Outsourcing
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ADVANCED STRATEGIC OUTSOURCING

10 Chapters 33 lessons      Advanced

About this course

New strategic approaches, when properly combined, allow managers to leverage their companies’ skills and resources well beyond levels. 

Course Structure

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Strategic Frameworks for Outsourcing Decisions

$26 Billion Question – “When To Outsource And When Not To Outsource?”

This Chapter is based on OUTSOURCE, OUTSMART, OUTPROFIT – KNOW WHEN TO DO IT, AND HOW TO DO IT WELL by the author. Sydney, Australia based author Vivek Sood is the world’s foremost authority on Global Supply Chains.

Is There Something That Can’t Be Outsourced?

Fundamentally, Each Of The Department Carries Out Its Tasks At Four Different Levels – The highest level being strategic, the next lower level being tactical, the next lower level being operational and the finally the lowest level is the executional level. At the lowest level the execution of the task is carried out, while at the highest level the plans are long term all-encompassing plans.

Outsourcing Has A Long History

Conclusion

Outsourcing has been around for a long time and is widespread. While biases abound, there are relatively very few situations in which a company must not outsource, or must outsource.
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Myths About Outsourcing and How to Know the Truth

Myths About Outsourcing And How To Know The Truth

You want to find out how to use the leverage provided by outsourcing without the risks inherent in all leverage. We will be covering that material in the second part of this book. However, I want to point out in this chapter that everybody who in interested in the topic of outsourcing also have pre-conceived opinions on the topic. No doubt, you will have some too.

For This Chapter We Have Selected 7 Of The Most Popular Myths To Explore And Explode.

This myth pervades the thinking in some executive circles, based on the assumption that the decision to outsource can not only be easily implemented, but also easily reversed! However, in most cases this is far from true. Outsourcing is a strategy not a tactic. You are making a multi-year commitment, not only because of the contract, but to make the financial reasoning work; you also have to dismantle the PP&E, systems and people you have built up over time.

Summary

Outsourcing is an emotionally charged topic. Not only does everyone have a horse in the race, they cheer it quite vocally.
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Traditional Outsourcing

Traditional Outsourcing

When you read Chapter 3 of the book ‘Insourced Outsourcing: The Results-Focused Outsourcing Modularization'

Outso​urcing Is A Fact Of Life In Business Today

We will however, briefly focus on three relevant parties - BP, Transocean and Halliburton for the sake of discussion relevant to this Chapter - on modularized outsourcing.

Why Is This Pattern Of Failure Repeated Over And Over Again?

To answer the key question above, let’s first examine a typical project cost structure. It is estimated that the software costs are no more than 15-20% of the overall cost of systems renewal.

Key Mistakes In Large Scale Information Technology Deployment

A wise colleague (David Ball) once taught me, ‘people don’t care how much you know unless they know how much you care’.
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Cures for Outsourcing

Cures For Outsourcing Failures

When you read Chapter 4 of the book ‘Insourced Outsourcing: The Results-Focused Outsourcing Modularization ’

Different Outsourcing Models

Obviously, depending on the contractual terms and conditions specific to the arrangement between any two or more parties, there can be an infinite number of variations of the outsourcing arrangements.

Conclusion

Outsourcing is a common practise in the current context but many contracts are still failing. New models and perspectives enable companies to find new way of outsourcing and try to fix the problems.
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Modularization and Results

Modularization And Results-Focus Is The Solution

In this essay, we are going to try to explain the cornerstones of modularization and why it suits well with a results-focused outsourcing process.

Conclusion

Results-focused Outsourcing and Modularization is very attractive for companies in the current global context because it brings flexibility, control and cost reduction.
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Preparation is critical

Preparation Is Critical

The most important question anyone can ask about outsourcing is this – Why do so many outsourcing arrangements fail?

Conclusion

In all our project work in outsourcing, nothing comes close to value added as in preparation. Frequently we come across situations where companies think they have done adequate preparation, when a few simple questions reveal that it was far from adequate.
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Rules Of Engagement

Rules Of Engagement

If preparation was the critical first step in the process, then the next one, designing a fit-for-purpose market engagement process is the most artful step in the entire process. As we will note later in this chapter.

Summary

In fact, the possibilities are endless once you realize all the permutations and combinations of various parts of the market engagement process.

Conclusion

Outsourcing can be a great success, as well as it can turn into a disaster. That is the reason why the following points need to be carefully analysed in order to meet the objectives of the company through strategic sourcing.
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Selection

Introduction

Selection is the next step in our outsourcing process. Indeed, we have already seen that preparation was crucial, and engagement was the next step after preparation.

Collate And Analyse Vendors’ Propositions

In this Request For Proposal, the company has to specify its requirements according to what it is really important to it and how they want to do it.

Mode Of Selection

We can define almost all the selection methods that exist, although we could find more methods that combine some aspects of each one of the following methods.

Conclusion

Although it can take time to establish a criteria evaluation, it is necessary for the customer not to be surprised in the future. There are different selection methods and one can be better than others according to the project's characteristics.
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Integration

Introduction

The biggest mistake that companies make during the integration process is that they let the vendor lead the process.

Integration

Outsourcing processes, sharing information is necessary and very beneficial for all parties. Sharing information among all the supply chain partners seems to be the best strategy for managing integrated supply chains.

Conclusion

To conclude, integration is what links all the different subsystems or components of the process. It brings them all together in one unique system and enables them to work together.
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Value Creation

Introduction

Value creation is the final key of the outsourcing process. It involves a lot of expertise, knowledge on the process, as well as the needed capabilities and tools.

Value Creation

This huge network built through outsourcing makes possible combination of internal and external resources and capabilities, which enables synergies.

Parties Involved In Value Creation

The outsourcing initiative will have effects on all the parties within the company and outside the company (but still within the network).

How To Evaluate Value-Creation?

The easiest way of evaluation value-creation is to compare the results with predetermined referential, called benchmark in business situations.

Conclusion

Value-creation is the primary goal of any business. Most companies must agree on the fact that Results-focused outsourcing is the best way to create value.

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