FUNDAMENTALS OF

OUTSOURCING
The Two Types of Outsourcing
 Third Party
-owned by a service provider, a local
entity or part of a global group.
-providing services to clients of the
service provider.
Shared Service Center
-wholly-owned by a mother company
-providing services entirely to affiliates and
subsidiaries, or more rarely to clients of the
mother company.
 Third Party:
1 Accenture 5 IBM

2 AEGIS 6 Sitel

3 Convergys 7 SPi Global

4 EGS (NCO/APAC) 8 Stream Global

 Third Party:
1
9 Sutherland
3
Telus
1
Sykes
0
1
Tele Tech
1
1
Teleperformance
2
 Shared Service Center (SSC)

1 ANZ Bank 5 Dell

2 Chards Technology and

Operations Management
6 DKS

3 Chevron 7 HP

4 Citigroup 8 HSBC
 Shared Service Center (SSC)

1
9 J.P Morgan Chase 3
Thomson Reuters
1
Maersk
0
1
Manulife
1
1
Shell Shared Services
2 Asia
 Strategies for Outsourcing

1 Multisourcing 2 Crowdsourcing

3 Onshoring 4 Nearshoring

5 Offshoring
 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.
 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)
 Onshoring
Onshoring : Vendor in the same home country 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
 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
 Nearshoring
Nearshoring : Vendor is a country “close” (geographic
and/or cultural proximity) to client’s home country
Advantages:
- Fee-for-service variability rather than fixed compensation
costs
- Significant labor cost arbitrage
 Nearshoring
Disadvantages:
- Additional coordination costs, sourcing management,
communications
- Transfer pricing/tax margin requirements
Example:
Hong Kong retail firm offshoring
garments manufacturing in Manila
 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
 Offshoring
Disadvantages
- Data privacy / confidentiality issues
- Lack of right business acumen / right market knowledge
- Cultural differences leading to delays and miscues
- Risk of high attrition in service provider, weak staff
selection / training
 WHAT TO
OUTSOURCE
2 Types
 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
Core Activities - Tasks -
Processes
- Design
- Product Development
- Process
- "Recipe"
What to
Outsource
 What to Outsource
Well defined documented tasks, standard
outputs
Example:
-It Development: programming,
documentation, unit and integration
learning
-It Maintenance: Application maintenance,
helpdesk, network support
TypicalLy Outsourced
Activities-Task-
Processes
 TypicalLy Outsourced Activities-
Task-Processes
Business Processing Routine activities or Activities
1 Outsourcing BPO 4 that can be automated at larger
centers

2 It Outsourcing 5 Seasonal Requirements

3 Support Function's 6 Part Based Activities

 IT Outsourcing:
1 IT Technical Support 5 Software as a Service
(SaaS)
2 IT Application 6 Cloud (On-line Storage)
Services
Development
3 IT Application
Management
4 Data Center operations
 Support function/services:

1 Cafeterias 5 Trucking/ Shipping

2 Copy centers 6 Building Maintenance

3 Security

4 Janitorial Services
 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
 SEASONAL
REQUIREMENTS
- One day 50 employees needed; the 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
- AUTOMOBILES ASSEMBLY
- ELECTRONICS ASSEMBLY
- PACKAGING SOLUTIONS
- HANDICRAFTS OR GARMENTS FOR
Key Technologies that
Support Outsourcing
Video conferencing:
- HP-Halo (8.5 min. video)
- Cisco - Telepresence
- -un-MPK20: Project Wonderland
Web-based conferencing and
workflow tools:
- WebEx
- MS Windows Meeting Space
- MS Sharepoint
- Google Applications
Thank You