SUMMARY OF

MODULE 2: FUNDAMENTALS OF OUTSOURCING

2 TYPES OF OUTSOURCING

1. Third Party
● Owned by a service provider, a local entity or party of a global group.
● Providing services to the clients of a service provider.
2. Shared Service Center (SSC)
● A centralized function for an organization where back-office responsibilities are
managed for different business divisions.
● Provides support division for non-core activities
● These are processes of the business that don’t generate revenue but are
necessary for the company to operate properly

Typical SSC areas:

● Accounting
● Facility management
● Human resources
● Information technology
● Logistics
● Payroll
● Purchasing
● Security

Advantage of implanting SSC

● Cost reduction
● Improve services
● Improve quality
● Improve communication
● Greater flexibility
● Improve productivity
● Free up resources

STRATEGIES FOR OUTSOURCING

1. MULTISOURCING- Multiple vendors for client’s outsourced projects.

2. CROWDSOURCING- Company puts out a call for a project; best solution/submission is

accepted and contracted.
3. ONSHORING- Vendor in the same home country as client.

ADVANTAGES DISADVANTAGES

Allows immediate response: product Risk of inadequately selected, trained,

designers in the same country respond to supervised staff – i.e., less skilled because
market feedback quickly contractor staff are lower paid.

Local contractors have the same market Risk of higher attrition (lower business
knowledge, culture, language, communication acumen/process knowledge) than internal
style; minimize culture issues. staff; less motivation to deliver quality

4. NEARSHORING- The transfer of business to a nearby country, often sharing the same
border.

ADVANTAGES DISADVANTAGES

Free-for-service variability rather than fixed Additional coordination costs, sourcing

compensation costs. management communications

Significant labor cost arbitrage Transfer pricing/tax margin requirements.

5. OFFSHORING- Vendor and client in different countries

ADVANTAGES DISADVANTAGES

Allows company to focus on core business Data privacy/confidentiality issues

Fast ramp-up/down at reasonable cost Lack of business acumen/right market

knowledge in offshore location

Opportunity to expand into new areas cost Cultural differences leading to delays and
effectively miscues
WHAT TO OUTSOURCE?

● Well defined/documented tasks, standard outputs

WHAT NOT TO OUTSOURCE?

● Core Activities-Tasks-Processes
○ Design
○ Product Development
○ Process
○ “Recipe”

1. CORE ACTIVITIES-TASKS-PROCESSES- tasks and processes affect the business as a

whole. It may be the company's sales, image and product that makes the company known.

● Primary process or product of the business

● Tasks that deliver the primary product, the unique value proposition of the
company
● “Essential, defining activities of an organization,” what it needs to keep
enhancing to improve competitive advantage

2. NON-CORE ACTIVITIES- TASKS-PROCESSES- tasks and processes support the internal

processes and functions of a company that indirectly affects the value of the company’s
products and services.

● Support activities, processes, functions

TYPICALLY OUTSOURCED ACTIVITIES

1. BUSINESS PROCESS OUTSOURCING (BPO)- Outsourcing of entire business process

components.

● HR
● Payroll
● Accounting
● Financial, etc.

2. IT OUTSOURCING

● IT Technical Support
● IT Application Development
● IT Application Management
● Data Center Operations
● Software as a Service (SaaS)
● Cloud (On-line Storage) Services
3. SUPPORT FUNCTION/SERVICES

● Cafeterias
● Copy centers
● Security
● Janitorial Services
● Trucking / Shipping
● Building Maintenance

4. ROUTINE ACTIVITIES OR ACTIVITIES THAT CAN BE AUTOMATED AT LAGRER

CENTERS

● Small banks outsourcing check processing to larger banks, riding on ATM base
of multi-bank network
● Small vendors using Amazon.com as a data center, marketing, and payment
processing platform
● Banks using common/multi-bank core banking services of large technology
providers

5. SEASONAL REQUIREMENTS

● One day 50 employees needed; next day only 10 are needed

● Christmas hires to handle additional volume of transactions
● Temporary extension of operating hours to accommodate foot traffic

6. ALL PART-BASED ACTIVITIES

● These are activities that are; routine, scheduled, with little certainty
● Automobile assembly
● Electronics assembly
● Packaging solutions
● Handicraft or garments for mass production
KEY TECHNOLOGIES THAT SUPPORT OUTSOURCING

VIDEO CONFERENCING- Applications that allow people to virtually conduct meetings. It allows
discussion among people as if they were present.

● HP-Halo
● Cisco-Telepresence
● Sun-MPK20
● Project Wonderland

WEB-BASED CONFERENCING AND WORKFLOW TOOLS- These are applications that allow
people to work collaboratively with their teammates. It allows them to share their works and
work together in a single task.

● WebEx
● MS Windows Meeting Space
● MS Sharepoint
● Google Applications

FUNDAMENTALS OF OUTSOURCING

● Business Process Outsourcing Engagements

● Managing Outsourcing Transactions
● BPO Operations Management
● Issue Management and Critical Situation Management Control

GROUP MEMBERS:

Adayon, Lyn Rose

Arellano, Maebell Francis Nicole

Caminian, Mark Ernest

Dalida, John Christian

Ebojo, Abbygail

Garcia, Jian Matthew

Para-onda, Jacqueline

Pascual, Irizhe Shanyl

Tubungbanua, Ken Lee Ann