Meaning of re engineering.

Business process reengineering began as a private sector technique to help

organizations fundamentally rethink how they do their work in order to
dramatically improve customer service , cut operational cost, and become world-
class competitors. A key stimulus for reengineering has been the continuing
development and deployment of sophistication information system and networks.
Leading organizations are becoming bolder in using this technology to support
innovative business processes, rather than refining current ways of doing work.

Business Process Reengineering is basically the fundamental rethinking and radical

re-design, made to an organizations existing resources. It is more than just business
improvising.
It is an approach for redesigning the way work is done to better support the
organization's mission and reduce costs.. Reengineering starts with a high-level
assessment of the organization's mission, strategic goals, and customer needs.
Basic questions are asked, such as "Does our mission need to be redefined? Are
our strategic goals aligned with our mission? Who are our customers?" An
organization may find that it is operating on questionable assumptions, particularly
in terms of the wants and needs of its customers. Only after the organization
rethinks what it should be doing, does it go on to decide how best to do it.
Within the framework of this basic assessment of mission and goals, reengineering
focuses on the organization's business processes—the steps and procedures that
govern how resources are used to create products and services that meet the needs
of particular customers or markets .As a structured ordering of work steps across
time and place, a business process can be decomposed into specific activities,
measured, modeled, and improved. It can also be completely redesigned or
eliminated altogether. Reengineering identifies, analyzes, and redesigns an
organization's core business processes with the aim of achieving dramatic
improvements in critical performance measures, such as cost, quality, service, and
speed.
Reengineering recognizes that an organization's business processes are usually
fragmented into sub processes and tasks that are carried out by several specialized
functional areas within the organization. Often, no one is responsible for the
overall performance of the entire process. Reengineering maintains that optimizing
the performance of sub processes can result in some benefits, but cannot yield
dramatic improvements if the process itself is fundamentally inefficient and
outmoded. For that reason, reengineering focuses on redesigning the process as a
whole in order to achieve the greatest possible benefits to the organization and
their customers. This drive for realizing dramatic improvements by fundamentally
rethinking how the organization's work should be done distinguishes reengineering
from process improvement efforts that focus on functional or incremental
improvement.
Meaning of Reconstruction

If any company is suffering loss and it close its business and join with or without
other company, it create new company. That is called reconstruction. There are two
types of reconstruction.

Amalgamation Vs Absorption Vs External Reconstruction - Comparison through

Chart
Ist - External Reconstruction

When a company has no power to operate his own business due to heavy loss and
it sells his all business to a new company. It will be external reconstruction.

2nd - Internal Reconstruction

Internal Reconstruction means to do every action for bringing the company out of
losses. If a company is suffering heavy losses, company can use the provision 94
of Indian Company law 1956 and reduce its capital.

As per assignment is concerned we have to find out the two companies which
outsourced reconstruction and reengineering.

One who earned profit out of it and one who suffered loss because of this.

The companies I have chosen is Nissan who earned profit due to reconstruction
and reengineering. Luxena a software company. Who faced losses due to
outsourcing of reconstruction and re engineering.

The year before the millennium Nissan was a company in a financial crisis. The
debt was closer to $ 22000000000 1999th The company had been too complacent,
and had his previous success, of course .

Nissan have decided to outsource its IT infrastructure to IBM in 1999, a good way?
Nissan is a very troubled car manufacturer at the end of 1990. The company's
executives were known for their conservative views> Economy and its "old boys
network" mentality. Profits fell sharply, eventually forcing the company into $ 22
billion in debt, who then addressed. There was no sign of a change in the market
that should support earnings growth. Deliveries must be strengthened.

