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Outsourcing

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A Literature Review
The study investigates the evolution, pros and cons of outsourcing as business function. Many researchers have identified various reasons to outsource an activity following a set process. The review proposed a well defined integrated outsourcing process model for effective outsourcing. Using an example of a global company this study detailed the benefits of externalization process and concluded that outsourcing is successful if activity selected is correct.

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Global Procurement (BMO 5307) Assignment 1

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A Literature Review

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Contents
Introduction ............................................................................................................................ 4 United Technology Corp. (UTC) ................................................................................................... 5 Rise of an Era - History & Evolution ......................................................................................... 5 Why Outsourcing? ................................................................................................................... 5 Procurement Outsourcing & UTC................................................................................................ 6 Where To Begin? ..................................................................................................................... 7 What UTC Was Willing To Achieve? ............................................................................................ 9 Pro et Contra ......................................................................................................................... 10 UTC – Outsourcing Results ........................................................................................................ 11 Conclusion ............................................................................................................................. 12

Appendix A ............................................................................................................................ 13 Appendix B ............................................................................................................................ 14 Appendix C ............................................................................................................................ 15 Appendix D ............................................................................................................................ 17 References............................................................................................................................. 18

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Introduction
Ever since the industrial revolution and the evolution of capitalism, businesses have sought new ways to exploit their competitive advantages to increase their markets and growth. The world has become flat after we started using internet and cell-phones for outsourcing work to each other (Burkholder 2005). The global pharmaceutical outsourcing market augmented from $ 11.4 billion in 2001 to $ 24.9 billion in 2007 (Boulaksil 2009). The US Outsourcing market was valued between $ 200-300 billion in 2006 (Barrar & Gervais 2006). In almost few decades several providers of outsourcing services for categories like maintenance and facilities emerged. In an era of “global market” and “e-economy” using offshore based legal research, financial management and more became main pillars of the new ways to conceive the major international partnerships (Balls 2006; Galetto et al 2003). Outsourcing is one of the oldest hot business ideas and in today’s global economy it is almost impossible not to outsource. Burkholder (2006) suggests that the debate about outsourcing is hampered by the fact that people are often unclear about the subject. So what exactly is outsourcing? WNS (2013) broadly defines outsourcing as “a strategic initiative that organizations take to employ external resources to conduct functions and run business processes that are both core and non-core activities and critical for business success”. This means outsourcing is a strategy by which an organization contracts out major functions to specialized and efficient service providers, who in-return become valued business partners. A management process that is also known as “external sourcing”; it allows delegation of responsibility to an external agent (Galetto et al 2003). It is a “strategic use” of outside resources to perform activities traditionally handled internally (Handfield 2006). Summarizing, an organization gets an advantage to use the technology and competencies of an expert, thus saving one’s own capital investment and eliminating staffing requirements. As business is about bringing the right product to the market at the right price, if outsourcing allows organizations to produce their products more cheaply then they will have a competitive advantage (Parry et al 2006). It allows an organization to realize exactly what each product or result will cost before it decide to obtain it. Extensive outsourcing allows businesses to concentrate on core competencies (Leavy 2001). This report deals with the evolution, purpose, pros and cons, and process of Outsourcing. The concept has been explained with a real-life example of an organization and its experience with outsourcing strategy and will conclude whether outsourcing is a boon or hindrance. This report is a product of study conducted on extensive literature available in form of journal articles, books, research thesis and, web content.

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United Technology Corp. (UTC) (UTC 2013)
160 years old revolutionary United Technology Corp. became an industrial power, when its six core business units generated revenue of $31 billion in 2003 (IBM 2013). The company was born on 20th September, 1853 when inventor of “Safety Elevator” Mr. Elisha Otis sold it to Benjamin House, New York. After enormous success of its elevators, company diversified into aircraft engines and space propulsion systems as ‘Pratt & Whitney’; into helicopters as ‘Sikorsky’. UTC Aerospace Systems was formed to provide integrated solutions for aviation. UTC is a pioneer in Climate Controls & Security. In year 2012, UTC sold products worth $57.7 billion.

Rise of an Era - History & Evolution1
Externalization of low value added value chain activities in firms (Varadarajan 2009) is an historic concept. Burkholder (2006) wrote that it was used first time when a carpenter paid someone else to cut down a tree for wood, and a lot other fascinating stories have been discussed around the world to trace the origin of Outsourcing. Interestingly, very few management practices have attracted as much attention as “it” is enjoying at present. Outsourcing history dates back to as far as the Industrial Revolution although not fully recognized as business strategy until late 80’s. The birth of large-integrated business model in 20th century redefined theory of a successful business and corporeity’s facilitated development of multi-layered management structures. This highly manifested the demand of diversification during 1950-1960 to protect profit and exploit economies of scale. However, globalization in 1970-1980 gave rise to the never-ending war of global competition and organizations handicapped by their departmental silos were not flexible enough to compete globally. To change these undesirable situation businesses shifted their focus on their core activities and externalized their low value added value chain activities. Moreover, it wasn’t until 1989 when world formally identified outsourcing as a business practice and since 1990 it has been a continuous rise of an era of outsourcing.

