Outsourcing is the process of contracting a business function to someone else.

[1] It is sometimes confused with offshoring, though a function may be outsourced without offshoring or vice versa. The opposite of outsourcing is called vertical integration or insourcing. Overview The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider.[2] In this sense, two organizations may enter into a contractual agreement involving an exchange of services and payments.The concept of outsourcing thereby helps the firms to perform well in their core competencies and thus mitigating rise of skill or expertise shortage in the areas where they want to outsource. Of recent concern is the ability of businesses to outsource to suppliers outside the nation, sometimes referred to as offshoring or offshore outsourcing. In addition, several related terms have emerged to grasp various aspects of the complex relationship between economic organizations or networks, such as nearshoring, multisourcing[3][4] and strategic outsourcing.[5] One of the biggest changes of recent years has come from the growth of groups of people using online technologies to use outsourcing as a way to build a viable service delivery business that can be run from virtually anywhere in the world. The preferential contract rates that can be obtained by temporarily employing experts in specific areas to deliver elements of a project purely online means that there is a growing number of small businesses that operate entirely online using offshore outsourced contractors to deliver the work before repackaging it to deliver to the client. One common area where this business model thrives is in provided website creating, analysis and marketing services. All elements can be done remotely and delivered digitally and service providers can leverage the scale and economy of outsourcing to deliver high value services at vastly reduced end customer prices. Reasons This section is in a list format that may be better presented using prose. You can help by converting this section to prose, if appropriate. Editing help is available. (October 2010) Organizations that outsource are seeking to realize benefits or address the following issues:[6][7][8][9] Cost savings The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, repricing, re-negotiation, and cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.[10]

Focus on Core Business Resources (for example investment, people, infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specialised IT services companies. Cost restructuring Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable. Improve quality Achieve a steep change in quality through contracting out the service with a new service level agreement. Knowledge Access to intellectual property and wider experience and knowledge.[11] Contract Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.[12] Operational expertise Access to operational best practice that would be too difficult or time consuming to develop in-house. Access to talent Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.[13][14] Capacity management An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier. Catalyst for change An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a Change agent in the process. Enhance capacity for innovation Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.[14][15] Reduce time to market The acceleration of the development or production of a product through the additional capability brought by the supplier.[16] Commodification The trend of standardizing business processes, IT Services, and application services which enable to buy at the right price, allows businesses access to services which were only available to large corporations. Risk management An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.[17] Venture Capital Some countries match government funds venture capital with private venture capital for start-ups that start businesses in their country.[18] Tax Benefit Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country. Scalability The outsourced company will usually be prepared to manage a temporary or permanent increase or decrease in production. Creating leisure time Individuals may wish to outsource their work in order to optimise their work-leisure balance.[19] Liability Organizations choose to transfer liabilities inherent to specific business processes or services that are outside of their core competencies.

Revenue The classic outsourcing "mega-deal" tended to be the sale of a function and its associated capital [equipment, people, etc.] to an external vendor. The function was then rented back from the vendor over a series of years. The result was a short-run windfall.

Security Before outsourcing an organization is responsible for the actions of all their staff and liable for their actions. When these same people are transferred to an outsourcer they may not change desk but their legal status has changed. They are no longer directly employed or responsible to the organization. This causes legal, security and compliance issues that need to be addressed through the contract between the client and the suppliers. This is one of the most complex areas of outsourcing and requires a specialist third party adviser. Fraud is a specific security issue that is criminal activity whether it is by employees or the supplier staff. However, it can be disputed that the fraud is more likely when outsourcers are involved, for example credit card theft when there is scope for fraud by credit card cloning. In April 2005, a highprofile case involving the theft of $350,000 from four Citibank customers occurred when call center workers acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank.[23] Diversification The early trend in outsourcing was manifest in a financial construct where a function's associated capital and personnel were sold to a vendor and then rented back over a series of years. Early benefits were a boost in expertise and efficiency as outsource vendors had more focus and capability in their specialization. As time progressed, the year 0 benefit was off the books, customer needs evolved and contracts generally aged poorly. Rigid contracts hampered the ability of customers to respond to emerging business drivers, and simultaneously tied the hands of the vendor's team who was focused on increased efficiencies for static problems. The result tended to be additional "project" contracts for incremental changes in a monopoly environment. Many deals became contentious, and many customers have become very uncomfortable surrendering so much power to a single vendor. As the contract aged, it became increasingly difficult to even negotiate with vendors with confidence, because the customer began to lack any real knowledge of the cost structure of the function, or the competitive situation of the vendor. Industry leaders turned to each other, trade journals and management consultants to try to regain control of the situation, and the next answer that grabbed hold of the industry was labor cost arbitration; leveraging cheap, offshore resources to replace or pressure increasingly expensive legacy outsource vendors. Pressure led incumbent vendors to move resources

offshore, or to be replaced wholesale. As this renegotiation was under way, many customers seized the opportunity to restructure to gain more control, transparency and negotiating power. The end result has been fragmentation of outsource contracts and a decline in mega-deals. Many companies are now relying on several vendors who each offer specialization and / or lowest cost. "Insourcing" As mentioned above, outsourcing has gone through many iterations and reinventions. Some outsourcing deals have been partially or fully reversed citing an inability to execute strategy, lost transparency & control, onerous contractual models, a lack of competition, recurring costs, hidden costs, etc... Many companies are now moving to more tailored models where along with outsource vendor diversification, key parts of what was previously outsourced has been "insourced". "Insourcing" has been identified as a means to ensure control, compliance and to gain competitive differentiation through vertical integration or the development of shared services [commonly called a 'center of excellence']. "Insourcing" at some level also tends to be leveraged to enable organizations to undergo significant transformational change.[citation
needed]

