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Translation Workflow – Make or Buy? Textbook IT Sourcing Strategy for Localization Companies 2005-10-22.

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Presentation on theme: "Translation Workflow – Make or Buy? Textbook IT Sourcing Strategy for Localization Companies 2005-10-22."— Presentation transcript:

1 Translation Workflow – Make or Buy? Textbook IT Sourcing Strategy for Localization Companies

2 Source: ]project-open[, own elaboration, Contents Make or Buy? Examples/ Cases Rumors, Hype, Fashion ROI IT-Dept? Customer Relationship What to do?Why do it? How to do it? IT Provider & Evaluation Internal Efficiency Skills & Resources? Organization al Change Do we really need this? Cases Provider Relationship Which Parts/ Functionality? Make or Buy textbook Strategic or not? Make case Buy case Adapt case Explain & define Workflow BizProcs Workflow Design Resources Eval Matrix Workflow Scoping Whats in for me?

3 Contents "Make" vs. "Buy" Sourcing Options –Sourcing Options Overview –The case for "Pure Make" –The case for "Pure Buy" –The case for "Adaptation" How to Decide –Summary of Decision Factors –Example of Decision Factors Textbook Theory –"Classical" – Value vs. Risk –"Skills" - Skills vs. Strategic Importance –"IT Depts." - Strategic vs. Efficiency –"Integration" - Modular vs. Dependent –"Ford Motor Company" Case Suggestions –"Resource Dependence Theory" Strategic or Not? –What is "Strategic" –IT is not "Strategic" –Translation Workflow Benefits –Translation Workflow Extensions –How to Differentiate? –Sample ERP Architecture –Strategic Modules Summary –"Classical" – Value vs. Risk –"Skills" - Skills vs. Strategic Importance

4 "Make" vs. "Buy" Sourcing Options Sourcing Options Overview The case for "Pure Make" The case for "Pure Buy" The case for "Adaptation"

5 Sourcing Options Overview "Pure Make" (100% in-house) "Make" with external consultants "Make" with subcontracted functions "Make", followed by spin-off "Buy" from provider and customize in-house "Buy" from provider, with financial investment in the provider "Buy" from provider, but "nurture" provider with partnership and long-term contract "Pure Buy" (100% external)... "Pure Make" "Pure Buy" Source: ]project-open[, own elaboration,

6 The Case for "Pure Make" Advantages Tailored solutions for in-house needs Critical knowledge is kept in-house Disadvantages Lack of knowledge of building and maintaining state-of-the-art IT systems. Difficulties of keeping the IT staff busy after the end of the implementation phase Difficulty of retaining good IT staff Customer CEO ITOperations Finance & Admin TestDevelopment Project Mgmt.... Project 1 Project 2 Project 3 Customer Organization... Ownership 100% of the functionality is developed in-house Source: ]project-open[, own elaboration,

7 The Case for "Pure Buy" Advantages "Economies of Scale": Provider can occupy resources with projects from other customers and share development and maintenance costs among customers. Provider may provide additional knowledge, gained from other companies in the sector The customer can profit from continuous development of functionality Disadvantages Provider interests may not fit fully with customer interests (roadmap development, functionality, …) The application software is more complex if it needs to fit more than one customer Customer CEO ITOperations Finance & Admin Provider CEO TestDevelopment Project Mgmt.... Project 1 Project 2 Project 3 Customer Organization Provider Organization... Ownership 100% of "the" functionality is developed by a provider Source: ]project-open[, own elaboration,

8 The Case for "Adaptation" Advantages Critical knowledge is kept in-house In-house staff is able to react rapidly to company's needs Bulk of non-strategic functionality is outsourced with more efficient provider Fits with "Strategic or Not" section (see below) Disadvantages Difficulty to manage the partnership In-house developers need to learn the provider's software architecture Provider CEO TestDevelopment Project Mgmt.... Project 1 Project 2 Project 3 Customer Organization Provider Organization Ownership Buy 90% of the functionality and make 10% extensions Customer CEO ITOperations Finance & Admin Operations Project Mgmt.... Project 1... Ownership Source: ]project-open[, own elaboration,

9 How to Decide Summary of Decision Factors Example of Decision Factors

10 Decision Process Factors: Bla bla bla Cor e Com- modity Anxie ties Satisfa ction Market Test Outsourc e Insour ce Smart Source Decision Factors Theory Recom- mendation

