outsourcing: reaping the benefits, managing the challenges
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Next Level InternationalProprietary & Confidential
outs
ourc
ing
Outsourcing: Reaping the Benefits, Managing the
Challenges
Frances GrigsbyApril 15, 2005
• Key success factors• Risks
• Preparation
Next Level InternationalProprietary & Confidential
outs
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Outsourcing Taxonomy
Start-Up
Inherent to company
formation
Fundamental to structure
and strategy
Customer-driven
Create presence for market
access
Respond to customer
requirements
Supply Chain Planning
Worldwide presence
Economies of transportation and
manufacture
Other Motivators• Vertical or horizontal integration• Balancing currency and economic cycles• Opportunistic – politics, major order
Early Adopter Mainstream Conservative
Next Level InternationalProprietary & Confidential
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International Software Outsourcing Industry
Unknown $8,000-10,000 30,000-50,000 Philippines
$120 million+ $3,600-6,120+ 23,000 Pakistan
Unknown $5,000-8,000 3,000-4,000 Russia
$1 billion $6,000-8,000 400,000; 35,000 highly skilled China
$6 billion $5,000-8,000 300,000 India
Total Software Exports
Average Annual Wage
Number of Trained Professionals Country
Sources: Forbes, National Association of Software and Services Companies, Software Association of Pakistan, Software Outsourcing Research. Average annual wage is first-year salary for a highly trained professional.
Next Level InternationalProprietary & Confidential
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What Can Be Outsourced? • Good candidates for offshoring
– Web sales– Accounting – Order processing– Transaction processing and documents– Transcription – Telesales/telemarketing – Benefits administration – Tax processing – Human resources administration – Biotech trials – Claims processing– Product updates and migration– Defined product engineering– Manufacturing
• Questionable candidates– Customer service and inquiry handling– Help desk– Telemarketing– Account management
Next Level InternationalProprietary & Confidential
outs
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• Turn-key nearshore • Turn-key offshore• Joint venture • Build-operate-transfer • Wholly-owned• Local provider
Next Level InternationalProprietary & Confidential
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What Goes Wrong?
• Over-expectation• Sloppy preparation• Employee resentment• Intellectual property theft• Quality deterioration• Price escalation
Next Level InternationalProprietary & Confidential
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Key Success Factors• Strategic evaluation• Strong, comprehensive agreements• Disciplined planning and control• Direct personal contact with supplier, expert
outsiders to shorten learning curve• Patience about cost savings• Expectation of mixed success at beginning• Frequent communication and monitoring• Keeping core skills internal• Enhanced opportunities for employees• Protecting the customer experience• Consistent and appropriate procedures• Supplier and country with long-term capabilities
Next Level InternationalProprietary & Confidential
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Evaluating a Supplier
Market Position
Client managementCost
Reputation in marketplaceFocus
Environment
Compensation trendsPolitical stability
Legal and regulatory Education
Internal Assets
Capacity Financial viabilityOperational skills
Quality
Value propositionFlexibilityImplementation plan
Business Practicesand Documentation
ReportingHR practices
DocumentationIP protection
Strategy and Goals
Next Level InternationalProprietary & Confidential
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Next Level International
• Market entry for technology companies
• Specializing in– Business development– M&A preparation and integration– Outsourcing/supply chain
I99 Independence RoadConcord, MA 01742978-369-0012www.nextlevelinternational.com
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