Mergers were the flavor of the day in the automotive industry in late 1990. Nissan
executives approached Daimler Chrysler and Ford to discuss a possible merger, but
there wasThe interests of the two companies . There were left only one alternative
that are reinvented and unnecessary spending has been. This was the point of
setting out this decision, the Business Process Outsourcing.
This article attempts to answer the question "Is the solution cost to implement a
home-or even exceed the benefits of Business Process Outsourcing (BPO) to make
sense anymore?" We examined the sample of manufacturers,Nissan, when they
decided to sell the entire division to outsource IT to IBM in late 1999 to respond to
our request.
Nissan – A brief history and the events that preceded the decision of BPO

I. The boom years

Nissan in Japan was established in 1933 as a manufacturer of heavy industry. After

World War II, have turned their attention to motor vehicles. In 1950, finally having
an impact on the global market with the introduction of the Datsun brand Sedans
and small trucks. The company has finally opened a full-time work in the United
States in September 1960 .

The company has grown dramatically with the introduction of the sport "Z" series
sedans in the early 1970 with the 240Z always the fastest selling car of all time.
This success has prompted the chief importers of Nissan vehicles in the U.S.
market in 1975. Deliveries to customers in the United States exceeds 250,000 units
per year by 1970. The company was young, its leader Dynamics and the future
looked very rosy. They were competing for the U.S. market, with the likes of Ford,
Chrysler and General Motors, with improved quality and production efficiency
compared to its competitors.

The company was growing at a phenomenal pace, opening new production

facilities around the world regularly, such as Australia (1976), Spain (1980) and
the United Kingdom (1984) . There was no peace for the pace of growth
and generation of new firms by society.
In 1983 the company began marketing vehicles worldwide under the name Nissan
perceived image quality and should have started the transition of six years from
Datsun to Nissan vehicles, car dealerships, agencies and marketing materials.
Revenue continues to grow, reaching 830,767 in 1985 . The decade closed with a
resounding success for Nissan with their domination of the North American
market.

In 1993, the central stanza sedan replaced with a new Altima and non-competitive
Japanese designed van was created with a new version of the United States, which
was the first minivan with car-like handling. The sales are roaring in 1994 to
almost peak values of 774 405 .

In 1996, sales slipped again, fueled by a change in American automotive tastes.

Truck and SUV market share at the expense of sedans and sports cars . Nissan's
position as a production-driven company, which has helped80 'S and 90 / 1, then
had problems with the new budget dollar / yen, starting hurting their
competitiveness compared to market-oriented businesses.

Unlike its competitors, Toyota and Honda, which had focused on the most
important segments of the volume, Nissan did not dominate each segment into
equal segments and competing against Toyota and Honda.
Unfortunately for Nissan in 1990, the Japanese "bubble economy" burst, the crisis
in Europe fell, there was more pressure In U.S. conduct. Unfortunately, U.S.
customers have no real reason Nissan except for the "best price" bargain store.
The former president of Nissan, Nakamura has announced plans for a "back-to-
base." The key elements of the plan were to reduce the stock, remove the
unrealistic revenue targets and increase the profitability of the dealer.
Unfortunately for Nakamura and Nissan, the plan did not work .

II Trouble looms for auto manufacturers in 1990

In the early 1990s , woe started to deliver within the organization. The once
revered for Nissan executives were now seen as arrogant members of the Old Boys
Club, and were ignorant to the changing needs of its customers and the entire car
market in general.

As the most advanced societies in debt, has met with more problems.
Nissan commercial partners and suppliers were charging a premium for their
goods and services. Nissan was forced to meet its financial obligations and then
referred further into the debt trap. Finally, the company was in debt of 22 billion
U.S. dollars .The sponsoring companies were tightening the noose around them.
Nissan felt the situation was desperate.
III. Measures taken to solve problems
Nissan executives were on the way out, a possibility that the company is trying to
save from typing in bankruptcy. The first approach was to find a partner. Both of
the newly formed DaimlerChrysler and Ford Motor have been raised, but both
organizations rejects the idea of a merger . Finally, Renault has decided to recall
the French car company in a similar situation, in talks with the Japanese company
has beaten force. A senior executive of Renault, Carlos Ghosn was a big proponent
of the concept of merger.

