Turn Threats into Opportunities – Embrace Outsourcing

Concepts and Terms

Outsourcing is the process of contracting an existing business process which an organization previously performed internally to an independent organization, where the process is purchased as a service

In-sourcing is when a company ceases to contract a business function and begins to perform it  internally, opposite of outsourcing

Off-shoring company taking a function out of their business and relocating it to another country whether the external country is physically offshore or not

On-shoring is a company’s decision to bring the function back from overseas

  • Near shoring
  • Best shoring
  • Co sourcing
  • Global sourcing

Outsourcing Drivers

  • The usual – Cost, Quality and Time
    • Cost optimization vs. Cost reduction
    • Quality induction vs. Quality governance
  • Flexibility
    • The change – creating business of the future
    • Focus on core strengths
    • Budget
    • The access – hunt for talent
  • Control
    • Decision making
    • Policies
    • Negotiating power

Lifecycle

Tools

Tools used in Functional Areas

  • Contract Management
  • Performance Management
  • Relationship Management
  • Compliance Management
  • Change Management

Example of Tools

A sampling of software tool vendors addressing different  functional areas of  governance

  • Enlighta
  • Janeeva
  • Equaterra
  • Digital Fuel
  • Oblicore

Outsourcing Trends

  • The C level suite discovers strategic importance of outsourcing – offshoring
  • Globalization of innovation: software and product functions are the most frequently outsourced functions
  • It is all about speed (new product development, entering new locations and markets, recruiting talent, new organizational structures and processes)
  • Functional managers with entrepreneurial interface
  • Shift towards multiple vendors
  • For some companies experience with off-shoring became trigger for evolving new transformational and organizational capabilities such as flexible global functional centers and dis-aggregated innovation processes
  • Approach shift – Better, faster, cheaper to strategic and innovations like new business and reinvestment of skills
  • Automation, Information Security assurance, Cloud Services, AI/CI/ML are IN
  • Smaller service providers are getting more room to play, more opportunities

Adjust Today

Outsourcing is mainstream and here to stay

Adjust Today – Facts & Figures – Service providers by size

Adjust Today – Facts & Figures – Distribution of Service providers

Adjust Today

Opportunities for small and mid-size businesses y

  • SMB companies seem to be especially adept at identifying and selecting specialized second-tier locations and providers for off shoring software and product development, while large companies continue to prefer India
  • SMB companies’ primary focus is on off shoring product and development projects. 64% of all off shoring projects are still in this category
  • For small companies, increasing speed to market and cost saving are key drivers

Adjust Today

Opportunities for small and mid-sized  businesses

  • Midsize companies are planning new off shoring projects across all business processes and functions but especially for IT infrastructure, software development , contact centers and finance and accounting processes
  • Small companies are the test tubes for new organizational forms
  • Small companies are very adept in identifying specialized local vendors while large companies prefer captive models and international service providers
  • Small companies are inventing new organizational capabilities (e.g. flexible global structures, use of web based collaboration tools)

Opportunities for new comers

Stay Stable – Watch out for

  • Unrealistic client expectations
  • Lack of focus on total process of outsourcing when selecting (or providing) tools; defining and utilizing tools is a joint responsibility for both providers and customers
  • Underestimating scope of project
  • Quality focus missing during implementation of strategy
  • Lack of buy-in from clients middle-management
  • Lack of agile and uniform repeatable processes

Stay stable