Professional Documents
Culture Documents
Off Shoring Outsourcing Rev 7
Off Shoring Outsourcing Rev 7
Off Shoring Outsourcing Rev 7
Scope
Definition When is the model used Advantages and Disadvantages How is the Model Used Examples Where do jobs go
Definition
Outsourcing Outsourcing is contracting with another company or person to do a particular function. The outside firms that are providing the outsourcing services are third-party providers, or as they are more commonly called, service providers. Off-shoring Off-shoring is comparable to outsourcing, but the business process such as production, manufacturing or services is moved to another country.
OUTSOURCING/OFF-SHORING
DOMESTIC Domestic in-house production IN-HOUSE
Company produces its products domestically without any outside contracts
Off-shore outsourcing
Company uses services supplied by Company uses services supplied by another domestically-based company an unaffiliated foreign-based company
reduce fixed costs to increase focus on core competencies in order to use their labor, capital, technology and resources more effectively.
The decision to move to another country is taken because there is a cost or skills advantage in doing so, or because there is a need for international focus.
Advantages
reduce fixed costs; to increase focus on core competencies in order to use their labor, capital, technology and resources more effectively. To cope-up with the paace of technological advancement Larger knowledge pool Reduce project cycle time
Disadvantages
1.
Your outsourcing company will not be driven by the same standards and mission that drives your company. Difficulty in communication Time zone / deadline delays
2. 3. 4. 5.
Hidden Costs Threat to Security and Confidentiality Quality Problems Tied to the Financial Well-Being of Another Company
Strategic Thinking - to develop the organization's philosophy about the role of outsourcing in its activities; Evaluation and Selection - to decide on the appropriate outsourcing/off-shoring projects and potential locations for the work to be done and service providers to do it; Contract Development - to work out the legal, pricing and service level agreement (SLA) terms; Outsourcing Management or Governance - to refine the ongoing working relationship between the client and outsourcing service providers.
2)
3)
4)
1.
What are the costs, profits and risks, and which processes are eligible for outsourcing / off-shoring?
Alternatives Cost-benefit analysis
Wage levels Extra costs and charges Price levels Effect on the internal value chain of the company
3.
Finally, carry out a detailed feasibility analysis for each country, partner, process, and contract.
Technology Software/Hardware Maintenance Support Finance Loan processing Independent analysis Accounting audits Insurance Claims processing Health Care
Example - NIKE
PROFILE
Major publicly traded sportswear and equipment supplier based in the United States Products: Athletic shoes, apparel, and sports equipment Market Share: 47% market share of the domestic footwear industry, with sales of $3.77 billion.
Example - NIKE
OUTSOURCING STRATEGY Subcontractors throughout the globe
Nike employ teams of 4 expatriates per each of the big countries visiting the factories weekly to monitor production and working conditions.
Example - Dell
Dell, the world's largest producer of personal computers, has begun operations at its call center in the Philippines. The call center, provides customer and technical support to Dell computer users abroad. The company said it chose the Philippines for the center "primarily because of the strong language and communications skills of its work force and a robust telecommunications infrastructure."
Percentage Distribution and Number of BPO Companies, by sector, 2008 Sector Contact Centre Transcription Information technology Back office (KPO) Animation Engineering Total Percentage 31 % 22% 19% 13% 8% 7% 100% No. of Companies 191 135 119 81 49 43 618
Contact centre is consist of inbound and out band voice operation service for sale, customer service and technical support among others while transcription is data transcription (including medical) services. Back office service is also known as knowledge process outsourcing (KPO) like finance, accounting and human resources administration.
Based on a Philippine Daily Inquirer Article 21 July 2011 The Philippines is seen holding on to the third spot in the global off-shoring market, with revenue for the year expected to reach $10.7 billion for a 7.4-percent share of the market. According to Canada-based research firm XMG Global, India will continue to be the world leader, with an estimated global take of $61.5 billion, or 42.5 percent of offshoring revenue in 2011. China will come in second with a 31.5-percent share of the pie and $45.7 billion in offshoring revenue.
1.
1.
1.
end