Why Outsourcing?
Today, where competent vendors can provide services for virtually everything, it is worth asking how, when, and ‘Why’ outsourcing should take place (Balls 2006). In such an attempt Duke University Offshoring Research Network Survey 2007-2008, revealed “labor cost savings” as a prime reason and “cost saving from outsourcing” as another for conglomerates to outsource their activities (Esperne 2009). However, primarily it is about introducing and gaining capabilities that generally may not exist in an organization (Teems 2003).

1

Detailed in Appendix A

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Reilly & Tamkin (1996) suggests that the decision to outsource rather than adopting any alternative approach may be driven by history or the circumstances of the moment. There could have been a problem of long standing that an activity has delivered a poor service or at a high cost; although internal solution were tried without success, externalization was thus seen as a last resort (Reilly & Tamkin 1996). However today, outsourcing is more of a strategic decision revolving around core competencies rather than based on management philosophy or as a response to specific problem (Narayanan 2010; Reilly & Tamkin 1996).

Reasons For Outsourcing2
Acceleration of Reengineering Benefits Access to World-Class Capabilities Freeing Up Resources for Other Purposes Function Difficult to Manage Improved Company Focus Making Capital funds Available Reducing Operating Cost Sharing Risk Resources Not Available Internally
(Burkholder 2006; Kirker 2006; Balls 2006; Teems 2003; Galetto et al 2003; Reilly & Tamkin 1996) Handfield 2006; Narayanan 2010;

Lastly, reason behind outsourcing may vary with the type of activity being outsourced but still it seems reasonable to hypothesize that “cost reduction” would be the prime incentive where ancillary services are to be contracted out.

Procurement Outsourcing & UTC
In 2003, Procurement – or what many call “spend management” at UTC was more than $14.5 billion perhaps making it the richest vein of opportunity. Companies first Senior VP – Supply Chain Management Kent Brittan, envisioned of common sourcing processes across all business units. Organization negotiated contracts for indirect supplies and services, but unfortunately in absence of a centralized control system these contracts weakened their impact by making it impossible to restrain individualist purchasing. For consolidating its sourcing process UTC was required to rebuild them from scratch and reshape the entrenched culture that was evolved within each unit. Seeking more pleasant options, the company began benchmarking the procurement practices and came across IBM Procurement Strategy and decided to externalize procurement. Procurement Outsourcing is a process of transferring the operation of sourcing and spends management to a third-party service provider and aims at enhancement of shareholder value. (Huber & Minahan 2012; IBM 2013; Poisson & Devoe 2003)

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Detailed in Appendix B

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Where to Begin? The last two decades have shown an evolution in outsourcing processes making it strategic from traditional; it is considered traditional if a process not considered “critical” and do not require specific competencies by supplier for an organization are outsourced (Galetto et al 2003). Galetto et al (2003) suggest strategic outsourcing is “when companies outsource everything except those special activities in which they could achieve a unique competitive edge”. Secondly, outsourcing refers to a transitional phase, so when an organization beginning its outsourcing process should start a benchmarking procedure to evaluate the best practice for it specific case (Varadarajan 2009; Galetto et al 2003). The main aim of an organization is to conduct an externalization process that could have an impact on its strategic decisions, economic factors, organization and human resources. As it is a widespread process, it is essential for managers to fully become conscientious about the process implications and steps. This report proposes an outsourcing process model that is developed by integrating three different models to manage the implementation of an outsourcing process. The understanding of this integrated model can help outsourcing managers to be more secure in their daily decisions.

Planning Initiatives

Exploring Strategic Implication

Analyzing Cost and Performance

Transitioning Resources

Negotiating Terms

Selecting Providers

Managing the Relationship

Figure 1: Greaver’s Strategic Outsourcing Model (ASAE n.d.)

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Analysis and Planning

Transfer of the Activity

Outsourcing and Supplier Management

Supplier Selection

Contract Negotiation

Performance Sysyem Construction

End of Contact

Figure 2: Step by Step Outsourcing Model (Duarte et al 2004)

Internal Benchmarking
•Core Comepetence Evaluation •Identification of Processes to be Outsourced •Types of Relationship •Activities Stratification

External Benchmarking
•Outsourcer Slection •Service Level Agreement Efficiency Curves

Outsourcing Management Contract Negotiation
•Temporal Evolution •Management of the Outsourcing Process

Figure 3: The Outsourcing Model (Galetto et al 2003)

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Analysis & Internal Benchmarking

