challenges in outsourcing

7/30/2019 Challenges in Outsourcing

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International HRM challenges in outsourcing


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Trends in outsourcing

Outsourcing has become the new goldrush, especially for manufacturers,

but it's not uncommon for pioneers in

this unsettled business frontier

to shoot themselves in the foot or

dig themselves into a hole too deep to

escape.

Presentation By Dr. GowriRamachandran 2


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Ralph Welborn, a business advisor andauthor, says, "At its core, the outsourcingindustry rests upon an old businessmodel

based on inflexibility and cost reduction

that doesn't account either for thepredictable patterns of technology

adoption or for the demands customers face for

providing more 'value' and 'service'rather than simply reducing costs for

their customers." Presentation By Dr. GowriRamachandran 3


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Top 10 challenges ( 1 )

1. If it looks too good to be real, itprobably is.Too frequently, outsourcers try to lockclients into long-term deals based on

contract terms and pricing that will be outof date six months later.

The inevitable results are frustration, irritation and a lack of understanding and insight into why the sales promises of outsourcing aren't meeting up with its

delivery realities.



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Challenge 2

Too many outsourcing deals suffer"death by change order."Service providers may under-quote on

purpose, just to get the business. Then, when they get further into the

contract, they may demand moremoney,

citing change of circumstances. When such change orders occur

several times over the course of the

relationship, Presentation By Dr. GowriRamachandran 5


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Challenge 3

The prevalent "core vs. context" approach-- that is, outsourcing what's notimportant to let us focus on what isimportant -- is becoming outdated.Dell Computerwas prompted to regain

control of its outsourced customer servicecenters

because of the customer complaints receivedand

the drop in additional sales usuallygenerated by service calls.

Procter & Gamble has now outsourced -- or,more appropriately, cosourced -- its productinnovation process to harness the brainpower

of people well outside its organizational walls.Presentation By Dr. GowriRamachandran 6


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Challenge 4

The contractual crunch and win-losecontracts have unintended consequences.Outsourcing has become more difficult

to support because the processes are leanerthan before, leading to

the "I've-gotta-win-and-you've-gotta-lose"approach

to contract negotiation.

In the short term, one party wins and the other

loses, but in the long term, everybody loses,

because of the animosity,

frustration and bad-mouthing

that stem from such a partnership.Presentation By Dr. GowriRamachandran 7


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Challenge 5

What you don't know will bite you.There are many factors service providers don't, or can't,foresee.

For instance, some critical workarounds developed overthe years to keep a client's operations running smoothly

may not have been properly documented or formallyintegrated into the client's core technologicalframework.

These invisibles -- both manual and automated -- arenearly impossible to identify.

Companies often discover them afterward,

when customers complain, when frustration arises onboth sides,

when the partnership has been damaged.



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Challenge 6

Outsourcing providers build in a lack oftransparency -- the "black box" of costs andmargins.Some may try to hide their overall margins

to give themselves more profitability over the life of thecontract.

They provide a vast range of consulting services,application development, solution deployment andproject management,

all grounded by lots of change orders, into the complexcontract.

Because different services have different costs anddifferent margins, a provider can use -- or claim to haveused

-- the ones that offer the most benefit.

A client often has few means to oversee what the

service provider is doing and how much it charges.Presentation By Dr. GowriRamachandran 9


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Challenge 7

It's easy to underestimate the bull's-eyeeffect. Lots of stuff has to get done tooutsource a business process.This stuff ranges from simple things (movingequipment)

to difficult things (consolidating computerapplications)

to really difficult things (moving and retrainingpeople).

More importantly, it all has to come togetherjust right to hit the target.

If one thing goes wrong, it can have acascading effect on other things.



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Challenge 8

ompanies are starting to rejectlong-term contracts.

Unfortunately, the smaller, shorter-

term contracts have their ownproblems for the client company.

