Strategic Outsourcing: The Alchemy to Business Transformation in a Globally Converged World

252 Pages·2012·2.37 MB·English

by  Bharat Vagadia (auth.)

Management for Professionals
Forfurther volumes:
http://www.springer.com/series/10101
.
Bharat Vagadia
Strategic Outsourcing
The Alchemy
to Business Transformation
in a Globally Converged World
Dr.BharatVagadia
BramptonGrove53
HA38LELondon
UnitedKingdom
[email protected]
ISBN978-3-642-22208-5 e-ISBN978-3-642-22209-2
DOI10.1007/978-3-642-22209-2
SpringerHeidelbergDordrechtLondonNewYork
LibraryofCongressControlNumber:2011938156
# Springer-VerlagBerlinHeidelberg2012
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SpringerispartofSpringerScience+BusinessMedia(www.springer.com)
I dedicate this book to my late father and
grandfather; Khimji Karsan Vagadia
and Karsan Parbat Vagadia for showing
me the light
.
Preface
This book is for business leaders and managers from both the user and vendor
communities who make or implement strategic sourcing decisions. If you lead
outsourcing programmes or teams working on outsourcing, or seek to change a
functionorprocessthroughtheuseofoutsourcing,havethepowerandauthorityto
make decisions, or just feel strongly about the direction of your organisation or
outsourcingprogramme,thisbookisforyou.
This book bridges academic research and draws on practitioner experience to
provide a detailed understanding of how an organisation’s value chain can be re-
configuredinordertocreateamoreeffectiveorganisationusingstrategicoutsourcing.
Globalisation and in particular convergence are forces affecting most organisa-
tions and requires a strategic response by organisations in developed countries. To
meetthesechallenges,businessleadershaveturnedtooutsourcingandoffshoringas
atooltotransformtheirorganisationalstructures.
However, strategic outsourcing and offshoring represent significant changes to
businessmodels,andhaveledtosuccessandfailureformanyorganisations.
This book provides a roadmap to successful implementation of strategic out-
sourcingprogrammes,providingdowntoearthapproachestooutsourcingdecision
makingandimplementation,basedonagrassrootsunderstanding.
Outsourcingisnotnew;manyorganisationshaveusedoutsourcingsuccessfully
to bring about cost reduction, introduce flexibility or access specialist resources.
However, not many have managed to use outsourcing in a strategic context. The
bookexamineshowstrategicoutsourcingcanhelptransformorganisationalbusiness
models,structuresandmindsets.
Outsourcingcanbeaveryriskystrategy,ifnotmanagedadequately.Historically
the success rate has not been encouraging, with only 40–60% of initiatives being
deemed successful. Failure of the outsourcing programme not only affects those
processes or functions being transitioned, but also those interdependent elements,
touchedbyorassociatedwithsuchactivities.Thefailureofsuchaprogrammecan
have longer term consequences for the competitive advantage of the firm and its
reputationinthemarket.
vii
viii Preface
Managing these risks, whilst ensuring the rewards sought from outsourcing are
delivered, requires a combination of strong legal contracts and a relationship with
theserviceproviderbasedonhighlevelsoftrust.Italsorequirestheorganisationto
thoroughly understand its own capabilities to manage outsourcing and the impact
thismayhaveonitslongertermstrategy.
Thisbooktakesthereaderonajourneythroughits15chapters:fromunderstand-
ing the drivers for change as a result of globalisation and convergence and their
impactonorganisationalstrategies;toexamininghowoutsourcingcantransformthe
various processes and functions of an organisation; to the impact outsourcing is
havingonvariousindustryverticalsectors.
The book then examines the role of the three “R’s” – Risks, Rewards and
Relationships, in understanding the scope for the use of, and management of
strategicoutsourcing.
Awholechapteristhenfocusedontheoutsourcingdecisionmakingprocess,for
this is the most important management activity in developing and subsequently
managing a programme which delivers. Having understood the decision making
process for strategic outsourcing, the focus turns to transition management
and governance, and how, what is the most difficult phase of an outsourcing
programme,canbemanagedsmoothly.
Atthispoint,insightsdrawnfromacademicresearchareprovidedtocomplement
thepractitionerexperience.Throughtheseinsights,thebookproceedstoexplainhow
risks can be minimised through a combination of formal controls and informal
relational exchanges. The whole concept of relational governance is explored in
detailwithtwocasestudiesprovidinginsightsintotheclientandvendorperspective.
Achapterisdedicatedtothereviewofoffshoredestinations,detailingcriteriafor
theevaluationofdestinationsandanalysingtherelativemeritsofoutsourcingwithin
morethan35countriesacrossAsia,Americas,EuropeandMENA.
The issue of managing culture, especially when dealing with offshore destina-
tionsisthenconsidered,with insightsintohowculturaldifferencesmanifestthem-
selveswithintherelationshipandhowthesecanbemanaged.
The concluding chapter details the eights foundations of successful strategic
outsourcingimplementation,whichwhencombinedwithstrategicdecisionmaking
knowledge, guarantees that organisations embarking on the strategic outsourcing
journeywillderivethetransformationalbenefitstheyseek.
Eachchapterincludesanabstractatthebeginningandatake-awayattheendof
thechapter,whichserveasusefulreferencechecklistsforpractitioners.
Iwantyoutostopthinkingofoutsourcingasatacticaltool,butrecognisethatitis
a business system that will be increasinglyimportantinthe future, intransforming
the organisational monoliths that we see today into the agile market leaders of the
future. Strategic outsourcing will become an indispensable business model for
progressivebusinessleaders.Thisbookwillshowyouwhyandhow.
Contents
1 RoleofStrategicSourcinginaChangingWorld ....................... 1
1.1 EconomicDrivers ...................................................... 1
1.1.1 ChallengingTimesLeadingtoChangingBusiness
ModelsandPractice ............................................. 2
1.1.2 ContraryForcesatWork ........................................ 2
1.1.3 AllEyesonCost ................................................ 2
1.1.4 AllAboard ...................................................... 3
1.1.5 MixedFortunesfortheOutsourcingIndustry .................. 4
1.1.6 ChangingCommercialModels ................................. 5
1.1.7 GettingitRight ................................................. 5
1.2 TakeAways ............................................................ 6
2 GlobalisationandConvergence:Drivers
andStrategicOutsourcing ................................................ 7
2.1 Introduction ............................................................ 7
2.2 ConvergentWorld ...................................................... 8
2.3 RaisingBarrierstoGlobalisationandConvergence .................. 10
2.4 AdaptingBusinessestoCompeteonaGlobalLevel ................. 11
2.5 ACaseinPoint:TheRiseofIndia ................................... 16
2.6 TakeAways ........................................................... 19
3 SocialandPhilosophicalConsiderationsofOutsourcing ............. 21
3.1 Introduction ........................................................... 21
3.2 EconomicConsequences .............................................. 22
3.3 SocialConsequences .................................................. 23
3.4 SeparatingtheSpinfromReality ..................................... 24
3.5 PolicyImplications .................................................... 24
3.6 TakeAways ........................................................... 25
References ................................................................. 25
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