Planning Initiatives

•Core Competence Evaluation •Analyzing Cost & Performance •Activities Stratification •Exploring Strategic Implications

Type of Relationship

External Benchmarking
•Outsourcer Selection

Transitioning Resources

Contract Negotiation

Outsourcing & Supplier Management
•Performance System Construction & Time Evolution

End of Contract

Figure 4: Integrated Model3

What UTC Was Willing To Achieve?
With high degree of decentralization that made replacing UTCs procurement process costly, cost reduction was a clear goal of this initiative. UTC was willing to achieve, primarily a procurement process with greater control and visibility without having to embark on a complex, disruptive and costly investment in its own systems. Subsequently, transformation of it long and manual approval cycle into anything but “hands-free” order processing and automated system. Third aim was for general procurement a system to make corporate deals with strategic suppliers and to drive compliance with corporate contracts. Lastly, increasing its ability to effectively harvest the potential efficiencies and economies of scale that lays within its global operations. (IBM 2013)

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Detailed in Appendix C

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Pro et Contra There are many benefits that can occur from outsourcing. The primary benefits of outsourcing are lower operating costs and better capital reallocation of internal resources towards betterment of core activities (Poisson & Devoe 2003). Outsourcing makes it possible for an organization to limit its focus and efforts towards core business moreover also in pursuit of its medium-/long targets and diversification opportunities (Galetto et al 2003). Typically, businesses can expect to realize the following benefits from an effective outsourcing initiative.

Advantages
Access to World-class Capabilities Better Capital Allocation Cost Infusion4 Diversification Opportunities Elimination of Recruitment Cost Elimination of Training Cost Hedge Future Increase of Raw-material or Inventory Improved Focus on Long-term Targets Improved Focus on Non-core Activities by Supplier Improved Quality & Service Time Increased customer satisfaction Reallocation of Internal Resources to Core Activities Reduced Operating Cost Reduced Risk Staffing Flexibility
(Poisson & Devoe 2003; Balls 2006; Narayanan 2010; Landgraf 2011; Galetto et al 2003; Kirker 2006; Hanson & Olson 2005; Burkholder 2006

A Deloitte Survey (cited in Esperne 2009) revealed that a three-fourth of respondents felt that their contracts suffered from “poor vendor selection and lack of service levels”. Another twothird had at least once terminated its contract and moved it to another outsource, and almost another two-thirds mentioned that problems were escalated to senior management within the first year of contract (Esperne 2009). It is alluring to presume that externalization will lower costs, and reduce work load of an organization. Ironically, that is not the case to be because very often the reverse can be true. According to Balls (2006) “why should it cost less to buy in a service from an independent vendor who is in business to make a profit?” In support an International Association of Outsourcing Professional Survey 2006 reported that only eleven percent participants agreed that their outsourcing deals generated value (Esperne 2009).
4

Detailed in Appendix D

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The issues after outsourcing have stemmed from a lot of causes, partly determined by why outsourcing was chosen, and partly determined by how it was put into effect; because if organizations have failed to solve a problem themselves and as a solution transferred it to outsourcer, they5 have tended it to find that it has remained difficult (Reilly & Tamkin 1996). The following table lists however doesn’t limit to most of the consequences of inadequate or faulty decision making or poor contract preparation.

Disadvantages
Supplier Product Quality Failure Regulatory Compliance Outsourcing a Wrong Function Contractual Difficulties Time Spent in Monitoring Contract Performance Service Difficulties Loss of Expertise to Manage Contractors Problems with User Group Employee Difficulties Unexpected Costs Inability of Managers to Adjust Poor Communication Between the Parties Putting Part of your Company in Someone Else’s Hand (Landgraf 2011; Burkholder 2006 ; Reilly & Tamkin 1996

UTC – Outsourcing Results
Procurement Externalization resulted in complete automation of UTC’s 80% procurement transaction that improved its workflow efficiency and transaction quality. Since its productive buyers were now more focused on strategic sourcing issues rather than on solving problems UTC was able to save in excess of $250 million from its total indirect procurement transformation program. With decrease in share of off-contract purchases and increased ability of efficiently capturing volume-based discounts and rebate, IBM facilitated lowered overall procurement costs. Another great advantage was achieved from real-time control over purchasing that raised accountability and discouraged unnecessary spending and lowered supply inventory stocks across the company. Last but not least, procuring Procurement as a service from IBM enabled UTC to avoid the cost and effort of implementing its own new systems and processes. With a solid track behind record of savings behind it, Kent Brittan said – “the biggest savings inherent in this system were the things that never get bought and forced people to consider and justify their expenditures much more closely”. (IBM 2013)
5

both outsourcer & outsourced

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Conclusion
As organizations question whether to perform an activity within the boundaries of its firm or outside, the review illustrates that there are reasons to believe that outsourcing is a magical-wand to certain problems. Since, outsourcing from a small activity has turned into aggressive business phenomena reviews have been made in favor of outsourcing. Although researchers have always expressed their concern about how organizations are using practices and then why they should outsource. Outsourcing as a growing business model is all about strategically transferring an activity to an expert and in doing so organizations must calculate risk involved. Lonsdale & Cox (2000) suggests no business decision is risk free; indeed outsourcing on some occasions is the riskier course of action. This study reveals that outsourcing an activity is only fruitful when done efficiently, which not only involves choosing right partner and building strong vendor-client relationship. However, deciding a correct activity and differentiating between core non-core functions is quintessential and forms the base of an effective outsourcing project.

