...Risk Analysis for Outsourcing Decisions Linda Duvall CMGT/442 Mr. Thomas Maricle February 23, 2011 Abstract The purpose of this paper is to identify the possible risks to an organization in each of the following outsourcing situations: a) the use of an external service provider for your data storage; b) the use of an enterprise service provider for processing information systems applications such as a payroll, human resources, or sales order taking; c) the use of a vendor to support your desktop computers; and d) the use of a vendor to provide network support. The paper will include a risk mitigation strategy for each situation. Risk Analysis for Outsourcing Decisions “Outsourcing”, as defined by Wikipedia, the free encyclopedia, is the contracting out of a business function to an external provider. In this sense, two organizations enter into a contractual agreement involving an exchange of services and payments. Paul Strassmann, in his paper “The Squandered Computer” would prefer the term “out-tasking” because one organization is utilizating the specialization of another organization. According to “Microsoft Business for Small and Mid-Size Companies”, small business owners are outsourcing a range of services, from Human Relations to finance and accounting to customer services. Small businesses can now tap outside facilitators for a much greater range of services. As an example, entrepreneurs with strong sales often assume a full-time...
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...Adversity of Outsourcing: Outsourcing from the Employee’s Perspective Schillen & Steinke Mitigating the Adversity of Outsourcing: Outsourcing from the Employee’s Perspective Sarah J. Schillen Seattle Pacific University USA sschillen@gmail.com Gerhard Steinke Seattle Pacific University USA gsteinke@spu.edu ABSTRACT This paper explores how outsourcing activities and decisions put the well-being of the remaining employees at risk, ultimately affecting productivity and creating further costs to the employer. It highlights four potential threats to remaining employees: trust, job satisfaction, motivation, and stress. The paper provides several suggestions for mitigating these impacts, including communication to retain trust, acting ethically to ensure satisfied employees, seeking an understanding of employee perspectives to build employee motivation, and providing good planning along with training and development to reduce employee stress. INTRODUCTION Globalization provides organizations with more options than ever before. Business leaders are continuously encouraged to adapt, reevaluate, and strategically improve processes and approaches. Best practices are reinvented rapidly in attempt to keep up with market trends. The quest to recognize new methods for increasing revenue has become the inspiration for exploring new management techniques and strategies. One such rising trend in the advent of global markets is that of outsourcing. Common purposes for outsourcing include improvements...
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...Supply Management Outsourcing Purchasing is common to all organizations with any kind of supply function. It is one of the basic processes of supply management. As time has gone by, the term ‘purchasing’ has taken on a broader definition. As companies become more independent, more competitive, and start growing towards the future in technology, specifically e-commerce, purchasing becomes a strategy. Purchasing became “strategic sourcing.” Strategic sourcing has become a huge responsibility for the supply manager. There are a few activities that strategic sourcing accomplishes for the manager. It allows the manager to strategize the spending habits of the company, it forces the manager to strategically look in to the supply market for any changes, trends, and what other firms are offering, and it provides a method to develop a sourcing strategy that fits the company’s strategy to lower costs and risk, while bringing in a profit. Profit is produced through mastering or at least competently managing the five M’s; machines, manpower, materials, money, and management. Part of that strategy is where and how to source these 5 M’s that will meet the cost strategy of the company. This brings up the most strategic question a firm can ask of a supply manager; to make or buy? To meet the company’s needs that will consequently meet the current demand, should the company in-source or outsource? What should the company outsource? What are the functional areas of supply management...
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...out the business environment of procurement and then presents the development and propensity of procurement. This is followed by a review of principal works and differences of perspectives of resource-‐based view. The next section contains an analysis of the relationship between procurement and resource-‐based theory and discusses empirical works on outsourcing that address outsourcing from the resource-‐based view. The studies are classified into two categories: those studying the propensity to procure and those studying the relationship between procurement decision and firm’s performance....