Dealing with more providers inevitably

stretches a company's valuable

and already scarce -- management

time



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Challenge 9

Outsourcing firms are suffering from the BotoxEffect.Botox takes out wrinkles but inhibits normal facialexpressions.

Around year three to five, outsourcing service providersare supposed to have eliminated

many of the easy processes and added simpleautomation.

But the technology refresh maybe is a lot moreexpensive than they thought.

And they're confronting so many operational challenges

and cost pressures just to keep going -- or keep the smile

on

that they can't afford to do the planned investments forthe technology refresh.



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Challenge 10

All customers want is a flexible,innovative partner, but they usually getthe opposite.Customers want a flexible outsourcingpartner who will introduce innovation into

their processes, help them manage both costs and service

and use relevant and emerging technologies.

They also want someone who understands

their specific requirements and theirbusiness.

Unfortunately, outsourcing service providerstend to fall short in flexible infrastructure,

understanding the client's business andinnovation. Presentation By Dr. GowriRamachandran 13


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6Tips for successful

outsourcing Conduct workshops to illuminate the

invisible.The undetectable exceptions,

the workarounds and the embedded

business logic in applications that culminated over time must be

identified up front. Conduct experiential workshops to understand the experience of all those

involved -- people, processes, assetsand technology.



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Tip 2

Work to bridge everyone involved in youroutsourcing effort.Marketing people,

management people,

operations people, IT people and outsourcing people can all be

in the same meeting,

yet come out thinking they agreed to doentirely different things.

You need what the authors call "a commonDNA of execution" to let everyone alignthemselves in the pursuit of the same goal.



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Tip 3

Don't get suckered in by one-size-fits-allcontracts.Be sure your business objectives fit the

appropriate collaborative outsourcing relationshipyou enter into.

It's critical to acknowledge there's more to outsourcing than driving down costs and

recognize that potential innovations and

opportunities will come from the embedded

knowledge and insight of some of the outsourced processes.

Both are important considerations for defining theoutsourcing relationship.



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Tip 4

Do the complex juggle betweenmanaging costs and increasing value.Force your outsourcing provider toexplicitly say how it performs this

juggling act.In the past, outsourcing was all aboutlowering your costs.

Today, it's just as much about delivering

value. A first key step is knowing you have to wrestle with the tension between having

your provider support both cost and

value. Presentation By Dr. GowriRamachandran 17


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Tip 5

Put "service" back in the term"outsourcing service provider."The expected but unpleasant appearance ofexpensive change orders

-- a contractual device that allowsoutsourcing providers to renegotiate inmidstream

has ruined more than one businessrelationship.

Bring up this sticky subject early in thenegotiating process.

Interrogate the service provider.

Ask them to describe, in detail, how the

processes work. Presentation By Dr. GowriRamachandran 18


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Tip 6

Never stop pursuing flexibility andvisibility in your outsourcerrelationships.First and most obviously, don't do

business with a provider who says, "Hey,give me your business processes tomanage and you'll never have to thinkabout it!"

Such lack of transparency is based onan outmoded business model and denialof competitive reality.

Markets change. So do customer needs,technologies and prices.



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Tip 6 contd

The ideal partner thoroughlyunderstands your business processes,

both the visible and invisible parts of

them; seeks to understand the changing

customer needs in your marketplace and

innovate in response to them; and works with you to figure out how to

take advantage of emerging

technologies and



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Conclusion

If the suggestions are followed thechallenges can be smoothly tackled in

outsourcing .

THANK YOU !!!!!!!!!!!!!!



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Contents

Domestic vs international HRM, - page 66 to71

cultural dynamics, culture assessment,cross cultural education and

- Page 25 to 59 training programs, Page 168 to 185

leadership and strategic HR issues ininternational assignments, Page 87 to 91

current challenges in outsourcing,

cross border m and a Page 113 to 116

repatriation, - Page 253 to 261

etc, building multicultural organizations, --

international compensation. Page 223 to247 22Presentation By Dr. GowriRamachandran

challenges in outsourcing

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