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Appendix A
History & Evolution
Period/Year
Eighteenth Century

Description

Outsourcing history dates back to as far as the Industrial Revolution when companies browbeaten their competencies to boost their markets and their profits, although it was not fully recognized as business strategy until late 80’s. Nineteenth In the Nineteenth century railway companies relied on steel manufacturers, Century component manufacturers and tool makers to construct locomotives. Twentieth The twentieth century saw the emergence of the model of large-integrated and Century global corporations that “own, manage, and directly control” its assets with complex and multi-layered management structures and reintroduced the definition of a successful firm based on its ability to perform these functions. 1950 - 1960 To broaden corporate bases and take advantage of economies of scale, the World economy witnessed the emergence of diversification as a popular strategy. However, the rallying cry was to protect profit; businesses took expansion irrespective of the fact that it required multiple layers of management. 1970 - 1980 Globalization gave rise to the never-ending war of global competition. At the same time businesses discovered themselves incapable as they lacked agility to compete because diversification had overstuffed their management structures leaving them handicapped to adapt flexibility. To win over this detrimental development, many organizations developed a new strategy of shifting their focus on their core business processes and externalized their low value added value chain activities. 1990 – Till Date It was in 1989 when Outsourcing was formally identified as a business strategy and the following decade global economy saw the rise of Outsourcing. Managers realized the value of handing-off noncore activities as they focused on cost-saving measures to increase revenue. The trend toward using outsourcing as part of an effective business strategy continues to the present. (The Outsourcing 2013; Handfield 2006; Narayanan 2010; Varadarajan 2009; Lonsdale & Cox 2000)

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Appendix B
Reasons For Outsourcing
Reasons Description
Acceleration of Reengineering aims at improvement of performance measures like cost, quality, service, and speed for increasing efficiency however which usually conflicts with the need to invest Reengineering in the core business. Ironically, then noncore functions are neglected making system less Benefits efficient. By outsourcing noncore activities to competent vendors, companies can exploit the benefits of reengineering.

Access to World- Competent vendors make extensive investment in technologies, methodologies, Class Capabilities and people. They gain expertise by working with many clients facing similar challenges. This blend of specialization and expertise gives clients a competitive advantage and help them avoid the cost of chasing technology and training. Every organization has limits on the resources available to it. Outsourcing permits an Freeing Up organization to redirect its resources, most often people resources, from noncore Resources for activities towards activities that serve the company. The organization can redirect these Other Purposes people or at least the staff slots they represent onto greater value-adding activities. People whose energies are currently focused internally can now be focused externally-on the customer. When a function is viewed as difficult to manage or out of control, outsourcing is certainly one option for addressing this problem. However, It is critical to remember that the organization must examine the underlying causes. If the requirements, expectations, or needed resources are not clearly understood, then outsourcing won’t improve the situation; it may in fact exacerbate it. If the organization doesn’t understand its own requirements, it won’t be able to communicate them to an outside provider.

Function Difficult to Manage

Improved Company Focus

Outsourcing lets a company focus on its core business by having operational functions assumed by an outside expert. Freed from devoting energy to areas that are not in its expertise, the company can focus its resources on meeting its customer needs. Making Capital By outsourcing the need to invest capital funds in noncore functions is eliminated. funds Available Because, the acquisition of noncore resources are not made through capital expenditures. The need to show return on equity from capital investments made in noncore activities is eliminated. Reducing Business activities incur vast expenses, all of which are passed on to the customer. Operating Cost A vendor’s lower cost structure, which may be the result of a greater economy of scale or other advantage based on specialization, reduces a company’s operating costs and increases its competitive advantage. Sharing Risk Risks are associated with the investments. Investments like market, competition, technology, and especially people all may change extremely quickly. Vendors make investment on behalf of many clients not just one. So shared investment spreads and reduces risk. Resources Not The quick and easy solution to it is Outsourcing. It builds the desired capabilities Available required by an organization. Internally (Burkholder 2006; Kirker 2006; Balls 2006; Teems 2003; Handfield 2006; Narayanan 2010; Galetto et al 2003; Reilly & Tamkin 1996) Victoria University | Saurabh Babbar

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Appendix C
Integrated Model
Steps
Planning Initiatives/Program Initiation

Description
The most difficult and most important step of any outsourcing process is to identify the purpose behind externalization. Organizations must begin with establishing “cross-functional teams” to plan and discuss variety of ideas and opinions about the purpose and scope of outsourcing. This team will control the outsourcing process during the initial phase. Also it is at in this phase that organization must share the outsourcing information with employees to boost their moral.