Standpoint of labor From the standpoint of labor, outsourcing may represent a new threat, contributing to worker insecurity, and reflective of the general process of globalization.[26] On June 26, 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce commenting that the U.S. has outsourced too much and can no longer rely on consumer spending to drive demand.[27] Standpoint of government Western governments may attempt to compensate workers affected by outsourcing through various forms of legislation. In Europe, the Acquired Rights Directive attempts to address the issue. The Directive is implemented differently in different nations. In the United States, the Trade Adjustment Assistance Act is meant to provide compensation for workers directly affected by international trade agreements. Whether or not these policies provide the security and fair compensation they promise is debatable. The Evolution of Management Consulting - A Historical Perspective of How the Industry Has Changed Since its Founding. Evolution of Management Consulting The first management consulting firm was Arthur D. Little founded in 1886 by an MIT professor of the same name. The firm originally

specialized in technology research, although it expanded to general management consultancy in later years. Booz Allen Hamilton was founded in 1914 by Edwin G. Booz a graduate of the Kellogg School of Management at Northwestern University and was the first management firm to serve both private industry and government clients. Post-war Years Post World War II saw a significant increase in the field of management consulting with the Boston Consulting Group, founded in 1963, being the most notable firm to emerge during this period. The impetus for this growth was the realization by both company management and board members that senior staff does not generally possess essential competencies in all functional areas of their business and could benefit from external guidance and assistance. The work performed by Boston Consulting Group and others like it (e.g. McKinsey) during the 1960s and 1970s developed the methodology that would define the field of strategic management consulting from this point forward. This methodology may be said to fall along a continuum, with the expert or prescriptive approach at one end and the guide or facilitative approach on the other. As its name implies, the expert consultant provides authoritative advice and assistance to client companies. There is minimum client collaboration as the consultant is perceived as the one who knows best. In a facilitative approach, the focus is less on providing technical expertise than on the process with the consultant taking on the role of coach and advisor. Because of the emphasis on process, this approach has often been referred to as process consulting with Edgar Schein considered the most well-known practitioner of this method. 1980s and 1990s The growth of management consulting has been rapid over the past 20 years, showing a 20 percent increase during the 1980s and 1990s. Technology consulting has been one of the largest areas of growth. If one looks as the consulting landscape even 20 years ago this specialization was relatively small and untapped. At that time, technology consulting was an add-on service provided by software providers. For example, IBM would provide technical assistance to companies with regard to implementation of its products. As technology has become more advanced and complex, the field of technology consulting has expanded to help companies determine how best to integrate existing and new systems to drive synergy and leverage capacity.

During the1990s, a number of the larger consulting firms (e.g. PWC, Andersen, KPMG, etc.) started to change their methodology to what can be considered a future-based approach. This approach places emphasis on aligning the staff of an organization around a shared vision for future operations. The basic premise is that people behave according to their expectations of future conditions. A future-based approach is commonly employed in those companies undergoing strategic realignment/business transformation and/or a merger that requires alignment of two cultures. 21st Century trends The consulting industry is cyclical in nature and highly correlated with economic conditions. The industry experienced a period of slow or no growth during the recession periods of 2001-2003 and 2007-2009 but has grown steadily since and has once again stabilized. New Millennium: New Revenue Model Traditionally, consulting firms charged for time and materials with billing based on number of hours worked, materials supplied, and such out-ofpocket expenses as travel, lodging and living expenses. During the late 1990s and early 2000s, as companies began to notice a lessening of ROI, many clients have asked consulting firms to accept a results-based pricing (aka benefit-sharing) payment arrangement in which the consulting firm will receive a percentage of the value delivered; i.e. the consultant will receive x dollars if s/he can delivers y value. Deliver more get paid more, deliver less and get paid less. The current trend seems to consist of a hybrid of fixed pricing with benefit-sharing with risks shared between the consultant firm and client company. In a true sense of irony, companies were only able to notice that they were not getting the ROI that was promised because their consultants implemented systems and solutions that provided them with much more robust capability to analyze, spend and track overall performances. The type of services purchased will have a significant impact on the pricing model. For example, if a client purchases business transformation services, they arrange a fixed fee / gain sharing model. If the client purchases staff augmentation work or general project management work, the fee structure will be based on the more traditional time and expense model. Models of service Many consulting firms are organized around two primary structures: Functional - Strategy and transformation, information technology, human resources, and sales; and

Industry - Oil & Gas, retail, automotive, healthcare, environmental, etc. Both structures form a kind of matrix in which most consulting firms occupy one or more cells.

