7afb0lecture 1 mbpo

7/21/2019 7afb0lecture 1 MBPO

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Scope of Outsourcing

The term outsourcing has more popularly come to be associated with I T enabled services or Business

Process Outsourcing (BPO). We can classify the scope of Outsourcing into ma!or areas.

Financial Services

The firm may outsource various financial services li"e payroll preparation# $nderwriting# %erchant

ban"ing etc.

Advertising

Business firms generally depend on advertising agencies for designing developing and disseminating

their products and services. $nder the agreement the advertising agencies agrees to provide all the

services associated with advertisement.

Courier service

Big firms generally depend on the courier agencies to dispatch their large amount of parcels.

Customer support Services

&ustomer service is the ma!or area where outsourcing applicable. 'lmost all the companies outsources its

after sale services and customer services. &all centers are the best eample for the customer service

outsourcing.

BARRIERS TO OUTSOURCING

! If it loo"s too good to #e real$ it pro#a#l% is!

Too freuently# outsourcers try to loc" clients into long*term deals based on contract terms and pricing

that will be out of date si months later. The inevitable results are frustration# irritation and a lac" of

understanding and insight into why the sales promises of outsourcing aren+t meeting up with its delivery

realities.

&! Too man% outsourcing deals suffer 'deat( #% c(ange order!'

,ervice providers may under*uote on purpose# !ust to get the business. Then# when they get further into

the contract# they may demand more money# citing change of circumstances. When such change ordersoccur several times over the course of the relationship# irreparable damage may occur.

)! T(e prevalent 'core vs! conte*t' approac( ++ t(at is$ outsourcing ,(at-s not important to let us

focus on ,(at is important ++ is #ecoming outdated!

-ell &omputer was prompted to regain control of its outsourced customer service centers because of the

customer complaints received and the drop in additional sales usually generated by service calls. Procter


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/amble has now outsourced ** or# more appropriately# cosourced ** its product innovation process to

harness the brainpower of people well outside its organi0ational walls.

.! T(e contractual crunc( and ,in+lose contracts (ave unintended conse/uences!

Outsourcing has become more difficult to support because the processes are leaner than before# leading

to the 1I+ve*gotta*win*and*you+ve*gotta*lose1 approach to contract negotiation. In the short term# one party

wins and the other loses# but in the long term# everybody loses# because of the animosity# frustration and

bad*mouthing that stem from such a partnership.

0! 1(at %ou don-t "no, ,ill #ite %ou!

There are many factors service providers don+t# or can+t# foresee. 2or instance# some critical wor"arounds

developed over the years to "eep a client+s operations running smoothly may not have been properly

documented or formally integrated into the client+s core technological framewor". These invisibles ** both

manual and automated ** are nearly impossible to identify. &ompanies often discover them afterward#

when customers complain# when frustration arises on both sides# when the partnership has been

damaged.

2! Outsourcing providers #uild in a lac" of transparenc% ++ t(e '#lac" #o*' of costs and margins!,ome may try to hide their overall margins to give themselves more profitability over the life of the

contract. They provide a vast range of consulting services# application development# solution deployment

and pro!ect management# all grounded by lots of change orders# into the comple contract. Because

different services have different costs and different margins# a provider can use ** or claim to have used **

the ones that offer the most benefit. ' client often has few means to oversee what the service provider is

doing and how much it charges.

3! It-s eas% to underestimate t(e #ull-s+e%e effect! 4ots of stuff (as to get done to outsource a

#usiness process!

This stuff ranges from simple things (moving euipment) to difficult things (consolidating computer

applications) to really difficult things (moving and retraining people). %ore importantly# it all has to come

together !ust right to hit the target. If one thing goes wrong# it can have a cascading effect on other things.

5! Companies are starting to re6ect long+term contracts!

$nfortunately# the smaller# shorter*term contracts have their own problems for the client company. -ealing

with more providers inevitably stretches a company+s valuable ** and already scarce ** management time.

7! Outsourcing firms are suffering from t(e Boto* Effect!

Boto ta"es out wrin"les but inhibits normal facial epressions. 'round year three to five# outsourcing

service providers are supposed to have eliminated many of the easy processes and added simple

automation. But the technology refresh maybe is a lot more epensive than they thought. 'nd they+re

confronting so many operational challenges and cost pressures !ust to "eep going ** or "eep the smile on

** that they can+t afford to do the planned investments for the technology refresh.

8! All customers ,ant is a fle*i#le$ innovative partner$ #ut t(e% usuall% get t(e opposite!

&ustomers want a fleible outsourcing partner who will introduce innovation into their processes# help

them manage both costs and service and use relevant and emerging technologies. They also want

someone who understands their specific reuirements and their business. $nfortunately# outsourcing

service providers tend to fall short in fleible infrastructure# understanding the client+s business and

innovation.


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In #usiness# the term word sourcingrefers to a number ofprocurementpractices# aimed at finding#

evaluating and engaging suppliersof goodsandservices3

Outsourcing# the process of contracting a business function to someone else

Insourcing# a process of contracting a business function to someone else to be completed in*house

/lobal sourcing#a procurement strategy aimed at eploiting global efficiencies in production

,trategic sourcing# a component of supply chain management# for improving and re*evaluating

purchasing activities

Tradegood sourcing# a process of finding the right suppliers who have gone through the

uniue Tradegood1Business done right1 verification process by Interte"# the global leading uality

and safety company.

,ourcing (personnel)# the practice of recruiting talent using strategic search techniues

&o*sourcing# a type of auditing service

4ow*cost country sourcing# a procurement strategy for acuiring materials from countries with

lower labour and production costs in order to cut operating epenses

&orporate sourcing# a supply chain# purchasing5procurement# and inventory function

,econd*tier sourcing# a practice of rewarding suppliers for attempting to achieve minority*owned

business spending goals of their customer

6etsourcing#a practice of utili0ing an established group of businesses# individuals# or hardware

software applications to streamline or initiate procurement practices by tapping in to and wor"ing

through a third party provider

Inverted ,ourcing#a price volatility reduction strategy usually conducted by procurement or

supply*chain person by which the value of an organi0ation+s waste*stream is maimi0ed by actively

see"ing out the highest price possible from a range of potential buyers eploiting price trends and

other mar"et factors

7emote Insourcing# a practice of contracting a third party vendor to complete a business function

by creating collaborative units between in*house and third party staff

%ultisourcing# a strategy that treats a given function# such as IT# as a portfolio of activities# some

of which should be outsourced and others of which should be performed by internal staff.
http://en.wikipedia.org/wiki/Procurementhttp://en.wikipedia.org/wiki/Procurementhttp://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Outsourcinghttp://en.wikipedia.org/wiki/Insourcinghttp://en.wikipedia.org/wiki/Global_sourcinghttp://en.wikipedia.org/wiki/Global_sourcinghttp://en.wikipedia.org/wiki/Strategic_sourcinghttp://en.wikipedia.org/w/index.php?title=Tradegood_sourcing&action=edit&redlink=1http://en.wikipedia.org/wiki/Tradegoodhttp://en.wikipedia.org/wiki/Sourcing_(personnel)http://en.wikipedia.org/wiki/Co-sourcinghttp://en.wikipedia.org/wiki/Low-cost_country_sourcinghttp://en.wikipedia.org/wiki/Corporate_sourcinghttp://en.wikipedia.org/wiki/Second-tier_sourcinghttp://en.wikipedia.org/w/index.php?title=Netsourcing&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Netsourcing&action=edit&redlink=1http://en.wikipedia.org/wiki/Inverted_Sourcinghttp://en.wikipedia.org/wiki/Inverted_Sourcinghttp://en.wikipedia.org/w/index.php?title=Remote_Insourcing&action=edit&redlink=1http://en.wikipedia.org/wiki/Multisourcinghttp://en.wikipedia.org/wiki/Supply_chainhttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Outsourcinghttp://en.wikipedia.org/wiki/Insourcinghttp://en.wikipedia.org/wiki/Global_sourcinghttp://en.wikipedia.org/wiki/Strategic_sourcinghttp://en.wikipedia.org/w/index.php?title=Tradegood_sourcing&action=edit&redlink=1http://en.wikipedia.org/wiki/Tradegoodhttp://en.wikipedia.org/wiki/Sourcing_(personnel)http://en.wikipedia.org/wiki/Co-sourcinghttp://en.wikipedia.org/wiki/Low-cost_country_sourcinghttp://en.wikipedia.org/wiki/Corporate_sourcinghttp://en.wikipedia.org/wiki/Second-tier_sourcinghttp://en.wikipedia.org/w/index.php?title=Netsourcing&action=edit&redlink=1http://en.wikipedia.org/wiki/Inverted_Sourcinghttp://en.wikipedia.org/w/index.php?title=Remote_Insourcing&action=edit&redlink=1http://en.wikipedia.org/wiki/Multisourcinghttp://en.wikipedia.org/wiki/Procurement


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&rowdsourcing# using an undefined# generally large group of people or community in the form of

an open call to perform a tas"

In6ournalism# it can also refer to3

8ournalism sourcing# the practice of identifying a person or publication that gives information

,ingle sourcing#the reuse of content in publishing

In computing# it can refer to3

Open*sourcing# the act of releasing previously proprietary software under an open source5free

software license

Power sourcing euipment#networ" devices that will provide power in a Power over 9thernet

(Po9) setup

In electronics# it can refer to3

,in"ing and ,ourcing(electronic circuits# output current capability)
http://en.wikipedia.org/wiki/Crowdsourcinghttp://en.wikipedia.org/wiki/Journalism_sourcinghttp://en.wikipedia.org/wiki/Single_sourcinghttp://en.wikipedia.org/wiki/Single_sourcinghttp://en.wikipedia.org/wiki/Open-sourcinghttp://en.wikipedia.org/wiki/Power_sourcing_equipmenthttp://en.wikipedia.org/wiki/Power_sourcing_equipmenthttp://en.wikipedia.org/w/index.php?title=Sinking_and_Sourcing&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Sinking_and_Sourcing&action=edit&redlink=1http://en.wikipedia.org/wiki/Crowdsourcinghttp://en.wikipedia.org/wiki/Journalism_sourcinghttp://en.wikipedia.org/wiki/Single_sourcinghttp://en.wikipedia.org/wiki/Open-sourcinghttp://en.wikipedia.org/wiki/Power_sourcing_equipmenthttp://en.wikipedia.org/w/index.php?title=Sinking_and_Sourcing&action=edit&redlink=1

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