Analysis & Internal Benchmarking

1. Core Competence Evaluation

2. Exploring Strategic Implications 3. Analyzing Cost & Performance

4. Activities Stratification

Type of Relationship

External Benchmarking

1. Outsourcer Selection

An organizational change implies setting up of distinguishing activities in comparison with competitors. In doing so outsourcing may bring opportunities as well as risks to an outsourcer; so a detailed and cautious analysis is crucial. By internal benchmarking team must identify core and non-core activities. Also known as individualization of activities to be outsourced, it is facilitated by considering and comparing the efficiency of different activities. At this step organization analyze its “vision of the future; current and future structure; current and future competencies”, using outsourcing as a strategic tool. Once current and future analysis of an organizations core and noncore activities is done, next step is to take into account every individual cost required to support each activity. Reason, for every activity a “make or buy” decision is made and these decisions are based on both monetary and performance factors. Where monetary is related cost, performance factors are related to the improvement of activity’s performance and its consequences. Based on the “strength” of an activity to be “strategic” than the other, an ordering of activities is very critical for the activation of outsourcing process. Organization can create a concentric stratification of the activities to be outsourced thus progress accordingly within these layers. Different type of relationship can be considered between “outsourced” and “outsourcer” based on the criteria of “Specificity” and “complexity” of process. Usually relationships are described as “traditional vendor; temporary relationship; strategic union; and network organization”. It is a tool monitor the service level offered and to define competitors relative positioning in the market. Its main aim is supplier selection therefore a criterion for supplier selection must be developed and should cover the reason why the activity is being outsourced, the expected benefits and potential dangers. Finding potential vendors can be achieved through references, advertisements, and RFIs. Organization can choose to cooperate Victoria University | Saurabh Babbar

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Contract Negotiation

with a single vendor, multiple vendors, or integrated suppliers. Once RFP process is completed, potential suppliers are identified and an initial assessment of their ability is made. Successful vendors are invited to present a proposal for the outsourcing. Proposal evaluation results in discussions and further leads to supplier’s final formal proposal presentation. Finally, the vendor is selected by the outsourced. This phase is the formalization of the relationship between both the parties. It is very clear and important phase of the process; it is in this phase that the rules of the outsourcing are set. The creation of an excellent, well-documented understanding at this point can substantially contribute to the success of the relationship.
This phase is the reassignment of control of the outsourced activity from the outsourcer to the contactor. Externalization is a transitional activity and therefore introduces new situations with in a traditional company operation. Now “outsourced” has an external organization performing significant task and therefore it has to establish a basis to properly integrate the supplier into its own processes. Both parties should define their expectations and work together; however general issues during this phase may include cultural differences, relationship between employees at all level, and other human resource issues especially as job losses.

Transitioning Resources

Outsourcing & Supplier Management

Once the outsourced process is already running, during this mature phase vendor is responsible for the activity and its performance. As an “outsourced” has to change its normal management to more strategic management. It also defines the strategy and objectives of the outsourcing that a vendor is expected to achieve. In doing so the client’s new management role is to monitor and manage the supplier and its performance.
For managing the time evaluation of an outsourcing process it is compulsory to fix performance levels. Tools used by client should be defined in the contract. The reports presented by suppliers are measured against the performance and results are evaluated by managers periodically. If tolerated gaps are exceeded, the client analyzes the reaons and provides corrective actions. Possible reasons could be wrong definitions of standards, or incorrect activities arrangement in progressive layers. If none of the causes is the reason for the exceeded gaps, client must reconsider his strategy and think about re-inshoring/backsourcing the process within the organization.

1. Performance System Construction & Time Evolution

End of Contract

At the completion of a contract client has three options: to renegotiate with same vendor, switch to another supplier or to backsource the function. An organization may adapt to a combination of all three. Last one leads to termination of the contract in cases if irrevocable decisions have been made. In such cases staff and companies accept the new situation and move with it. However, a lot of information will be generated during the life of the program, and retained by staff for future.

(ASAE n.d.; Galetto et al 2003; Duarte et al 2004)

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Appendix D
Advantage
Reason
Cash Infusion

Description
Outsourcing often involves the transfer of assets from the company to the provider. Equipment, facilities, vehicles, and licenses used in the current operations have value and are sold to the vendor. The vendor then uses these assets to provide services back to the client. Depending on the value of the assets involved, this sale may result in a significant cash payment to the company.