For example, one firm may specialize in technology for healthcare sector while another may focus on strategy within the automotive sector. Then there are staff augmentation firms that are not true consultancies but rather provide supplemental and contract staff and project managers on a temporary basis. They may be compared to traditional temporary employment agencies that provide workers to augment current staff, especially during times of peak work flow. These companies operate very much like a job portal. They establish relationships within a business and try to assess if there is a need for temporary staff. With the job description in hand (which they typically obtain by looking at the corporate web site), they go to sites like Monster.com or others and filter through the resumes. Resumes that appear to be a fit (typically these firms have very limited knowledge of business advisory activities) would be forwarded to the hiring manager. If the hiring manager indicates interest in the candidate, the staffing firm will coordinate interviews. If a business wishes to hire one of these candidates, the staff augmentation firm will extend the offer to the candidates and arrange the placement fee with the company. In many cases the fee is based on an hourly rate so that if the candidates ask for $120 per hour, the staffing firm will bill the company at a higher rate. Predicted employment change for the industry According to the U.S. Bureau of Labor Statistics, employment of management consultants is expected to grow by 24 percent during the period 2008-2018, as both private industry, non-profit organizations, and government agencies rely on outside assistance with strategic planning and to enhance operational efficiencies. Employment opportunities are expected in large consulting firms with international expertise, as well as smaller boutique firms specializing in such areas as biotechnology, healthcare, and information technology. Employment growth will be driven by a number of changes within the business environment that have required firms to more closely review their operational policies. These changes include the implementation of stricter regulatory oversight due to corporate malfeasance, developments in technology, and the rise in ecommerce. In addition, consultants will be called upon to offer guidance and advice as companies attempt to work through the required regulatory changes due to the on-going economic, credit, and housing crises. Firms will also retain consultants who specialize in green issues to help them lower energy consumption and implement environmentally-friendly policies. Startup firms also hire consultants to assist with such tasks as organizational development, pricing and marketing strategy, on-boarding new staff, and talent management.

We hope that you have found the information contained in this article useful in terms of understanding the genesis of the management consulting industry. We invite you to share your thoughts and comments below. Additionally if you would like to learn more about Perluxi and how we can help your organization in the areas either strategy consulting, operational efficiency, or technology implementation, please dont hesitate to contact us at info@perluxi.com.

Skill sets required for management consultants

Market Knowledge & Capability: This is the application of fact-based knowledge of technical skills, business understanding, sector insight, and external awareness.

Consulting Competencies: These are the core consultancy skills, tools, and techniques which are essential in delivering consulting services. Consulting Skills and Behaviors, and Ethics: These define the professional skills, behaviors, and attitudes which act as "enablers" in achieving market capability, knowledge and Consulting Competence. They establish the level of credibility and trust between the client and the consultant.

PE Performance Counselling RFORMANCE COUNSELLING The primary reasons for introducing Performance Counselling are to accelerate:

Improvement in performance Acquisition of skills Changes in behaviour Overcoming personal shortcomings

We work with individuals on behalf of the organisation to improve performance. Typical Model for Performance Counselling Step One: Understanding the Individual's Requirements

What issues and outcomes are you hoping coaching will help them overcome or achieve? What is stopping them, and what has stopped them from achieving or overcoming these issues in the past How will your organisation measure the results of the coaching intervention How will your organisation sustain the outcomes achieved by the individual from the counselling

Step Two: Initial Meeting with Individual

Explain the aims and goals of your organisation in relation to performance counselling. Explain what is involved in a counselling session, what the individual can expect, what the initial session will involve, what subsequent sessions will entail. Determine length and number of sessions, self monitoring, homework. Roles and obligations of both parties.

Step Three: Individual undertakes Thinking/Leadership Styles Profile Questionnaire The more the individual knows about how they think and behave, the better prepared they are to improve their performance. The Thinking/Leadership Styles Profile and/or EXPERT Psychological Profiler for Business can help the individual create change through:

Identifying the unique thinking patterns that characterise their current behaviour; Understanding which of their thinking patterns are more effective, which arent and why; Helping the individual decide which thinking and behaving patterns they want to change

Step Four First Session Typically the coach will work with the individual to:

debrief the results of the Thinking/Leadership Styles Profile and or EXPERT Psychological Profiler for Business. Identify priorities for development and set targeted improvement goals.

Step Five: Regular Counselling Sessions (Sessions usually run fortnightly, for up to 2 hours each session, over a 2 -3 month period) Depending on the agreed upon period for the counselling assignment, varying amounts of time is typically spent on the following:

Formulating strategies to bring about change in behaviours and attitudes; Recognising, examining and challenging self limiting beliefs; Developing action plans- for achieving the goals and removing barriers to success.

Step Six: Managers as Coaches (How to manage the individual now the performance counselling has ended) Long after the formal counselling relationship has ended the improvement seen in the counselling intervention can be built upon.

Managers can be trained in recognising and managing the specific personal styles of the individual as depicted in the Profile.

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