Strategic Outsourcing

Transcription

1 Bharat Vagadia Strategic Outsourcing The Alchemy to Business Transformation in a Globally Converged World 4y Springer

2 1 Role of Strategic Sourcing in a Changing World Economic Drivers Challenging Times Leading to Changing Business Models and Practice Contrary Forces at Work All Eyes on Cost 2, AllAboard Mixed Fortunes for the Outsourcing Industry Changing Commercial Models Getting it Right Take Aways 6 2 Globalisation and Convergence: Drivers and Strategic Outsourcing Introduction Convergent World Raising Barriers to Globalisation and Convergence Adapting Businesses to Compete on a Global Level A Case in Point: The Rise of India Take Aways 19 3 Social and Philosophical Considerations of Outsourcing Introduction Economic Consequences Social Consequences Separating the Spin from Reality Policy Implications Take Aways 25 References 25

3 < Contents 4 From Tactical to Strategic Outsourcing Introduction The Role of Relationships Information Technology Outsourcing and the Cloud Cloud Computing and IT Outsourcing Cloud Services The Challenges of Cloud Sourcing Cloud Vendors Business Process Outsourcing and Call Centres Defining BPO Services by Organisational Impact Drivers for Customer Service Outsourcing The Future of Call Centres Travel, Transport and Logistics Outsourcing Drivers for Logistics Outsourcing Finance and Accounting Outsourcing Drivers for F&A outsourcing Human Resource and Recruitment Processing Outsourcing Drivers for HRO Knowledge Process Outsourcing Typical KPO Services Challenges in Knowledge Process Outsourcing Legal Process Outsourcing Drivers for LPO in Law Firms What Not to Outsource LSO Challenges Corporations Rather Than Legal Firms Driving LSO Take Aways 54 5 Outsourcing Within Industry Verticals Banking Sector Banking Value Chain Outsourcing Drivers for Banking Sector Insurance Sector Insurance Sector Value Chain The Telecoms and Technology Sector Main Drivers for Outsourcing and Managed Services Public Sector A Means to Radically Transform Service Provision Evolving Generations of Outsourcing The Drivers for Outsourcing in the Public Sector Public-Private Partnerships (PPP) Outsourcing Offshore Versus Onshore A Closed Market for New Suppliers 74

4 xi 5.5 Retail Sector Drivers Outsourcing Drivers not Just Focused on Cost The Need for an Integrated Contact Management Strategy Transforming Customer Service Cost Centres into Sales Centres The Need for Greater Pro-activity Charity Sector TheSMESector Take Aways 79 References 80 6 Strategic Outsourcing: Risks, Rewards and Relationships Rewards Risks Loss of Core Competence and Innovation Capability Cost Escalation Supply Market Risk Change Management Costs Selection, Contracting and Vendor Management Communication Challenges Relationships Knowledge Retention Trust Take Aways 91 References 91 7 Sourcing Models Evolution of Sourcing Models TakeAways Strategic Outsourcing Decision Governance Introduction Decisions Driven by Consensus and Debate Suggested Decision Process for Outsourcing Denning the Objectives Outsource for the Right Reasons Using a Methodical Approach Engage with All Stakeholders Choosing the Right Relationship Ill Negotiating a Robust Contract Use of Performance Incentives Establish a Relationship Governance Structure Establish a Relationship Management Function Managing Human and Communication Issues 113

5 Single Versus Multi-Sourcing Understand the Vendors TakeAways Transition and Relationship Governance Introduction Managing the Soft Issues Governance and Relationship Management Typical Governance Structures Joint Review Board (JRB) Service Management Team (SMT) The Operating Group/Service Delivery Team (OGSDT) Governance in Practice Role of the Legal Contract 127, 9.7 Service Level Agreements Take Aways 131 References Insights from Academic Research on Outsourcing Introduction Defining Outsourcing and Offshoring From Tactical to Strategic Outsourcing Empirical Studies Suggest Outsourcing can be a Risky Practice Outsourcing Rewards Better Focus on the Core Business Cost Reduction Benefit from Supplier Investment and Innovation Increased Flexibility and Technology Gain Access to External Competencies Outsourcing Risks Strategic Risks Operational Risks Commercial Risks Human Resource (HR)/Communication Risks Outsourcing Models Agency Theory Transaction Cost Economics (TCE) Resource Based View (RBV) Dynamic Resource (Capability) Model (DRM) Incomplete Contract Theory OtherModels Take Aways 147 References 147

6 11 Minimising Risk Through the Contract Introduction Outcome Based Accounting Controls Appropriate Contractual Clauses Contract as an Enabler of Trust Take Aways Minimising Risk Through Relationships Introduction Trust Organisational Trust Group Trust Individual Trust Creating Institutional Mechanisms for Building Trust Control and Its Relationship to Trust Vendor Selection Service Level Agreements as a Means of Control Collaboration Relationship Management and Internal Knowledge Retention Necessity of Legal Contracts for Positive Trust Development Adaptation to Cultural Differences 169" Knowledge Transfer Managing Distance and Communication Challenges Continuous Improvement Risk Minimisation in Practice Take Aways 173 References Offshoring Leaders, Laggards and Hopefuls Introduction Location Selection From Countries to Cities Criteria to Assess the Location Decision Factor Weightings Country Evaluation Relative Merits of each Location, Based on a Rational Analysis Effects of the Recent Political Unrest on Offshoring The Outsourcing Industry in Asia The Outsourcing Industry in India Infrastructure Challenges The Outsourcing Industry in China The Outsourcing Industry in Philippines The Outsourcing Industry in Europe The Outsourcing Industry in North America and Latin America 195

7 13.11 The Outsourcing Industry in Middle East and Africa Take Aways 197 References Managing Cultural Differences Introduction Cultural Influences on Management Style Cultural Influences on Hierarchy Cultural Influences on Group Relationships and Motivations Cultural Influences on Negotiation Styles Distinctions Blurring Between Cultural Dimensions Cultural Differences in Evidence Take Aways 206 References Implementing Successful Strategic Outsourcing Programmes The Eight Principles to Success Principle 1: Strong Yet Flexible Contracts Principle 2: Effective Governance Principle 3: Effective Control and Monitoring Principle 4: Building Commitment and Mutual Dependence Principle 5: Ensuring Goal/Expectation Alignment Principle 6: Building Individual and Institutional Trust Principle 7: Managing Effective Collaboration and Knowledge Sharing Principle 8: Effective Communications A Summary of Strategic Outsourcing: Risks, Rewards and Relationships Don't Start at the End Establish What is Core Establish What Success Means Measuring Success Making It Happen: Ever Had a Yearlong Migraine? The True Picture It's Not All Plain Sailing Impact on Strategy and Value Retention Don't Overlook the Challenges Organisational Change Cultural Adaption Detailed Contractual Agreement Knowledgeable Resources 222 References 222 Further Reading 223