(Burkholder 2006)

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References
1. ASAE n.d., The process of outsourcing, American Society of Association Executives: The Center for Association Leadership, viewed on 09 August, 2013, . 2. Balls, A 2006, ‘The pros and cons of outsourcing’, NZ Business, vol. 20, no. 6, pp. 64. 3. Barrar, Y & Gervais, R 2006, Global outsourcing strategies: an international reference on effective outsourcing relationships, Ashgate Publishing, Aldershot. 4. Boulaksil, Y 2009, Planning of outsourced operations in pharmaceutical supply chain, Beta Research School for Operations Management and Logistics. 5. Burkholder, NC 2006, Outsourcing: the definitive view, applications, and implication, John Wiley & Sons, Inc., New Jersey. 6. Duarte, GM, Sackett, P & Evans, S 2004, ‘Step by step: breaking outsourcing down into manageable phases’, Engineering Management, vol. 14, no. 6, pp. 28-30. 7. Esperne, E 2009, ‘Outsourcing the real question is not “why?” but “how?”’, Contract Management, vol. 49, no. 6, pp. 46-61. 8. Galetto, F, Pignatelli, A & Varetto, M 2003, ‘Outsourcing: guidelines for a structured approach’ Benchmarking: an International Journal, vol. 10, no. 3, pp. 246-260. 9. Handfield, R 2006, ‘A brief history of outsourcing’, The Supply Chain Resource Cooperative – North Carolina State university, viewed 09 August 2013, . 10. Hanson, D & Olson, E 2005, ‘High performance via procurement outsourcing’, Electric Light and Power, vol. 83, no. 1, pp. 18. 11. Hurber, B & Minahan, T 2012, Procurement outsourcing not an all or nothing value proposition(white paper) ,Technology Partners International, Inc., viewed 09 August 2013, . 12. IBM 2013, United Technologies: outsourcing procurement yields high efficiency and tight spending control, IBM Corporation, viewed on 15 August, 2013, . 13. Kirker, T 2006, ‘Outsourcing benefits’, The Centralian Advocate, 10 October, viewed on 09 August, 2013, 14. Landgraf, T 2011, Procurement outsourcing: a cost reduction solution for U.S. companies

(whitepaper), Above the Standard Procurement Group, viewed on 09 August, 2013, .
15. Leavy, B 2001, ‘Supply Strategy – what to outsource and where’, Irish Marketing Review, vol. 14, no. 2, pp. 46. 16. Lonsdale, C & Cox, A 2000, ‘The historical development of outsourcing: the latest fad?’, Industrial Data System, vol. 100, no. 9, pp. 444-450. 17. Narayanan, L 2010, ‘Brief history of outsourcing’, Credit Today, viewed on 09 August 2013, . Victoria University | Saurabh Babbar

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18. Parry, G, Moore, MJ & Graves, A 2006, ‘Outsourcing engineering commodity procurement’, Supply Chain Management: An International Journal, vol. 11, no. 5, pp. 436-443. 19. Poisson, J & Devoe, S 2003, ‘Procurement outsourcing delivers value’, Pulp & Paper, vol. 77, no. 4, pp. 64. 20. Reilly, P & Tamkin, P 1996, Outsourcing: a flexible option for the future?, The Institute for Employment Studies, Brighton, The UK. 21. Teems, Y 2003, ‘Outsourcing offers some pros, along with a few cons’, Business Insurance, vol. 37, no. 30, pp. T13. 22. The Outsourcing 2013, In the beginning- a quick history of outsourcing, The Outsourcing-Guide, viewed on 09 August 2013, . 23. UTC 2013, United Technology, viewed on 15 August, 2013, . 24. Varadarajan, R 2009, ‘Outsourcing: think more expansively’, Journal of Business Research, vol. 62, no. 11, pp. 1165-1172. 25. WNS 2013, Tenets of outsourcing, Dictionary, WNS (Holdings) Ltd., viewed on 09 August 2013, .

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...Outsourcing: The Government, the People and the Companies Jeffrey W. Coleman Webster University Abstract Making a decision about whether or not to move these activities offshore is a decision of far-reaching consequences. Developing countries have been unable to radically alter their industrial structure due to numerous internal institutional and external technological barriers. Consequently, they have sought global participation through outsourcing activities. This is indeed a break from the traditional self-reliant way of doing business. Outsourcing arrangements are technologically and organizationally complex, and present a variety of challenges to manage effectively. Outsourcing benefits include cost savings, quality improvement, and the ability of the organization to concentrate time and resources on its core business. Outsourcing trends change from year to year, and usually involve changes such as progressive outsourcing, cloud sourcing, mergers between organizations from different parts of the world and protectionism. In this paper we will look at a few of these areas such as the how in recent years the business practice of outsourcing jobs has been considered both a blessing for American business and a concern for the American worker, the amount of outsourcing being done and why, the affect on the economy in the United States, and the role government plays in outsourcing. The paper concludes, however, that the trend is just beginning and how our country...

