Group 1:

Outsourcing: From cost cutting to innovation

Baleegh Khan

Lenka Stoklaskova

Ratiel Gapa

Sara Chahine

Introduction

•Outsourcing cost cutting, cost restructuring, transfer the risks of

a defined process to a third party

•Smartsourcing innovation, balance risk and opportunities, focus on

its core activities

•Challenges and future trends flexibility, overall control, cultural diversity

What is Outsourcing?

• A practice used by different companies to reduce costs by

transferring portions of work to outside suppliers rather

than completing it internally.

• The contracting or subcontracting of noncore activities in

which a company holds competitive advantage.

Reasons for Outsourcing

Source: http://www.arcusglobal.com

Outsourced Business Segments

• Information Technology

• Human Resources

• Facilities and real estate management

• Accounting

Types of Outsourcing

• 1- Business Process Outsourcing (BPO):

Contracting of the operations of a specific

business process to a third party. It is typically

categorized into back office outsourcing and front

office outsourcing.

Types of Outsourcing

• 2- Knowledge process outsourcing (KPO):

The allocation of high-level tasks to an outside

organization.

Advantages of Outsourcing

• Cost Reductions

• Access to a team of professionals

• Focus on core activities

• Develop Internal Staff

• Better Systems

• Distribution of Risk

Disadvantages of Outsourcing

• Loss of Managerial Control

• Threat to security and confidentiality

• Delays

What is Smartsourcing?

• Smartsourcing, simply put means outsourcing intelligently.

• Outsourcing is only one part

• Bridging the gap between high performance core competencies and poor performance non-core activities.

• Let you see the spectrum of your organization capabilities

• determine how to best achieve the highest level of performance, cost and innovation

• Intimate relationship between the organization and its service partner

Difference between Outsourcing and Smartsourcing

OUTSOURCING SMARTSOURCING

CUT COSTS CUT COSTS + INCREASE INNOVATION

STREAMLINE OPERATIONS STREAMLINE THE VALUE CHAIN

PARTNER ON WHAT YOU KNOW PARTNER TO DEFINE WHAT YOU DON’T KNOW

TACTICAL IMPROVEMENT STRATEGIC EXCELLENCE

DISCONTINUOUS CONTINUOUS

ARMS LENGTH PARTNERSHIP TRUST-BASED PARTNERSHIP

How can Smartsourcing create innovation?

• Key Principles:

• Flexibility (short term relationship, change of scope)

• Preparation (measurement framework with real data)

• Choice (multisourcing, reduce provider lock-in, greater options)

• Planning (picture of end state, change management)

• Control (retain the business value functions)

• Partnership (shared ownership, common goals)

Smartsourcing Based on

• Products and services

• Business model

• Processes

• Supply chain

• Customer care

Key Areas

Issues in outsourcing

• A multi-objective solution

• Flexibility – a trending theme

• Due diligence and effective vendor engagement

• Higher costs/slower product development

• Environmental context

Conclusion

• Careful analysis

• Effective outsourcing

• Don’t ‘Outsource your soul’

References• Brad Vaughan, Ken Buchanan, & Richard Evans Manageability Services

Practice - White Paper September 2005

• T. M. Koulopoulos: Smartsourcing: Driving innovation and growth through

outsourcing, Platinum Press, Avon, 2006

• Schwenker, S. Boetzel: Making growth work - How companies can expand

and become more efficient, Sprin- ger Berlin Heidelberg, Hamburg, 2007

• http://www.entrepreneur.com

• http://www.investopedia.com

• http://www.businessdictionary.com

• http://www.sitel.com

• http://www.outsourcing.com

• http://www.venturenavigator.co.uk

Questions?