After lengthy discussions the Japanese Ministry of Economy, Trade and Industry
to allow Renault to buy a substantial share of Nissan. The Renault-Nissan alliance
was born and became the chief Ghosn Operating Officer.
Nissan executive decisions and important events

I. Create a vision of Global Alliance:

The following is from the source Renault Nissan Alliance Vision:

"The Renault-Nissan Alliance is a unique group of two global companies through
cross holdings attached. You are responsible for the performance, however, put
together a coherent strategy, objectives and principles, results-driven synergies,
shared best practices. They respect and to strengthen their identity and Brands.
The Alliance sat down three goals, with the aim, among the best three automotive
groups in the following areas:

1. Quality.

Reach customers and recognition as a value added product quality.

2. Technology.

Lead in the most important technological development and implementation, with

an emphasis on excellence in specific areas of the automotive industry.
3. Operating profit.

Consistently generate a high profit margin and operatingto vigorously pursue

growth.

II appointed a new leader

Ghosn, like his enthusiasm for the merger, his tenacity, and his experience in the
automotive sector was a natural choice for a senior position at Nissan. His first
assignment as Chief Operating Officer (COO), was only a temporary assignment.
In 2000 he was named president in 2001 and was Chief Executive Officer .

As CEO Ghosn was very conscious of the fact that stops the 'Buck' with him. E
'wasThe final decision maker. Some very important and difficult decisions have
been taken to save the company in difficulty. Ghosn had to save all his valuable
experience of other relief organizations such as Michelin and Renault, Nissan.

III. The decision to save a troubled car maker

With Ghosn arrive in Japan in spring 1999, immediately began the search for the
root problems Nissan. The newly appointed COO had a management philosophy
that "it is necessary always with a clean sheet of paper, because the only thing
worse that can have is to start, ready-made solutions … You must start with a zero-
based thinking, and cleaning out of my head.

For the first month, Ghosn flew to Japan, meeting and greeting people at all levels,
the inclusion of information and formulation of a plan. He used this information to
a picture of Nissan from a global perspective of the structure, identifying the issues
and problems that created the scattered non-profitable organization.

One of the many questions Ghosn identified is the lack of communication within
the organization. Senior managers from around the world were aware of some of
the questions that the slowdown causes of happiness in society. They also had their
own solutions, but not to implement the necessary authority or the solutions
communicate back to headquarters.

Finally, the important issues in five key questions carved

• Lack of clear Useful guidance. Nissan has not been focused on driving
profits, but they were more focused on market share and ended with their
market share at the expense of declining profits for the purchase.

• The lack of attention to customers and too focused on competitors. The

company was carved out of the competition concerned with the introduction
of a new line that would have the market share of Nissan. For example,
when it introduced its new Volkswagen Jetta sedan Nissan has recorded a
significant decline their highest sales.

• Lines are not cross-functional, cross-border and intra-hierarchical

work in the company. Nissan seemed to work as separate islands scattered
 all over the world. There was no central purchasing or even a major in
other business activities. The organization was not the best use of the global
presence or purchasing power.
• Lack of urgency. Nissan executives have been complacent in their
activities. Things were going so well for the company over the past 60 years
which is believed to have been no reason to change.

• No shared vision or common long-term plan. The senior management of

Nissan do not have a common plan for the various brands within the
company. Every department has its own thing with little or no thought for
the good of society. An example was the Z series, its phenomenal success in
the 1970s and 80s were, but suddenly dropped from production when sales
declined. It would be natural to have done was to test the market with an
updated design. Instead, Nissan has chosen to ignore the market and bring
down the mark.

• The reduction in operating expenses, net debt, the number of people

worldwide and vehicle assembly plants and production platforms.

• The generation of investment in new products with the introduction of 22

new models.
The plan called for the cost of centralized purchasing, procurement,
personnel and information technology. By centralizing these functions
essential to the plan, support the company achieve its aggressive cost Cuts.
• Spending, especially in terms of information technology was perceived as
out of control. Ghosn message to the leaders was clear: "Reducing costs in
all areas possible." If you meant outsourcing non-core, because someone
else might cheaper then had carefully examined and determined. The
management has been ruthless in their execution of the plan.