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Outsourcing

...Outsourcing – A Global Challenge MBA-700 International Economics Abstract The choice to outsource is a major strategic decision not made lightly by companies in today’s global marketplace. Though it brings probable results of cost reduction, loss of control in your product or the quality of service rendered makes this a decision that should not be taken lightly. Though a concept decades old, outsourcing is a topic that brings out fervor in individuals fighting for or against it. It’s a debate centered on moral, economical, and political aspects, with feelings that intensify during economic downturns because of the This paper will discuss theories of outsourcing, while comparing and contrasting the disadvantages and advantages (SWOT Analysis – see Appendix 1) of a concept that is growing in global business. The paper will conclude, most importantly, with discussions on three outsourcing alternatives and their potential to re-invent the status quo. Introduction The advent of globalization has proven that outsourcing is not a hypothetical situation; it is a major strategic business decision growing in popularity that our American workforce must now face in the decline of our U.S. economy. Some believe that outsourcing has become a serious issue not only for our workforce, but also in our major corporations, and the political arena. Issues such as the security of our nation have become debate topics, with critics arguing that outsourcing has weakened national......

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...Emerging Trends: Outsourcing Outsourcing or subcontracting is a process where employers handover routine or peripheral work to outside organizations that specialize and execute functions more efficiently. Outsourcing has advantages and disadvantages. Outsourcing nonessential functions can be cost effective and improve the quality of services. Outsourcing agreements create long-term relationships through contracts between employers and subcontractors by flexible renewable contracts. When companies outsource, they send a small number of permanent employees to oversee a shifting workforce of possible employees. The trend of outsourcing human resources functions such as payroll, training, and recruiting are more common. Human resource outsourcing is an $80 billion industry with a projected growth rate of 33percent. Although outsourcing payroll activities is efficient, there are some downsides to outsourcing human resource functions of training and performance evaluations. Outsourcing Advantages Outsourcing companies provide a better-quality of people who are on the up and up with current human resource practices that pertain to specific human resource tasks and activities. The core mission of outsourcing firms is to specialize in a particular function while providing exceptional services and increasing efficiency. For example, a firm specializing in training employees to use work processing software is likely to train employees when new software upgrades are launched......

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...Benefits of Outsourcing Outsourcing is understood by many to be a means for an organization to decrease its employee payroll while increasing its production. While this may be true there are a number of other advantages of outsourcing. Outsourcing can also streamline processes, allow for greater team and individual performance, and aid in cutting the costs of products which could lead to raise increases for employees. According to Bucki (2011) there are seven top outsourcing advantages: 1. Focus on Core Activities – outsourcing activities which consume resources (human and financial) will allow refocusing on those business activities that are important without sacrificing quality or service. 2. Cost and Efficiency Savings – the size of the company (i.e. number of employees) is preventing the organization from performing at a consistent and reasonable cost. 3. Reduced Overhead – consider outsourcing those functions which can be easily moved. 4. Operational Control – operations whose costs are running out of control or departments who over time have evolved into uncontrolled and poorly managed areas are prime motivators for outsourcing. It would aid in bringing better management skills to the company. 5. Staffing Flexibility – outsourcing will allow operations that have seasonal or cyclical demands to bring in additional resources when you need them and release them when you’re done. 6. Continuity & Risk Management – periods of high employee...

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...Outsourcing refers to a company which contracts with another company in order to provide services that might otherwise be performed by its own employees. These jobs are handled by separate companies that specialize in each service. Often, these outsourced employees may be located overseas. To know whether outsourcing is appropriate in a given circumstance, it is important to understand several key concepts. Many professors and experts in the business world have conducted case studies and general research to understand the implications of outsourcing, both positive and negative, and the environment which provides the greatest chances for a successful outsourcing venture. The framework within which a firm must decide whether to outsource or not will often involve a two-stage decision process. First, the business must make its decision and secondly, it must take managerial action to implement the decision. To begin with, a company must identify why outsourcing can be useful in an ideal situation and then evaluate whether their circumstances fit these conditions. Essentially, outsourcing can ideally benefit a company from a financial perspective since the outsourced work can be cheaper in and of itself and secondly because it allows the company to focus on other, perhaps more pressing issues. As important as it is that the company can identify appropriate conditions it is equally necessary to be aware of circumstances which will not provide an appropriate environment to......

