization
customer and service provider): In a
joint venture, the organization
customer and the service provider each
contributes capital, intellectual
property, personnel, and other
resources to design and implement a
solution. By definition, a joint venture
is a joint organization, regardless of
form, in which at least two partners
share assets, management, and profits
and losses within an agreed joint
commercial mission.
10. Types Of Models:
Group Captive (among multiple organization customers for their own
captive): In some industries, such as banking, financial services and insurance
(BFSI), common regulations impose a compliance burden on competitors. In
such cases, competitors may elect to establish a jointly owned “group
captive” to perform such compliance-mandated services. Such “group
captives” enable industry players to share information on compliance
standards in order to design a standard template of services that meets those
standards. Group captives were popular in the 1980s and 1990s before BPOs
developed and perfected the classic outsourcing model. A review of group
captives offers an insight into this evolution.
11. Types Of Models:
Wholly Owned Operating Subsidiary (“Captive” or “Shared Services
Centre”): An organization may choose to establish a wholly owned subsidiary
to perform particular services for all corporate affiliates. Such an
organization is often referred to as a “captive” or a “shared services centre.”
The organization controls all aspects of operations and is able to integrate
business process transaction operations with its front-office customer-facing
business.