Nissan looks like Business Process Outsourcing Media

There are good records of the company to save money and other documented
horror stories of outsourcing. The success really depended on the situation and the
provider.
Most experts agree, but you need to use BPO in strategic decisions, such as efforts
focused on its core competencies and not only for the purposes of cost reduction
[1]. Stephen Withers, ZDNet said in his online article that you should just "BPO
for strategic purposes, not to use, take a reduction in costs. "Withers then asked the
reader," the outsourcing of IT infrastructure do you mean? "To answer this
question, Corporate Chief Information Officer should have completed research
and processes to make a thorough analysis of their company.
This is exactly what Nissan CIO or better what's Ghosn said to do. The company
had invested approximately 80000000000 yen (about$ US760million) in 1998 on
IT services, but their processes do not yet provide the management infrastructure
that could be competitive in the construction of them . The final decision was made
to various outsourcing services to the approach a lot of help needed.
II is the outsourcing of IT infrastructures that make sense?

When information technology is really a commodity like gasoline or electricity, so

the companies that compete on the price of just Profit margins. In this case, the
decision of IT outsourcer again was as easy as it was a century ago to do it in the
car instead of horse and buggy. But while computers and the networks they run on
standard should be, provided that the benefits of outsourcing IT in many various
ways. Services such as data analysis, development of IT applications and processes
of decision-making companies more competitive in the market are therefore the
elements of IT level seen as a product.

Referring to the decision to outsource, many factors were considered in the case of
Nissan. Ann Moynihan in their article in the Albany Business Post says:
"Outsourcing allows you to:
• Reduce and control operating costs.

• Freelance business focus on core business.

• Access to specialized skills and technologies.

• The introduction of positive changes.

• Gain control of a Function difficult to manage resulting from uneven

workloads, inadequate resources or unskilled.

With Nissan in 1999, this was exactly what they sought. Realignment of personnel
acquired efforts, the introduction of positive change and control in all critical areas
led to the decision of outsourcing.

The selection of IBM as a strategic partner Nissan was outsourcing.

At the end of 1990 there were many companies that the width of outsourcing or
the global reach, IBM had .Competitors such as EDS and CSC were not considered
because only the client and could not offer hardware and software to upgrade its
infrastructure Nissan [5] necessary. If any of these competitors have been selected
by IBM as a partner Nissan are still matters of critical infrastructures would have
to face. IBM was the only logical partner.

It is the working relationship between Nissan and IBM?

I. Another look at the relationship between IBM and Nissan

In a joint press release from IBM and Nissan in Tokyo June 19, 2000, the two
companies announced that "extend its global partnership for information systems
operations, Nissan Motor Co. agreed, Ltd. IBM in October 1999, Nissan and IBM
announced today that its Nissan is outsourcing in Japan, IBM Japan.

The service includes regular maintenance and operations, and Nissan as part of
their application Development, but includes the planning and design of new
systems. The two firms will start from 1 October.

In North America, Nissan has the same operations outsourced to IBM Corp. in
October 1999. This latest agreement in Japan is expected to further accelerate the
integration, standardization and centralization of Nissan is based on a global level.
"

Ghosn also stated, "Nissan Revival Plan cannot be done without effective
information systems .After the recent agreement with Japan Telecom, this
partnership with IBM, most recently the site of the global infrastructure to support
the key to long-term growth of Nissan's profitable.

II hypothetical view of the return-on-investment model used

Before they could calculate the return on investment (ROI), Nissan had only the
total cost of ownership model of the IBM flight schedule. Total Cost of Ownership
has developed a type of calculation to help consumers and Managers assess both
direct and indirect costs and benefits associated with the purchase of an IT
component. The intention was to reach a final number, the actual cost of purchase,
the total reflect.

