06
Sun, Oct
2 New Articles

Is Strategic Outsourcing in Your Future?

Commentary
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

It is believed that over 19% of U.S. businesses now have some offshore outsourcing strategy, but within the Fortune 1000, it is a whopping 95%! Global outsourcing providers such as Accenture, CSC, EDS, HP, and IBM are obviously taking a major chunk of this business, but they are coming under pressure from the smaller players. Their percentage of the pie is reducing. However, large outsourcing dealssuch as the recent General Motors deal for over $7 billion go to the global giants named above. Nearly $100 billion of major commercial outsourcing agreements are coming up for renewal in 2006 and 2007.

Global sourcingthe use of workforce from anywhere in the world outside of the U.S. was once a strategy only of the IT sector. Today, outsourcing is not restricted only to IT and non-core activities anymore. It is expanding into business processes and core activities like design, R&D, and intellectual property (IP) creation. The key to survival is to adapt to it. As with any significant change, this evolution will abound with both challenges and opportunities for the organizations and their work force.

What should businesses do?

Organizations must focus intently on their core businesswhether that business is manufacturing, software development, banking, or financeand on marketing and developing customer-centric solutions for that business. For companies to effectively adopt global sourcing, they must identify the areas of their business that global resources can perform and then focus internal resources on the areas that elicit the highest value.

Organizations are turning to external suppliers for outsourcing everything from payroll processing to facilities management. The goal is better quality at lower costs, but too often the outsourcing results are disappointing to dismalsimply because many buyers lack a clear outsourcing methodology.

Using the outsourcing concepts listed below, managers responsible for outsourcing will learn to avoid typical pitfalls and ensure success.

  • Plan and initiate outsourcingUse best practices for evaluating and selecting a service provider and for negotiating and renegotiating service contracts.
  • Manage existing outsourcingUse governance and organizational models for managing outsourcing. Create business-value service-level agreements (SLAs).
  • Manage financial/cost aspects of outsourcingUse known sourcing strategies, select the right vendor, and address sourcing-related HR issues.
  • Manage the four phases of the sourcing cycleBe diligent about managing the sourcing cycle phases: sourcing strategy, evaluation and selection, contract development, and sourcing management.

Benefits

There are some good reasons for an organization to choose outsourcing. The key elements of the benefits are to enhance effectiveness by focusing on what you do best, to increase flexibility to meet changing business needs, and to improve operating performance. Other potential benefits should also be considered:

  • Obtain skills, technology, or expertise not otherwise available within the organization.
  • Improve risk management and agility.
  • Improve management and control of operations and profitability.
  • Improve credibility internally (within the organization) and externally (with suppliers, partners, customers, shareholders, investors, etc.).
  • Reduce investments in assets.
  • Generate cash for more-efficient operations and management.
  • Accelerate expansion into newer markets, newer technology, and/or product range.
  • Reduce costs and convert to variable costs, thereby improving profitability and shareholder value.

Levels

There are essentially three levels of outsourcing:

  • Individual or project levelOutsourcing of individual activities, such as a project or a management or technical position
  • Functional or program levelOutsourcing certain projects in a program
  • Process or division levelOutsourcing the entire operations of a division

Various factors govern a customer's decision to outsource at a particular level:

  • Critical nature of the workIf the work is critical to a company's core business, the company will prefer to outsource as little as possible and in discrete parts.
  • Faith of the customer in a vendorThe higher the faith a customer has in its vendor, the more it will outsource. In some cases, it will outsource even the operations of an entire division.
  • Cost advantageCost efficiency is an important deciding criterion, with larger work being outsourced if cost savings are large.
  • Proven track record of the vendorA supplier's proven track record inculcates a feeling of trust, thereby inspiring the customer to outsource larger work to the vendor.

