business b6 strategic outsourcing. 2 learning outcomes explain the business benefits of outsourcing...
TRANSCRIPT
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BUSINESS B6
Strategic Outsourcing
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Learning Outcomes
Explain the business benefits of outsourcing Identify the three primary outsourcing options Describe the benefits and challenges of
outsourcing Compare offshore outsourcing and nearshore
outsourcing Summarize a list of offshore outsourcing countries Describe the future trend of multisourcing and how
it can support a business need for outsourcing
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Introduction
Outsourcing – an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house
Typically, the outsourced process or function is a noncore business activity
The worldwide IT outsourcing market will reach $164 billion by 2005
Businesses that outsource are growing faster, larger, and more profitable than those that do not
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Most organizations outsource theirnoncore business functions, such as payroll and IT
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Outsourcing growth drivers
Globalization The Internet Growing economy and low unemployment
rate Technology Deregulation
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Outsourcing Benefits
Increased quality and efficiency Reduced operating expenses Outsourcing non-core processes allows businesses to focus on
their core competencies Reduced exposure to risk Access to outsourcing service providers economies of scale and
expertise and best-in-class practices Access to advanced technologies Increased flexibility Avoid costly outlay of capital funds Reduced headcount and associated overhead expense Reduced frustrations and expense related to hiring and retaining
employees in an exceptionally tight job market Reduced time to market for products or services
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Outsourcing models and cost savings
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Who’s Who in Offshore Outsourcing
Big selling point for offshore outsourcing “inexpensive good work”
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Canada
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India
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Ireland
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Israel
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Philippines
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Brazil
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China
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Malaysia
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Mexico
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Russia
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South Africa
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Argentina
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Chile
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Costa Rica
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New Zealand
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Thailand
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Ukraine
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Outsourcing Challenges
Contract length■ Difficulties in getting out of a contract
■ Problems in foreseeing future needs
■ Problems in reforming an internal IT department after the contract is finished
Competitive edge Confidentiality Scope definition
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Future Trends
Outsourcing is becoming less of a cost-saving strategy and more an overall context for business
Outsourcing is approaching commodity status Companies should look for value-based pricing
rather than the lowest possible price Multisourcing – a combination of professional
services, mission-critical support, remote management, and hosting services that are offered to customers in any combination needed
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Closing Case One:Mobile Travel Guide Mobil Travel Guide decided to outsource to IBM all of its
Web applications and database servers Mobile Travel Guide avoided up-front capital investment
without sacrificing scalability, reliability, or flexibility
1. What are the main reasons Mobil Travel Guide used an outsourcing option?
2. What other areas would you recommend Mobile Travel Guide outsource?
3. What advantages and disadvantages would offshore outsourcing or nearshore outsourcing have for Mobile Travel Guide?
4. Make a list of the countries where Mobil could outsource its Travel Guide
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Closing Case TwoOutsourcing Brew Coors Brewing Company needed to improve access to
information, consolidate systems, and reduce costs Coors outsourced its day-to-day management of its
technical operations, conversion of legacy applications, and system to EDS
1. Describe an alternative approach that Coors could have used instead of outsourcing to EDS
2. What would be the advantages of offshore outsourcing Coors’ IT department?
3. What are some other reasons Coors outsourced its information technology functions that were not mentioned in the case?
4. Describe some of the factors causing Coors to be “forced” to outsource its information technology functions
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Closing Case Two: Demanding Chocolate
Ghirardelli is the longest continuously operating chocolate manufacturer in the Untied States
Ghirardelli improved inventory management and profitability through the implementation of an ERP system
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Closing Case Two Questions
1. Which additional core ERP components would you recommend Ghirardelli implement?
2. Which additional extended ERP components would you recommend Ghirardelli implement?
3. How can implementing an Advanced Planning ERP component help Ghirardelli’s business?