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...Outsourcing Running a business requires many decisions to be made, one decision is whether a company should perform work internally or outsource job duties. Outsourcing is the technique used by companies to reduce cost by transferring portions of work to third party suppliers as opposed to performing the job internally. Outsourcing can be very beneficial in reducing cost, but there are also issues that surround outsourcing in general. In order to understand the benefits of outsourcing, one needs to fully comprehend the issues involved with outsourcing, the benefits that a company may experience from outsourcing, how to truly determine whether outsourcing a specific job is necessary or beneficial, and how outsourcing is relevant in today’s workplace. First, it is important to understand what outsourcing is. According to Robert Handfield (2006), outsourcing, which became a formally indentified business strategy in 1989, can be defined as “the strategic use of outside resources to perform activities traditionally handled by internal staff and resources” (para. 5). Outsourcing, sometimes referred to as facilities management, is the strategy that involves an organization to contract out certain aspects of a business to both specialized and efficient service providers. Handfield (2006 points out that subcontracting and outsourcing, although similar in nature, are different because outsourcing “involves substantial restructuring of particular business activities including, often,...

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...Outsourcing is affecting the U.S. economy greatly. Outsourcing is taking away jobs from the American people causing a rise in the unemployment rates. Not only is outsourcing taking away jobs, but it is making it harder to find new jobs. Outsourcing is where an American company will send certain jobs or duties to be done in another country. Outsourcing is also the transfer of the management, and also the day by day execution of an entire business function to an external service provider. It is a company’s practice of paying an employee in a small developing country to perform a function or produce a product that could be made by the paying company. Business jobs that are typically outsourced include information technology, human resources, facilities and real estate management, accounting, Customer support and call center functions, like telemarketing, customer services, market research, manufacturing and engineering. Outsourcing has become one of the fastest growing trends in the business world. There are many reasons that a company would elect to use outsourcing. Among them is the fact that it provides an almost immediate opportunity for savings as well as a noted improvement in quality. The main reason why American companies are doing this is to save money. It’s cheaper to have someone form a developing country do the job because a dollar goes a lot further than in the states. One management problem that is causing outsourcing is that companies are looking for ways to......

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...TLMT441: Advanced Business Logistics Outsourcing Professor: Stacey Little April 28, 2013 What is outsourcing? Outsourcing is “contracting with another company or person to do a particular function”. It is the act of one company performing the job with another to provides the services which might have otherwise been performed in house by their own employees. HISTORY The history of outsourcing goes way back “ever since people have been performing tasks for employers”, some duties performed off site, according to Jodee Redmond. Outsourcing could be considered started by people in villages when they wasn’t able to produce all the necessary items that they needed to survive in order to get the necessary items they traded and this became the early form of outsourcing. The Industrial Revolution began the way companies did business. A lot of company owners started to outsource some of their services to other companies instead of keeping them in house. Usually when a company outsources their work, they outsource it to a company that is in that same city. BENEFITS OF OUTSOURCING There are many reasons that companies outsource their work to other companies to perform, but the most prominent reason seems to be that tit saves money. Companies that provide the outsourcing have the ability to do the work for a considerably less cost especially if they don’t have to worry about benefits for the workers. The second reason that companies outsource is that it allow the company to...

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Outsourcing

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...Introduction Before any company starts outsourcing any part of a company it should be investigated and analyzed thoroughly in order to achieve maximum success. The decision to outsource a part of a company should not be taken lightly but rather seriously. There are many advantages to outsourcing, however, with that some disadvantages come in as well. The following information in regards to advantages and disadvantages was taken out of articles about IT offshore outsourcing. Advantages There are many good reasons to consider outsourcing. Some are listed below. Cheaper Labor – workers in developing countries are paid less Cut Operating Costs – the outsourced work has to be paid for, but this payment is also cheaper than having your company performed the operation itself. Lower Labor Training Costs – training new employees is expensive. Each employee might need one to three weeks of training and that is expensive. When the customer service or IT department is outsourced the training is cheaper. Increase Productivity – Your Company can have employees working on site 24 hours a day. It becomes harder to attract talented employees to work less desirable shifts, however with outsourcing your company can provide service 24 hours a day, with workers around the globe operating in the best shifts available. Focus on Core Business – the outsourcing of the IT department can leave some space for other important departments within the organization. Disadvantages As discussed above...

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Outsourcing

...Outsourcing Information Technology services is when a company hires the services of another company and/or individual to perform the work that would have been performed by that company’s employee or employees. The usual information technology services companies outsource are website design and maintenance, help desk services, and application development and software maintenance. Outsourcing is done to save the company money, improve quality, share knowledge, and the flexibility of utilizing the company’s resources for other activities. With how much technology and software has improved throughout the years with the help of information technology, things that were once done manually are now done by operating systems. With these information technology systems companies are able to receive up to date information constantly throughout the day, in turn this keeps the companies running more efficient. Outsourcing information technology services allows companies to customize products and services based on the company’s requirement, access to the latest technology and updates, less risk of errors and higher quality services. Outsourcing information technology services has a few advantages such as: 1) Cost effective - Information technology outsourcing can cost the companies less than what it would cost them if they were to do all the work on their own time and effort. Information technology systems help a company be aware of everything going on minute by minute, which in......

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