Logistics and Operations Management

Google Inc.
Contents
Introduction: .................................................................................................................................... 3

The decision logic of outsourcing: .................................................................................................. 3

The five performance objectives:.................................................................................................... 6

Mitigating strategies to the risk: ..................................................................................................... 7

Conclusion: ................................................................................................................................... 10

References: .................................................................................................................................... 11

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Introduction:
Outsourcing could be defined as increasingly popular and successful enterprise management
strategy in order to provide added value to the customers. The logistics and operational
management are used as effective tool in order to strengthen the position in the market place as
well as get competitive advantage from the competitors. In practical sense, the outsourcing is
determined as using external resources. It is used when business organisation assigns a task such
as business processes, or particular functions to external provider, which was fulfilled in – house
earlier. The external provider is considered to be specialised in that specific area and is assigned
for a given period of time. In this assignment, the main focus would be considering on logistic
operations of Google Inc. as the operational manager of the company. Google is determined as
the fastest internet service provider and in recent times, it is considered more than just a search
engine. It has grown its business all over the world and assembled large collection of services
and products. The informal corporate slogan of Google is “Don’t be evil” that means Google is
intended to serve its users and they should also support Google to establish its baseline for
decision making process. The revenue generation of Google is by providing cost effective online
advertising. The marketers use AdWords program in order to promote their services and products
in the market by advertising them in Google. There are other third party websites that publish
their services on Google Network through AdSense program and enhance the experiences of the
users and simultaneously increases revenue of Google. However, the company could outsource
some of its functions to third party in order to provide value added services to the users.

The decision logic of outsourcing:

The outsourcing is considered when any process or operations that are performed in house by an
organisation is sub contracted to third party organisation for a particular period of time. The
outsource task could be off – site or on – site. The outsourcing is currently popular in both non
profit as well as profit making organisation in order to get potential advantage in the market
place. The decision of outsourcing depends upon marginal revenue and marginal cost
considerations (Benish, 2014). The outsourcing decision could reduce some internal cost but at

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the same time might add some external costs. The revenue of the business could also be affected
if the outsourcing increases the capacity.

Therefore, while considering the advantages of outsourcing, Google had also outsourced its
projects to Globant, which is a software development company situated at Buenos Aires (Wood,
2005). Google had provided most of its projects to Globant while considering its service
portfolio that consists of creative services to engineering services as well as infrastructure.
However, the company is mainly focused on particular cutting edge technologies such as mobile
applications, multiplayer gaming, and social networks. In the year 2006, Globant and Google
worked in hand to enhance the service of Google AdWords online advertising system and in the
year 2007, Google assigned Globant to examine its application programming interface (API) for
its transaction and checkout system (Brodner, 2012). The main target of both Google and
Globant was to identify the security holes. After commencement of the work, Google’s advocate
developer, Patrick Chanezon said that they were impressed by the innovating capacity of
Globant, and the examining the Application Programming Interface is not an easy task and
requires innovating solutions in order to proceed with the workflow. Hence, it could be stated
that the decision of outsourcing of Google to outsource its functions to Globant was a successful
decision that provided additional support to the company in order to maintain their workflow
(Brodner, 2012).

In order to determine which products or services should be outsourced and which should not be
and kept in – house, could be analysed by the Harmon’s Process Strategy Matrix; and it further
includes other improvements or automation. The Harmon’s Process Strategy Matrix uses two
tools in order to proceed with this strategy; and they are dynamism or complexity of the process,
which means the measure of changes in the process and the importance of the strategic process
(Jafarnejad et al. 2013). It could be diagrammatically represented as follows:

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Source: (Jafarnejad et al. 2013).

In the above diagram, the strategic importance in higher at the right hand side and therefore, the
outsourcing is not recommended at that point. It could be explained as if a process is strategically
important then it must provide competitive advantage to the company. However, if the company
decides to outsource some of its sections then the company would have to reveal some of its
competences and secrets (Yi and Xu, 2013). Therefore, the company might face risk at some
point of time. However, if a process is relatively non – complex and stable then the automation
would be worthwhile and feasible. Further, if the automation is complex and requires random
changes, then automation would be difficult to target and more critical to keep it up to date.
Hence, from the above strategy, Google could evaluate which process should be kept in – house
and which should be outsourced (Yuzhong and Guangming, 2012).