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...Outsourcing is an important part of Globalization. The choice to outsource U.S. jobs should be taken into great consideration as there are many segments into which it effects greatly. Also, outsourcing is a great option for a company who needs a certain project completed who do not have the man power or the money to hire a new employee, companies can outsource based on projects in the U.S.A. or abroad. Often outsourcing is a way to save money, but there can be unexpected costs as well. While it can be both a benefit to a customer it can also be a reason to avoid doing business with a company due to it. The decision to outsource is certainly not one that any organization should enter into lightly. There are many reasons to consider outsourcing to foreign countries. A few of the most significant advantages of outsourcing include the most well-known reason to consider outsourcing is to access cheaper labor. Workers in developing countries are paid far less than workers in developed countries due to the lower cost of living. Often these workers are not unionized as well, which further helps with cost cutting. At the same time outsourcing U.S. jobs to a foreign country can create a detrimental blow to the reputation of a company. In 2002 when T-Mobile was established the television spokesperson was Catherine Zeta Jones, a very classy and beautiful actress. Customer service call centers were based in the United States and there was never an issue that could not be...
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...What Went Wrong At Boeing? My article, The Boeing Debacle: Seven Lessons That Every CEO Must Learn, elicited spirited conversation. Several commentators noted that, in addition to the general lessons, Boeing made specific errors in the way it handled outsourcing and offshoring. Let’s take a closer look at those specifics. Boeing enthusiastically embraced outsourcing, both locally and internationally, as a way of lowering costs and accelerating development. The approach was intended to“reduce the 787′s development time from six to four years and development cost from $10 to $6 billion.” The end result was the opposite. The project is billions of dollars over budget and three years behind schedule. “We spent a lot more money,” Jim Albaugh, Chief of Commercial Airplanes at Boeing, explained in January 2011, “in trying to recover than we ever would have spent if we’d tried to keep the key technologies closer to home.” The right goal: add value for customers Let’s start with what Boeing did right. After losing market share to Airbus (owned by EADS) in the late 1990s, Boeing could have decided to focus on reducing the costs (and the selling prices) of its existing aircraft. That would have led inexorably to corporate death. Instead Boeing decided— commendably—to innovate with a new aircraft that would generate revenues by creating value for customers. First, Boeing aimed to improve their travel experience for the ultimate customers, the passengers. As compared...
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...S0263-2373(98)00040-1 0263-2373/98 $19.00 0.00 The Impact of Corporate Outsourcing on Company Value DAVID J. BRYCE, Wharton School, University of Pennsylvania MICHAEL USEEM, Wharton School, University of Pennsylvania Companies worldwide are expanding their use of outsourcing for services and products. This article appraises what is known about the impact of outsourcing on company value, and the emergent picture is not an unblemished one. Company managers frequently complain about the downsides, some companies have retrieved what they had sourced out, failures can be seen here and there, and the long-term potential consequences of outsourcing too much are yet to be seen. Still, the weight of the research evidence indicates that, when well designed and well managed, outsourcing reduces operating cost, enhances competitive strategy, and enlarges shareholder value. © 1998 Published by Elsevier Science Ltd. All rights reserved Many observers mark the beginning of the contemporary surge of company outsourcing with Eastman Kodak’s decision in 1989 to source out its entire information management to IBM, Businessland, and Digital Equipment Corp. Since this deal’s execution, now almost a decade ago, outsourcing has become a standard management device at many US firms, and corporate expenditures on it have rapidly accelerated. Symptomatic of the trend, companies signed major new contracts for information outsourcing in 1994 worth $11 billion; in 1995, $20 billion; and in 1996, $33 billion...