The TCO model used, the cost was necessary, on a charge of outsourcing should
be calculated. The organization had certain criteria that could be added costs for
the outsourcing project to be evaluated. They also had to calculate the cost of
managing during the entire duration of the contract .
Then, after calculating the return time Nissan was able to calculate ROI. Once
numbers were crunched, a thorough financial analysis and risk has been conducted.
The ROI is measured in profits or savings. It 'been done prior to an investment
period of 3 years and calculates the profits created through the investment.

The results were convincing. Nissan and IBM entered into their agreementand to
begin operations on 1 October 1999 expected.

I BPO Nissan achieve its stated objective?

The stated aim of Nissan is to outsource its IT infrastructure was to control

spending, improve efficiency, and improved infrastructure. By outsourcing to IBM
Nissan achieved all its objectives.

In expenditure control has been outsourcing companies the opportunity to calculate

the monthly household expenditure. This amount can be either no less than current
spending, but the component that is essential for a large organization such as the
Nissan, is that the amount is predictable. There was no variable component of the
price. may have fluctuated, the only time that the prices of additional services that
were outside the scope of the contract were necessary.

In the case of Nissan, which is never an obligation. The company was the first
phase of a major restructuring project overall and there were new Initiatives
instead.

The second goal was in the BPO in order to improve efficiency. IBM is the world's
largest information technology company with annual sales close to $ 100 000 000
000 . When companies outsource the activities of IBM wins best-of-breed
technologies, excellent consultants and architects can buy some of the best for the
money.

The way in which each global outsourcer makes his money is to be achieved
through economies of scale. The only way to achieve these economies Scale is to
ensure that best use the hardware, software and infrastructure as possible and make
these devices work for maximum efficiency. By taking full advantage of this best-
of-breed technology, Nissan has hit its goals, the second and third set.

II And if the infrastructure was kept in-house?

If Nissan has decided to maintain their IT infrastructure at home and trying to

implement a system upgraded and modernized, there would be a significant
increase in their spending. Ghosn is the top priority when he took over the
company in 1999, spending by 700 billion yen reduced. He was not interested in
spending any additional money to upgrade existing installations.

In support of the proposal to improve the competitiveness, Nissan had to ensure

that their infrastructure also supports the additional workload. There was no way
that they intended to improve the efficiency could be done without external
support. Nissan was not competent and working to force the extra handle the
necessary updates and re-engineering of business processes.

III. Final evaluation and summation of the relationship

Robert Greenberg, Chief Information Officer of Nissan North America has been
publicly stated in 2006: "We were happy with the services of IBM, but the world
had changed." This review summarizes the report, as it is now almost 8 years later .
In the Nissan Revival Plan announced in 1999 the company was cut very clear
goals, costs, and a return to profitability.

The company Luxuny faced different kind of losses due to outsourcing of

reconstruction and re engineering. These are mentioned below.
 • Loss of managerial control: Because it is more difficult to manage outside
service providers than managing one’s own employees working possibly in
the same building.

• Hidden costs: Often the hidden costs are difficult to calculate or prepare
for. These include legal costs related to putting together a contract between
two companies and the time spent to coordinating the contract.

• Threat to security and confidentiality: Another disadvantage of

outsourcing can be a threat . If your company is outsourcing processes like
payroll, medical transcriptions or other confidential information, a company
must be very careful in choosing which process it wants to outsource and to
which provider.

• Flexibility: A possible loss of flexibility in reacting to changing business

conditions, lack of internal and external customer focus and sharing cost
savings may also be a disadvantage of outsourcing.

• Other disadvantages of outsourcing may include unfavorable contract

lengths, loss of competitive edge, problems in contract renewal, and
contractual misunderstandings.

Conclusion.

So these are two companies that outsource re engineering and reconstruction

out of which one that is Nissan earned lot of profit but on the other hand
Luxany faced loss I have mentioned above faced loss due to outsourcing of
the reconstruction and re engineering .