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The five performance objectives:
Outsourcing certain operations of an organisation has been increasing in demand. However, there
are mixed result of experiences as some of the organisations had not achieved their desired goals
by outsourcing their certain functions and faced failure in outsourcing. There are five
performance objectives that could be analysed at the time of outsourcing operations and to
decide whether to keep them in – house or outsource them. The five performance objectives
could be determined as the benchmark of excellent performance that evaluates the work carried
out by the outsourcing party (Marsh, 2009). These performance objectives are the tools that
should be followed by the third party providing outsourcing and that should be demonstrated in
their performance. The five performance objectives are as follows:

i. Demonstration of professional ethical values;

ii. Awareness on non – financial risk;
iii. Effective communication;
iv. Proper use of information and communication technology;
v. Managing on – going activities (Phillips and Phillips, 2010).

Professio
nal
ethical
values

Non-
Managing financial
on-oing risk
activies awarenes
Performance s
objectives

Effective
Use of
communi
ICT
cation

Demonstration of professional ethical values – The third party should be fully aware of their
professional ethics and should try to maintain it by applying them into their performances.
Hence, in order to behave ethically, the outsourcing party should take responsibility of their work

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and perform their work with integrity and try to avoid any conflict of interest. The third party
should try to maintain due care, confidentiality of the project, as well as professional competence
(Phillips and Phillips, 2010).

Awareness on non – financial risk – The third party providing outsourcing should be capable
enough to identify potential risks as well as should be well unknown about their consequences
along with its occurrence. The third party should further identify the risk and inform the
outsourcing party about it and further try to manage the probability of the risk. The third party
should be capable enough to undertake decisions and activities in order to prevent the risk
(Marsh, 2009).

Effective communication – The third party providing outsourcing should have effective
communicating skills in order to get outsourcing from other companies. This includes
communicating within the organisation as well as with the members of the outsourcing
companies. Barriers to communication must be eradicated and information should be conveyed
properly (Phillips and Phillips, 2010).

Proper use of information and communication technology – The third party should use effective
use of information and technology in order to improve the output of work. Proper use of software
application must be done in the workplace and it must be updated regularly and practical use of
that software must be efficiently done, which might include proper use of technology to interpret
data, calculate them and to gather valuable information (Phillips and Phillips, 2010).

Managing on – going activities – The third party needs to manage their day to day activities and
regularly provide update to the outsourcing company. Proper planning of work must be in order
to get the desired work done. The third party must always recognise the potential risk and
prevent it accordingly (Marsh, 2009).

Mitigating strategies to the risk:

The outsourcing resources provide competitive advantage to the business organisation but it
comes along with set of risks. The business organisation identifies the potential risks and tries to
prevent the risks through risk management process. However, the risk analysis process must be
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accompanied by risk management process in order to effectively mitigate the potential risk
approaching towards the company (Beck and Schott, 2012).

The risk analysis process could be determined as point – in – time assessment. The risk analysis
process is mainly done before selecting the outsourcing company but it is also effective enough
to reassess the risk involved within the profile of the suppliers. This process involves comparing
the supplier’s potentiality with the set of risks involved within the outsourcing company. The
business organisation does risk analysis process and filters the number of available outsourcing
suppliers. In this way the managers of the business organisation could evaluate the risk involved
within each and every outsourcing supplier and then could set the rigorous risk management
systems process in the agreement contract that could mitigate the risk involved in outsourcing
operations (Hoecht and Trott, 2006). The relationship with the outsourcing supplier could be
developed within the risk analysis process phase. The diagrammatic representation of risk
management process is provided as follows:

Source: (Hoecht and Trott, 2006).