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...Outsourcing Jobs I think it is interesting to know the positive and negative arguments about outsourcing. On one hand, there is the current uproar about illegal immigrants swarming in to the U.S. to do the jobs that Americans don’t want to do. And on the other hand, there is the continuing outcry about jobs going overseas. This would be the outsourcing of jobs that Americans would be willing to accept if the corporations were not so adamant about improving their bottom line for their stockholders. So, what is outsourcing and offshore outsourcing? By definition, “outsourcing (or contracting out) is often defined as the delegation of non-core operations or jobs from internal production within a business to an external entity (such as a subcontractor) that specialized in that operation. Outsourcing is a business decision that is often made to lower costs or focus on competencies” (Miller, 2010). A good example of outsourcing is janitorial services. Instead of a company training several people for the position, they can outsource these tasks to another organization that specializes in recruitment services. This way they can save the time from hiring and training, and the work output should be of the highest quality. Offshore outsourcing is referred to as, “work done for a company by people in another country that is typically done at a much cheaper cost” (Miller, 2010). These services are outsourced elsewhere to countries other than where the goods and services are actually...
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...Abstract Global Communications (GC) was facing a major decline in revenue, profits and stock values and had to make serious upgrades in its business practices. GC had to determine a cost-effective way to ensure their company would survive. The solutions involved outsourcing jobs, laying off workers and offering new services as well as teaming up with a satellite provider. Although stakeholders realized without these changes, GC would not survive, it is found to be difficult for some long-term stakeholders. GC’s approach appeared to have personal and ethical conflicts as they failed to communicate with employees. GC has identified the problem, strategized with its stakeholders, implemented a plan and has set the process for reevaluation and changes, if necessary. GC has found other companies, in and outside its industry, to benchmark and has taken the best practices for issues similar to theirs and have used them to increase revenue, and forego any immediate outsourcing of call center jobs. However, GC has a communication problem, in that the union was never consulted or included in the decision to outsource positions. Whey they learn of the idea, the union is very upset as they worked very hard to have employees agree to a decrease in benefits previously. The union is outraged and states they will fight the newly devised plan for its members. Implementation of these changes would allow GC to lead the communications industry globally, while providing their small...
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...mixing of various cultures. The tern covers a range of aspects including economic, cultural and political trends. It also signifies the tendency of businesses and investment funds to cross national and domestic markets to other locations all over the world ending up strengthening the way various markets become interconnected, increasing international trade and enhancing cultural exchange. Globalization enables companies to draw workers from different cultural backgrounds and gain fresh insights into various cultures from the standpoint of marketing and management. The changes necessitate companies to learn the ways of dealing with the diversity and adopt new guidelines and policies. As more firms access foreign companies that provide outsourcing, employee wages tend to change significantly. The cultural, ethnic and religious diversity presents the need for increased employee training. Since more companies are operating on an international platform, employees begin working in foreign countries. With globalization it is relatively easy to manage projects from different corners of the world. Companies can also increase efficiency in their projects by comparing how other projects run in different parts of the world. Globalization has a huge impact towards increasing competition in the business world. The competition usually relates to service cost, products, price, technological adaptation, quick production and quick response among others. Presently, the market has a broad range of...
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...Outsourcing IT Services for Data Center Consolidation | Applied Research Project | | IS535 | | 6/10/2011 | | Executive Summary Outsourcing IT Services for Data Center Consolidation California Natural Resource Agency’s Best Option for the Consolidation Project into Department of Water Resources Tier III-Equivalent Data Center The Department of Water Resources for the state of California is responsible for managing “the water resources of California in cooperation with other agencies, to benefit the State's people, and to protect, restore, and enhance the natural and human environments.” (http://www.water.ca.gov/about/mission.cfm) In late 2009 the Department of Water Resources (DWR) launched a multi-million dollar project to build a modernized IT infrastructure that is to house several of the California Natural Resources Agency’s (CNRA) commissions and conservatories. This project would make DWR a certified tier III data center. There are only four tier III data centers currently operating in California. The project was broken into two phases; the first was the build-out of the IT infrastructure, and the second phase is the migration and consolidation of the various agencies computer rooms and data centers. The first phase was completed in early 2011 and consisted of: * Better performance. New servers boost performance of key business solutions and applications by up to four times while enabling system engineers to keep computer intensive...