Destinations

Many consultants have released a ranking of the world's top outsourcing destinations. The preferred destination for IT, call center, and business process outsourcing is clearly India, with its cost advantage and qualified manpower base. India is followed by China, Malaysia, the Philippines, Singapore, and Thailand. The factors that these rankings are based on include infrastructure, skills availability and retention, access to a qualified pool of people, cost and quality of living, and political support. Other destinations include Central/South America, Ireland, Spain, Australia, and Eastern Europe.

Innovation

A fundamental transformation is happening today in the nature of any business. The importance of innovation cannot be over-emphasized. Innovation has to be creative, continual, and fast. With innovation becoming imperative to the growth of any organization, companies will need to continually innovate their outsourcing strategy and bring in newer models and methods. In fact, some companies are considering outsourcing the "innovation" that is required at their organizations to create competitive advantage and to stay ahead.

That is why outsourcing and innovation have now come together. The concept of outsourcing is increasingly used as a tool to assist innovation through providing information, procedures and business methodologies, new product development, and ongoing services. Outsourcing is the only business strategy available today that helps to inject new ideas, new perspectives, and the flexibility and agility required for success.

Innovate or Die

The real business solution to managing in this highly volatile, innovate-or-die Darwinian world is outsourcing. In an increasingly turbulent business environment, companies are focused on top-line growth, business innovation, and competitive advantageand it is therefore fair to expect their outsourcing partners to help them address the challenges.

Rajan Narayanan is currently a Senior Vice President at MindTree Consulting based at Bangalore, India. He heads the IBM Technology solutions group that focuses on mainframe and iSeries/System i. He is widely traveled and has been involved in offshore projects since 1985. He can be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it..


Rajan Narayanan

Rajan Narayanan is a Senior Vice President at MindTree Consulting. In his current role, he heads the IBM technologies practices at MindTree, which include the Mainframe, System i, and the IBM software brands of WebSphere, Rational, Lotus, Tivoli , and IM. Rajan is an Engineering graduate and is currently pursuing a doctoral program in management. MindTree is a global IT and R&D Services Company co-headquartered in the U.S. and India . MindTree partners with its clients to create a transparent, value-based relationship delivering business-enabling solutions by leveraging a consulting-led, framework-based, and IP-driven approach. Rajan can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

BLOG COMMENTS POWERED BY DISQUS

LATEST COMMENTS

Support MC Press Online

$

Book Reviews

Resource Center

  • SB Profound WC 5536 Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application. You can find Part 1 here. In Part 2 of our free Node.js Webinar Series, Brian May teaches you the different tooling options available for writing code, debugging, and using Git for version control. Brian will briefly discuss the different tools available, and demonstrate his preferred setup for Node development on IBM i or any platform. Attend this webinar to learn:

  • SB Profound WP 5539More than ever, there is a demand for IT to deliver innovation. Your IBM i has been an essential part of your business operations for years. However, your organization may struggle to maintain the current system and implement new projects. The thousands of customers we've worked with and surveyed state that expectations regarding the digital footprint and vision of the company are not aligned with the current IT environment.

  • SB HelpSystems ROBOT Generic IBM announced the E1080 servers using the latest Power10 processor in September 2021. The most powerful processor from IBM to date, Power10 is designed to handle the demands of doing business in today’s high-tech atmosphere, including running cloud applications, supporting big data, and managing AI workloads. But what does Power10 mean for your data center? In this recorded webinar, IBMers Dan Sundt and Dylan Boday join IBM Power Champion Tom Huntington for a discussion on why Power10 technology is the right strategic investment if you run IBM i, AIX, or Linux. In this action-packed hour, Tom will share trends from the IBM i and AIX user communities while Dan and Dylan dive into the tech specs for key hardware, including:

  • Magic MarkTRY the one package that solves all your document design and printing challenges on all your platforms. Produce bar code labels, electronic forms, ad hoc reports, and RFID tags – without programming! MarkMagic is the only document design and print solution that combines report writing, WYSIWYG label and forms design, and conditional printing in one integrated product. Make sure your data survives when catastrophe hits. Request your trial now!  Request Now.