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The outsourcing risk management system is an on – going process that includes three elements
and they are the service level agreement (SLA), supplier and contract management, and the
billing accuracy. The supplier and contract management keeps record of statistical data as well as
historical performance of the outsourcing company for a long period of time. These statistics are
beneficial in order to develop relationship between the outsource provider and the outsourcer
company. The supplier and contract management process determines which statistical data
should be kept and which are useful in order to improve the relationship between the outsourcer
and outsource provider (Huang and Li, 2009). As per the contract terms, the supplier and
contract management processes should be periodically upgraded. The billing accuracy is separate
element in the risk management process as it is involved with various kinds of billing processes.
The outsourcing party must regularly review the billing status in order to ensure the compliance
with the contract terms. The diagrammatic representation of risk management process is as
follows:

Source: (Huang and Li, 2009).

The business organisations are generally benefited if the recognises that the outsourcing
agreement consists of high risks and vital to them. Once this process is done, the agreement
could be separated into parts such as low, medium and high risk and could be managed further

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accordingly. The agreement that consists of high risk volume goes through severe reviewing
cycle as they provide critical product service or critical transactional volume. The medium risks
could be evaluated actively but not constantly. However, low risk agreement could not be
actively monitored. According to Xiao (2012) “there are some set of metrics that are tracked
and review might be triggered by deviations to contracted service levels”.

Conclusion:
As per the requirement of the assignment, the importance of outsourcing had been discussed in
the entire assignment as well as the need of outsourcing has been demonstrated. The assignment
also consists of discussion regarding the performance objectives, which must be evaluated at the
time of outsourcing products as well as when taking decisions logistically that a product or
service must be kept in – house or must be outsourced to third party. The assignment also
focuses on the business operations of Google and its outsourcing partner Globant. The
assignment clearly demonstrates that how effectively, Google had commenced it logistic
decisions and how efficiently Globant had outsourced services to Google. Hence, from this
assignment it could be determined that before making logistic decisions, every business
organisation should conduct risk analysis process as well as the risk management process in
order to mitigate the potential risk that could occur at the time of outsourcing products.

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References:
Beck, R. and Schott, K. (2012). The Interplay of Project Control and Interorganizational
Learning: Mitigating Effects on Cultural Differences in Global, Multisource ISD Outsourcing
Projects. Bus Inf Syst Eng, 4(4), pp.183-192.

Benish, A. (2014). Outsourcing, Discretion, and Administrative Justice: Exploring the

Acceptability of Privatized Decision Making. Law & Policy, 36(2), pp.113-133.

Brodner, S. (2012). Google Inc. The Baffler, 19, pp.125-125.

Hoecht, A. and Trott, P. (2006). Outsourcing, information leakage and the risk of losing
technology―based competencies. European Business Review, 18(5), pp.395-412.

Huang, J. and Li, A. (2009). Empirical Analysis on Perceived Risk of Enterprise’s Logistics
Supervisor for Outsourcing Logistic Business. IBR, 2(2).

Jafarnejad, A., Sherafat, A., Taghavi, N. and Talab, Z. (2013). Designing a Operational
Evaluation Model for Outsourcing Decision Making by Effective Outsourcing Factors. IJARBSS,
3(7).

Marsh, C. (2009). Outsourcing in reverse: A case study from the public sector. Performance
Improvement, 48(8), pp.19-25.

Phillips, J. and Phillips, P. (2010). The power of objectives: Moving beyond learning objectives.
Performance Improvement, 49(6), pp.17-24.

Wood, L. (2005). Google, Inc., Mountain View, Calif. Sci Am, 293(6), pp.49-49.

Xiao, X. (2012). Business Logistics Outsourcing Risk and Management. AMR, 479-481,
pp.1718-1721.

Yi, Z. and Xu, D. (2013). Decision Making Model for Business Process Outsourcing of
Enterprise Content Management. AJIS, 18(1).

Yuzhong, M. and Guangming, Y. (2012). A Study of Outsourcing and Self-Run Business

Decision- Making in the Distribution Transportation of International Logistics. Energy Procedia,
16, pp.965-970.

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