11 Summary Decision Factors The decisions depends on many factors: "Value" or "Impact": How much $$$ is involved in the sourcing decision Relative effectiveness: How efficient is your company in building the goods, compared with a provider? Ease of sourcing: Is it easy for you to find another provider? Relative sourcing position: Is it easier for you to find a provider than for your competition? Strategic or Not: Does the sourcing decision influence the possibility to build/lose sustainable competitive advantage? Integrated or Modular: How tightly are the sourced goods integrated with the company? Product or service 1 Product or service 2 Product or service 3 Product or service 4 Source: ]project-open[, own elaboration,

12 The decisions depends on many factors: Value" or Impact": How much $$$ is involved in the sourcing decision Relative effectiveness: How efficient is you company to build the goods, compared with a provider? Ease of sourcing: Is it easy for you to find another provider? Relative sourcing position: Is it easier for you to find a provider then for your competition? Strategic or Not: Does the sourcing decision influence the possibility to build/loose sustainable competitive advantage? Integrated or Modular: How tightly are the sourced goods integrated with the company? LowHigh Very low OKGoodBad Easy Diff SameGood Med- Bad Bad Not Stra- tegic Med Mod MedInteg This example uses a fictitious MLV translation agency with 20 employees, specialized on marketing material. Should they "make" their translation in- house? What should they do with the workflow? Standard Translation Marketing Translation Workflow Office Material The company creates "value", by training its in-house staff in marketing translations. Freelance translators with these skills are very expensive. Freelance translators with these skills are very difficult to find. Big translation agencies may have better access to the skilled resources A new translator has to learn a lot of knowledge upon joining the company Decision Factors Example Source: ]project-open[, own elaboration,

13 Textbook Theory "Classical" – Value vs. Risk "Skills" - Skills vs. Strategic Importance "IT Depts." - Strategic vs. Efficiency "Integration" - Modular vs. Dependent "Ford Motor Company" Case Suggestions "Resource Dependence Theory"

14 Critical Ex: Very unique and "over specified" items Goal: Reduce or eliminate Strategic Ex: Components that represent a competitive edge in marketplace Goal: Form strategic alliances, partnerships, limited global sourcing Routine Ex. Office supplies, MRO, Administrative Goal: Reduce activity, minimize transactions, supplier managed inventory Leverage Ex. Basic Production materials, packaging Goal: Maximize leverage, standardize, consolidate volumes, reduce transaction costs Risk Value High Low High "Classical" – Value vs. Risk Source: I-Ping Chou, Cristal Brun, Augusto Gamarra: "Supply Chain Strategies Part II"

15 Routine Items Routine items are low-value activities which contribute little to the strategic direction of the firm Implement streamlining in the acquisition process Purchasing goal: Reduce the time spent by personnel in the firm on the acquisition, delivery, stock-keeping, and payment of these items Leverage Items Leverage items are high-value activities Focus on short-term contracts and pursue a proactive supply strategy to find new substitute products Purchasing Goal: Increase profit margin, use competitive purchasing practices to increase profitability "Classical" – Value vs. Risk Source: I-Ping Chou, Cristal Brun, Augusto Gamarra: "Supply Chain Strategies Part II" Critical Items Critical items are low-value activities with high exposure/risk Strategic items are high-value activities with high risk/exposure Purchasing Goal: Evaluate them for elimination Strategic Items Require the highest level of purchasing competence; consider long-term contracts. Total cost of acquisition must be monitored and controlled Purchasing Goal: Maximize competitive advantage –Earlier time to market, Superior Product Quality, Rapid Innovations

16 "Classical" – Value vs. Risk Leverage Ex. Basic Production materials, packaging Goal: Maximize leverage, standardize, consolidate volumes, reduce transaction costs Routine Ex. Office supplies, MRO, Administrative Goal: Reduce activity, minimize transactions, supplier managed inventory Strategic Ex: Components that make a competitive edge in marketplace Goal: Form strategic alliances, partnerships, limited global sourcing Critical Ex: Very unique and "over specified" items Goal: Reduce or eliminate Risk or Exposure Value LowH Covers the global sourcing situation of a company The classic 2x2 sourcing matrix Being tought in all MBA sourcing classes -Very generic -Most major IT systems are located in the "Strategic" sector. There are few conclusions for IT sourcing concerning "Make" or "Buy", except that we have to keep digging. Source: I-Ping Chou, Cristal Brun, Augusto Gamarra: "Supply Chain Strategies Part II"

17 Strategic Importance Companys Skills Related to Best External Source Low High Equal Buy/Outsource Make or Buy/ Outsource Tend to make Make Strategic Alliances Source: T. Rands: A framework for managing software make or buy. EJoIS, 1993, pp "Skills" - Skills vs. Strategic Importance

