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BUSINESS B6

BUSINESS B6. Strategic Outsourcing. 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

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BUSINESS B6

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  1. BUSINESS B6 Strategic Outsourcing

  2. 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

  3. 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

  4. Most organizations outsource their noncore business functions, such as payroll and IT

  5. Outsourcing growth drivers • Globalization • The Internet • Growing economy and low unemployment rate • Technology • Deregulation

  6. 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

  7. Outsourcing models and cost savings

  8. Who’s Who in Offshore Outsourcing Big selling point for offshore outsourcing “inexpensive good work”

  9. Canada

  10. India

  11. Ireland

  12. Israel

  13. Philippines

  14. Brazil

  15. China

  16. Malaysia

  17. Mexico

  18. Russia

  19. South Africa

  20. Argentina

  21. Chile

  22. Costa Rica

  23. New Zealand

  24. Thailand

  25. Ukraine

  26. 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

  27. 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

  28. 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 • What are the main reasons Mobil Travel Guide used an outsourcing option? • What other areas would you recommend Mobile Travel Guide outsource? • What advantages and disadvantages would offshore outsourcing or nearshore outsourcing have for Mobile Travel Guide? • Make a list of the countries where Mobil could outsource its Travel Guide

  29. 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 • Describe an alternative approach that Coors could have used instead of outsourcing to EDS • What would be the advantages of offshore outsourcing Coors’ IT department? • What are some other reasons Coors outsourced its information technology functions that were not mentioned in the case? • Describe some of the factors causing Coors to be “forced” to outsource its information technology functions

  30. 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

  31. Closing Case Two Questions • Which additional core ERP components would you recommend Ghirardelli implement? • Which additional extended ERP components would you recommend Ghirardelli implement? • How can implementing an Advanced Planning ERP component help Ghirardelli’s business?

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