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...Perceived Impact of Outsourcing on Organizational Performance Dean Elmuti, Eastern Illinois University Introduction In todays world of ever increasing competition, organizations are forced to look for new ways to generate value. The world has embraced the phenomenon of outsourcing and companies have adopted its principles to help them expand into other markets (Bender 1999). Strategic management of outsourcing is perhaps the most powerful tool in management, and outsourcing of innovation is its frontier (Quinn 2000). Outsourcing is a management strategy by which an organization delegates major, non-core functions to specialized and efficient service providers, or as Corbett (1999). President of Michael F. Corbett and Associates asserts, Outsourcing is nothing less than the wholesale restructuring the corporation around our core competencies and outside relationships. The traditional outsourcing emphasis on tactical benefits like cost reduction (for example, cheaper labor cost in low-cost countries), have more recently been replaced by productivity, flexibility, speed and innovation in developing business applications, and access to new technologies and skills (Greer, Youngblood, and Gary 1999; Bacon 1999). The market for providers of outsourced services of all types is growing rapidly. In 1996, American firms spent over $100 billion in outsourced business activities (Casale and Overton 1997). Other estimates place the total U.S. market for outsourcing at more than $300...
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...Italian Quality: Campagnolo Bicycle Components Introduction Campagnolo is renowned for producing some of the most innovative, highest quality, and best performing bicycle components available today. They also provide a benchmark for original design as evidenced by winning the prestigious Compasso d’Oro award from the Associazone Design Italiano and has been recognized by the Wall Street Journal as one of the most prominent sports brands in the world. ‘This reputation has been earned not only through its countless racing successes, but also by virtue of the attention given to quality and to service that sets this company apart from all others.’ ("Focus," 2011, para. 6) Tullio Campagnolo, an amateur bicycle racer who was frustrated with current technology to change gearing on his bicycle, founded Campagnolo S.r.l in Vicenza, Italy in 1933. At the time, changing gears required the rider to dismount, remove the rear wheel and then flipping the rear wheel around so a different sized cog on the opposite side of rear wheel could be used, then reattach the wheel to the bicycle frame, and finally remount the bicycle and resume the race. This required tools and a bit of time off the bicycle to complete as derailleurs and quick releases had not yet been invented. Tullio Campagnolo spent three years designing, perfecting, and producing what has become one of the ubiquitous components on a modern bicycle – the quick release skewer. ‘The company soon expanded, focusing on the three...
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...issues that is vital in outsourcing is whether Chrysler wants strict management control for day-to-day activities. By outsourcing to TCS, Chrysler will be outsourcing its maintenance and support services, particularly its sales, marketing, product development, shared services and after sales functions . Although Chrysler has the general oversight of the project deliverables, it is still done by the outsourcer. This would impact project approach, employee morale, customer interaction and feedback. For example, a recent outsourcing which proved to not be a good idea was customer support for computer equipment sales by Dell. Dell could not control the interaction with their customers and there were numerous complaints about communication skills, product knowledge and general attitude of the outsourced technician . These services that are outsourced to TCS are part of Chrysler’s daily operations and thus stringent management control over these activities must be carefully explored to ensure quality services and excellent customer service. Organization Issues The main organization issue that Chrysler should have considered would be the morale of employees and public reputation during their decisions to outsource. It was reported by Bertsch that, 200 people, 20 percent of the full-time employees, were scheduled to lose their jobs because of the new outsourcing arrangement . By laying off workers, many labour unions have been protesting against outsourcing and want the government...
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...tact, while foreign governments have reacted almost immediately, making their incentive programs much more attractive. This has affected several industries. While some states have experienced growth, there are more that are experiencing or have experienced reduction in operations and the closing of facilities. This eventually caused local governments to want to help out a little more. They have begun to arrange economic incentives for the purpose of keeping automotive operations and other industry operations and their associated jobs and payroll. Proposing these incentives have encouraged keeping jobs alive, but for how long? And is it necessarily a bad thing to outsource certain jobs? First, discussing the pros and cons of outsourcing, the decision to outsource is often made in the interest of lowering company costs. It is also in the interest of redirecting energy directed at the competencies of a...
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