  • SB HelpSystems ROBOT GenericForms of ransomware has been around for over 30 years, and with more and more organizations suffering attacks each year, it continues to endure. What has made ransomware such a durable threat and what is the best way to combat it? In order to prevent ransomware, organizations must first understand how it works.

  • SB HelpSystems ROBOT GenericIT security is a top priority for businesses around the world, but most IBM i pros don’t know where to begin—and most cybersecurity experts don’t know IBM i. In this session, Robin Tatam explores the business impact of lax IBM i security, the top vulnerabilities putting IBM i at risk, and the steps you can take to protect your organization. If you’re looking to avoid unexpected downtime or corrupted data, you don’t want to miss this session.

  • SB HelpSystems ROBOT GenericCan you trust all of your users all of the time? A typical end user receives 16 malicious emails each month, but only 17 percent of these phishing campaigns are reported to IT. Once an attack is underway, most organizations won’t discover the breach until six months later. A staggering amount of damage can occur in that time. Despite these risks, 93 percent of organizations are leaving their IBM i systems vulnerable to cybercrime. In this on-demand webinar, IBM i security experts Robin Tatam and Sandi Moore will reveal:

  • FORTRA Disaster protection is vital to every business. Yet, it often consists of patched together procedures that are prone to error. From automatic backups to data encryption to media management, Robot automates the routine (yet often complex) tasks of iSeries backup and recovery, saving you time and money and making the process safer and more reliable. Automate your backups with the Robot Backup and Recovery Solution. Key features include:

  • FORTRAManaging messages on your IBM i can be more than a full-time job if you have to do it manually. Messages need a response and resources must be monitored—often over multiple systems and across platforms. How can you be sure you won’t miss important system events? Automate your message center with the Robot Message Management Solution. Key features include:

  • FORTRAThe thought of printing, distributing, and storing iSeries reports manually may reduce you to tears. Paper and labor costs associated with report generation can spiral out of control. Mountains of paper threaten to swamp your files. Robot automates report bursting, distribution, bundling, and archiving, and offers secure, selective online report viewing. Manage your reports with the Robot Report Management Solution. Key features include:

  • FORTRAFor over 30 years, Robot has been a leader in systems management for IBM i. With batch job creation and scheduling at its core, the Robot Job Scheduling Solution reduces the opportunity for human error and helps you maintain service levels, automating even the biggest, most complex runbooks. Manage your job schedule with the Robot Job Scheduling Solution. Key features include:

  • LANSA Business users want new applications now. Market and regulatory pressures require faster application updates and delivery into production. Your IBM i developers may be approaching retirement, and you see no sure way to fill their positions with experienced developers. In addition, you may be caught between maintaining your existing applications and the uncertainty of moving to something new.

  • LANSAWhen it comes to creating your business applications, there are hundreds of coding platforms and programming languages to choose from. These options range from very complex traditional programming languages to Low-Code platforms where sometimes no traditional coding experience is needed. Download our whitepaper, The Power of Writing Code in a Low-Code Solution, and:

  • LANSASupply Chain is becoming increasingly complex and unpredictable. From raw materials for manufacturing to food supply chains, the journey from source to production to delivery to consumers is marred with inefficiencies, manual processes, shortages, recalls, counterfeits, and scandals. In this webinar, we discuss how:

  • The MC Resource Centers bring you the widest selection of white papers, trial software, and on-demand webcasts for you to choose from. >> Review the list of White Papers, Trial Software or On-Demand Webcast at the MC Press Resource Center. >> Add the items to yru Cart and complet he checkout process and submit

  • Profound Logic Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application.

  • SB Profound WC 5536Join us for this hour-long webcast that will explore:

  • Fortra IT managers hoping to find new IBM i talent are discovering that the pool of experienced RPG programmers and operators or administrators with intimate knowledge of the operating system and the applications that run on it is small. This begs the question: How will you manage the platform that supports such a big part of your business? This guide offers strategies and software suggestions to help you plan IT staffing and resources and smooth the transition after your AS/400 talent retires. Read on to learn: