b

• Offshoring and Outsourcing (O & O)


  One of the most unique developments in business and industry where firms now adopt a truly global scope with the opportunity to situate their Operations across the world
• IT processes and Operations were migrated to India as some American and European companies focused on dealing with the Y2K problem
• Capacity Management


  • Need to acquire / buy / hire (temporary) capacity
  • Demand chasing (one day 50 employees needed, next day only 10 are needed)
• Lower Cost


  • Replace expensive local or in-house resources with less expensive resources from external service providers
  • Tax differential or government incentive programs in other locations leading to lower cost
• Better Performance


  • Use of specialized external providers which can deliver service with better quality, innovation, in new platform
  • Sales force providing web-based sales management
  • PeopleSoft providing employee-facing tools
• Faster and Continuous Service Delivery


  • Greater output from work being done around the clock
  • Offshoring market research support to locations in reverse time zones
  • Offshoring processing of bills of lading to centers in other time-zones to complete task faster
• Part-based Activities


  • Automobile components
  • Cruise-ship rooms
  • Airplane avionics
  • Desktop build and configuration
• Support or Auxiliary Services

  • Cafeteria
  • Janitorial Service
  • Copy Center
  • Building Maintenance
  • Trucking / Shipping
  • Security
  • Payroll
  • Legal
• IT services


  • Application development
  • Application maintenance and management
  • Production / Data-Center Operations
  • Production technical / systems support
  • Helpdesk
  • Software as Service (SaaS): shared application software
  • Cloud services: shared data storage facilities, database management
• Advantages - Employee Perspective

  • "Work Abroad, Live here"
  • Be near your friends and family
  • Work in the country and support Philippine growth
  • Professional Growth
  • Financial Independence
  • Employee Assistance
  • Enjoy your favorite food
• Disadvantages - Employee Perspective

  • Shifting schedule (possibility to work at night)
  • Dealing with irate customer
• 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 the mother company, providing services entirely to affiliates and subsidiaries, or more rarely to clients of the mother company
• Multisourcing


  • GM's Brazilian e-commerce site with 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
• Onshoring


  Vendor in the same home country as the client
• Advantages of Onshoring


  • 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
• Disadvantages of Onshoring


  • Risk of inadequately selected, trained, supervised staff
  • Risk of higher attrition (lower business acumen / process knowledge) than internal staff; less motivation to deliver quality
• Nearshoring


  Vendor is a country "close" (geographic and/or cultural proximity) to client's home country
• Advantages of Nearshoring


  • Fee-for-service variability rather than fixed compensation costs
  • Significant labor cost arbitrage
• Disadvantages of Nearshoring


  • Additional coordination costs, sourcing management, communications
  • Transfer pricing/tax margin requirements
• Offshoring


  Vendor and client in different countries
• Advantages of Offshoring


  • Allows company to focus on core business
  • Fast ramp-up / down at reasonable cost
  • Opportunity to expand into new areas cost effectively
• Disadvantages of Offshoring


  • 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
• 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
• Core Activities-Tasks-Processes should not be outsourced
• Well-defined/documented tasks, standard outputs should be outsourced
• Typically Outsourced Activities-Tasks-Processes


  • Business Process Outsourcing (BPO)
  • IT Outsourcing
  • Support Function/s
  • Routine activities or activities that can be automated at larger centers
  • Seasonal Requirement/s
  • Part-based Activities
• Key Technologies that Support Outsourcing

  • Video conferencing: HP - Halo, Cisco - Telepresence, Sun - MPK20 : Project Wonderland
  • Web-based conferencing and workflow tools: WebEx, MS Windows Meeting Space, MS Sharepoint, Google Applications
• Client-Service Provider Relationship Attributes

  • Client company is concerned with quality transition of processes and efficient operation in business functions that were once handled in-house
  • Service-provider company is concerned with scope of service, performance measures, and benchmarks to ensure objective standards in assessing work quality
• BPO Contract


  A formal agreement between a client and a service provider to take over a "pre-agreed portion" of the client's business operations, documented as the scope of work (SOW), referred to as the master services agreement (MSA)
• Master Services Agreement


  Covering agreement that summarizes terms applicable to every job-order with the service provider
• Scope of Work


  Describes specific work to be delivered, by when, at what cost
• Core Elements of BPO Contract

  • Services to be rendered or provided as documented in the Scope of Work (SOW)
  • Performance standards expected from the service provider; Service Level Agreements (SLA), and, Key Performance Indicators (KPI)
  • Timeline of the contract; start date ("go live"), and, duration
  • Costs to the client
• Master Service Agreement (MSA)


  Covering agreement that summarizes terms applicable to every job-order with the service provider
• Main Elements of MSA

  • Service to be provided
  • Performance management, issues, change management
  • Country laws
• Group (A) and (B)


  Operational elements, used day to day
• Group (C)


  Just-in-case terms
• Scope of Work (SOW)


  Describes specific work to be delivered, by when, at what cost