Fundamentals Of Outsourcing Module 2 PDF

FUNDAMENTALS OF OUTSOURCING Module 2 Fundamentals of Business Process Outsourcing 101 Topical Overview The Two (2) Types of Outsourcing Outsourcing as a Business Strategy Outsourced Activities/ Processes o Core versus Non-Core Processes Readiness Asse...

FUNDAMENTALS OF OUTSOURCING Module 2 Fundamentals of Business Process Outsourcing 101 Topical Overview The Two (2) Types of Outsourcing Outsourcing as a Business Strategy Outsourced Activities/ Processes o Core versus Non-Core Processes Readiness Assessment Technologies and Trends Module Learning Objectives By the end of this module, you should be able to: Name and define the two (2) types of Outsourcing Enumerate the different outsourcing strategies State the common types of activities, tasks, and/ or processes that get outsourced Define the components of Readiness Assessment Identify what are the key technologies and trends in outsourcing. Putting Things into Context No man is an island Everything is connected The nature of business is … The Two (2) Types of Outsourcing Third-Party: Shared Service Center (SSC): Owned by a service Wholly-owned by the mother provider, a local entity or company part of a global group Providing services entirely to Providing services to affiliates and subsidiaries, or clients of the service more rarely to clients of the provider mother company The Two (2) Types of Outsourcing Third Party: Shared Service Center (SSC): ANZ Bank Accenture Chartis Technology and Operations AEGIS Management Convergys Chevron EGS (NCO/APAC) Citigroup IBM Dell Sitel DKS SPi Global HP Stream Global HSBC Sutherland J.P Morgan Chase Sykes Maersk Tele Tech Manulife Teleperformance Shell Shared Services Asia Telus Thomson Reuters Strategies for Outsourcing Multisourcing Crowdsourcing Onshoring Nearshoring Offshoring Strategies for Outsourcing – Multisourcing Multisourcing: Multiple vendors for client's outsourced project. Example: − GM's Brazilian e-commerce site. Vendors: Oracle, AT &T, Microsoft, Cisco, EDS (now HP Enterprise Services), IBM − GM's 2007/$7.5B IT outsourcing contract with EDS (now HP Enterprise Services), IBM, Capgemini, and Wipro Ltd. Strategies for Outsourcing – Crowdsourcing Company puts out a call for a project; best solution/submission is accepted and contracted. Crowdsourcing: "...outsourcing to an undefined, generally large group of potential offerers in the form of an open call." (Jeff Howe) Strategies for Outsourcing – Onshoring Onshoring: Vendor in the same home country as client Advantages: − Allows immediate response: product designers in same country respond to market feedback quickly − Local contractors have same market knowledge, culture, language, communication style; minimizes culture issues Strategies for Outsourcing – Onshoring Disadvantages: − Risk of inadequately selected, trained, supervised staff— i.e., less skilled because contractor staff are lower paid − Risk of higher attrition (lower business acumen/process knowledge) than internal staff; less motivation to deliver quality Example: New York bank contracting start-up security service firm in New York Strategies for Outsourcing – Nearshoring Nearshoring: the transfer of business to a nearby country, often sharing the same border. Advantages: − Fee-for-service variability rather than fixed compensation costs − Significant labor cost arbitrage Strategies for Outsourcing – Nearshoring Disadvantages: − Additional coordination costs, sourcing management, communications − Transfer pricing/tax margin requirements Example: Hong Kong retail firm offshoring garments manufacturing in Manila Strategies for Outsourcing – Offshoring Offshoring - Vendor and client in different countries Advantages: Allows company to focus on core business Fast ramp-up/down at reasonable cost Opportunity to expand into new areas cost effectively Disadvantages: Data privacy/confidentiality issues Lack of right business acumen/right market knowledge in offshore location Cultural differences leading to delays and miscues Risk of high attrition in service provider, weak staff selection/training Strategies for Outsourcing M____________ C____________ O________ N__________ O_________ Activities-Tasks-Processes Core Activities-Tasks-Processes: Primary process or product of the business Tasks that deliver the primary product, the unique value proposition of the company “Essential, defining activities of an organization,” what it needs to keep enhancing to improve competitive advantage Non-Core Activities-Tasks-Processes: Support activities, processes, functions What NOT to Outsource Core Activities-Tasks-Processes: Design Product Development Process “Recipe” What to Outsource Well-defined/documented tasks, standard outputs Examples: – IT Development: programming, documentation, unit and integration testing, implementation of new systems, conversion to new platforms – IT Maintenance: application maintenance, helpdesk, network support Typically Outsourced Activities-Tasks-Processes Business Process Outsourcing (BPO) IT Outsourcing Support Function/s Routine activities or activities that can be automated at larger centers Seasonal Requirement/s Part-based Activities Typically Outsourced Activities-Tasks-Processes Business Process Outsourcing (BPO): outsourcing of entire business process components; e.g., HR, payroll, accounting, Financial, etc. Typically Outsourced Activities-Tasks-Processes IT Outsourcing: −IT Technical Support −IT Application Development −IT Application Management −Data Center operations −Software as a Service (SaaS) −Cloud (On-line Storage) Services Typically Outsourced Activities-Tasks-Processes Support function/ services: ­ Cafeterias ­ Copy centers ­ Security ­ Janitorial Services ­ Trucking/ Shipping ­ Building Maintenance Typically Outsourced Activities-Tasks-Processes Routine activities or activities that can be automated at larger centers: − Small banks outsourcing check processing to larger banks, riding on ATM base of multi-bank network − Small vendors using Amazon.com as data center, marketing, and payment processing platform − Banks using common/multi-bank core banking services of large technology providers Typically Outsourced Activities-Tasks-Processes Seasonal Requirement/s: − One day 50 employees needed; next day only 10 are needed − Christmas hires to handle additional volume of transactions − Temporary extension of operating hours to accommodate foot traffic All Part-based Activities: − These are activities that are: routine, scheduled, with little uncertainty − Automobile assembly − Electronics assembly − Packaging solutions − Handicrafts or garments for mass production Summary BPO: Contracting third parties for specific business functions. IT Outsourcing: Delegating IT services to external providers. Support Functions: Activities that assist core operations, often outsourced. Routine Activities: Repetitive tasks suitable for automation. Seasonal Requirements: Fluctuating needs based on time-sensitive demands. Part-based Activities: Tasks related to specific components, often outsourced for specialization. Typically Outsourced Activities-Tasks-Processes B_______ P______ O__________ __ O_________ S______ F_______/s R______ activities or activities that can be a________ at larger centers S_______ R__________/s P___-_____ A________ Key Technologies that Support Outsourcing Video conferencing: HP - Halo (8.5 min. video) Cisco - Telepresence Sun - MPK20: Project Wonderland Web-based conferencing and workflow tools: WebEx MS Windows Meeting Space MS SharePoint Google Applications  Business Process Fundamentals of Outsourcing Outsourcing Engagements Issue Managing Management and Outsourcing Critical Situation Transitions Control BPO Operations Management Group Activity: Putting it all Together Group Activity: Putting It All Together Choose from one of the following businesses: 1. Food Delivery Services 2. Online Shopping 3. Digital Marketing 4. Printing Shop 5. Logistics and Supply Chain 6. Travel and Tourism 7. Education Technology (EdTech) Group Activity: Putting It All Together In your respective teams, create your business concept and supply the following information: Name of your business Products and services Price of products and/ or services Image/ Brand identity that you want to create Location Marketing Strategy Operating Processes Group Activity: Putting It All Together Assumption: Water – 5,000 per month Electricity – 5,000 – 10,000 Internet Connection - 1,000 Minimum wage – Php446.00, 15 workers or less Base Rent - 5,000 – 10,000 Provide for total expenses for two (2) years Group Activity: Putting It All Together Identify what services/products will you be outsourcing and why? Group Activity: Putting it all Together Business Presentations & Q&A