maseei 2(module 1)

7/29/2019 Maseei 2(Module 1)

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The future shape of business is

being redefined throughoutsourcing


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What is Outsourcing

Outsourcing means finding better ways of doing business.

It helps companies to look to the value chain forhigh leverage

areas and helps them to better utilise theirresources to

exploit these areas.

Outsourcing is a means to achieve competitive advantage by

focusing on core competencies.


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What to Outsource

CRM (Customer Relationship

Management)

SCM (Supply Chain Management) Back Office

Payroll

Billing

Accounting

Investor Relationship Management Share

Transfer & Fixed Deposit Accounting


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Why Outsource

Use the specialised services and

skills of the Outsourcing partner

Better utilise internal resources

Increased responsiveness to

customer needs

Decrease financial risks by reducing

capital investments


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In-house Vs. Outsourcing Key Questions

Speed and cost for transformation how

long will it take to transform the function

or process internally vs. externally? Management attention should

management devote a significant amount

of time and energy to this process?

Talent are we putting our best people,

with the appropriate skill sets, into these

processes?


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In-house Vs. Outsourcing Key Questions

Capital does the function win (or lose)the war for capital within the corporation?

Track record does the function have a

track record for meeting or beating itscommitments?

Accountability if the transformation isNOT successful, who will be held

accountable?


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Often a company will look to a contract

manufacturer to improve efficiency or reduce

labor costs. In Most cases the objective of outsourcing is a

targeted 20% cost reduction, with actual savings

coming from direct labor and variable cost.

while a seemingly low bid may look attractive,incomplete or misunderstood specifications can

result in an overhead nightmare.


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Outsourcing Opportunity or Burden

International outsourcing has become the easy way out for many

organizations seeking to stay competitive in a global economy,

whereas establishing a lean Six Sigma organization requires

sustained and consistent hard work. Proponents say

outsourcing is the only way costs can be cut enough to keep theorganization competitive. Ultimately, the decision to outsource

jobs should be based on both economic and value criteria.

Unless managers face the obligation to ensure that both the

organization and its suppliers are producing at the highest

quality levels and the lowest lean cost, the job is not being done.Only this cost base can determine the decision to outsource. It is

the quality professional's responsibility to challenge the value of

all activities throughout the organization that do not contribute to

a lean quality culture. The first objective should be insourcing

excellence. Outsourcing should be the last resort.


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Motivators for Outsourcing

The followings are the major reasonsgiven for taking outsourcing decisions

Difficulty of hiring skilled professionals(28.8 percent),

Lack of in-house skills to deliver thedesired levels of quality (20.3 percent),

Budgetary considerations (13.6 percent), Mandate from the management (11.9

percent).


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Risks in Outsourcing

Information Security

Loss of control

Compromising confidentiality

Monitoring costs


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Minimising Risks

Choose a service provider that has aproven track record - talk to customers ofthe service provider

Know your requirements, both current andfuture, and put them in the contract

Stay away from variable costs in thecontract like communication, travel etc.

Treat the outsourced relationship as apartnership and the employees andextended team members


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Minimizing Risks

Choose a service provider who providesyou with value adds, services or productsthat may not be in the contract.

Develop a strong partnership with thevendor

Secure a confidentiality agreement

Simplify the interface between the twoorganisations

Focus communications


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The Key Layers in Outsourcing

Strategy

Process Design

Operations

Systems


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Retain in-house

Strategy - governance, policy setting,

decision-making and direction Process Design - design, and

consultative activities

The Strategy and Process Design layersare typically retained with themanagement to ensure overall control ofthe activity


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Outsource

Operations - administration, clerical activities

and day-to-day execution System - technology, infrastructure and

transactional processing

It is these two bottom layers combined - Systemsand Administration layers that are mostappropriate for Business Process Outsourcing(BPO)


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Benefits

Service

Industry knowledge and expertise of the

vendor

Quick response time

Function Difficult to Manage or Out of

Control

They are great in a pinch ability to

increase resources whenever required


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Benefits

Costs

Pay only for what you need

The infrastructure is of the vendor

Economies of scale with the vendor

Reduce or Control Operating Costs

Outsourcing is a cost-effective way toincrease your resources.

maseei 2(module 1)

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