Amity International Business School

Session Two

Management in Action Outsourcing

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Outsourcing
Contracting with another company or person to do a particular function The function being outsourced is considered non-core to the business In recent history, companies began employing the outsourcing model to carry out narrow functions, such as payroll, billing and data entry

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Types of Outsourcing Process

Business Process Outsourcing (BPO) Account Process Outsourcing (APO) Recruitment Process Outsourcing (RPO) Knowledge Process Outsourcing (KPO) Technology Services Outsourcing (TSO)

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Outsourcing Process Framework

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Framework for the process of outsourcing

Whether? What?

Preparation
Where?

What Now?

When?

How? To Whom?

How?

Vendor Selection

Source: Perunovic
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Phases
Phase Preparation Key Activities Strategy Sourcing options Approach Configuration Key Issues Underlying philosophy Why and what to outsource Big Bang Incremental Piecemeal Many suppliers Preferred suppliers Prime contractor with subcontractors Sole supplier Contractual or collaborative

Screening of potential vendors Preferred relationship Preferred length of the contract Drafting the SLA

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Phases
Phase Vendor(s) selection Key Activities Announcing outsourcing Choosing the vendor Negotiating Creating a win-win situation Key Issues Request for Proposal Evaluation

Finalizing the contract

Transition Defining communication and exchange of knowledge and information Transferring assets, people, information, knowledge, hardware, software Human resource management

Type, flexibility and content of the Contract

Change management

Reengineering Adopting organizational structure and processes Job loss, transfer

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Phases
Phase Managing relationship Key Activities Type of relationship Key Issues Reciprocal Client dominant Vendor dominant Preferred vendor Contracts Trust

Maintaining relationship

Handling meetings and communicating, Performance

monitoring and evaluation

Applying incentives and penalties, Solving problems Re-negotiating and managing variations
Managing success factors Economic factors Co-operation between buyer and supplier

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Phases
Phase Key Activities Key Issues

Reconsideration

Reconsidering

Continue Change vendor Back-source Switching costs

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Making a Decision
Assess Goals and Alternatives Establish the baseline Determine contracts scopes and terms

Measure, Audit and Report results

Negotiate performance levels

Identify measures to support terms

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Top Reasons for Outsourcing

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