18 Generic matrix, not only for IT outsourcing decisions The 2x2 is used for large corporations. It's not clear how it relates to SME's Source: T. Rands: A framework for managing software make or buy. EJoIS, 1993, pp Strategic Importance Companys Skills Related to Best External Source Low High Equal Buy/ Outsource Make or Buy/ Outsource Tend to make Make Strategic Alliances

19 Operational Performance of IT Business Value of IT Core Commodity AnxietiesSatisfaction Market Test Outsource Insource Smart Source "IT Depts." - Strategic vs. Efficiency Source: Adam Murray: Costing, Outsourcing and Contracts

20 When to Outsource reduce head count service a "commodity" cant afford time, $ for new tech cant keep good staff dont have good staff small project When to Insource function is mission critical is a core competency cannot identify any cost savings not clear that vendor is any better vendor cannot be "controlled" "IT Depts." - Strategic vs. Efficiency Source: Adam Murray, Costing, Outsourcing and Contracts

21 Operational Performance of IT Business Value of IT Core Com- modity AnxietiesSatisfaction Market Test Outsource Insource Smart Source Focuses on the experience that an in-house IT department doesnt fully satisfy expectations. The 2x2 is being used in generic IT outsourcing decisions in large corporations. -The "Operational Performance of IT" measure depends on the track record of the IT department in a given area. This may be difficult to measure in the case of complex software development "IT Depts." - Strategic vs. Efficiency Source: Adam Murray, Costing, Outsourcing and Contracts

22 Dependent for Knowledge & Capacity Dependent for Capacity only BEST OUTSOURCING OPPORTUNITY WORST OUTSOURCING SITUATION CAN LIVE WITH OUTSOURCING A POTENTIAL OUTSOURCING TRAP ITEM IS MODULAR ITEM IS INTEGRAL Independent for Knowledge & capacity BEST INSOURCING SITUATION OVERKILL IN VERTICAL INTEGRATION "Integration" - Modular vs. Dependent Source: Fine & Whitney, "Is the Make/Buy Decision Process a Core Competence?"

23 "Integration" - Modular vs. Dependent Focuses on "modularity" of the product or service Captures the "dependency" of other systems in the products company. May apply more to the decison of how to source part of a product than to the IT "make or buy" decision. Also, the author further elaborates on the concept of "clockspeed" in the corresponding market which doesn't apply to IT sourcing decisions. Dependent for Knowledge & Capacity Dependent for Capacity only BEST OUTSOURCING OPPORTUNITY WORST OUTSOURCING SITUATION CAN LIVE WITH OUTSOURCING A POTENTIAL OUTSOURCING TRAP ITEM IS MODULAR ITEM IS INTEGRAL Independent for Knowledge & capacity BEST INSOURCING SITUATION OVERKILL IN VERTICAL INTEGRATION Source: Fine & Whitney, "Is the Make/Buy Decision Process a Core Competence?"

24 "Ford Motor Company" Case Suggestions High Low Need for tailor-made support LowHigh Market Potential to provide the support In- house solution Cost sharing or strategic alliance/ Selective outsourcing True spin-Off or outsourcing Source: Ford Motor Company Case: Supply Chain Strategy

25 "Resource Dependence Theory" High Low Degree of Resource Dependence LowHigh Degree of volatility In- house solution Cost sharing or strategic alliance Outsource True spin-Off or outsourcing Source: Strategic Choice Framework for the IT Professional Resource

26 Summary "Classical" – Value vs. Risk "Skills" - Skills vs. Strategic Importance

27 Critical Ex: Very unique and "over specified" items Goal: Reduce or eliminate Strategic Ex: Components that represent a competitive edge in marketplace Goal: Form strategic alliances, partnerships, limited global sourcing Routine Ex. Office supplies, MRO, Administrative Goal: Reduce activity, minimize transactions, supplier-managed inventory Leverage Ex. Basic production materials, packaging Goal: Maximize leverage, standardize, consolidate volumes, reduce transaction costs Risk Value High Low High "Classical" – Value vs. Risk Source: I-Ping Chou, Cristal Brun, Augusto Gamarra: "Supply Chain Strategies Part II"

28 Critical Ex: Very unique and "over specified" items Goal: Reduce or eliminate Strategic Ex: Components that make a competitive edge in marketplace Goal: Form strategic alliances, partnerships, limited global sourcing Routine Ex. Office supplies, MRO, Administrative Goal: Reduce activity, minimize transactions, supplier managed inventory Leverage Ex. Basic Production materials, packaging Goal: Maximize leverage, standardize, consolidate volumes, reduce transaction costs Risk Value High Low High "Classical" – Value vs. Risk Source: I-Ping Chou, Cristal Brun, Augusto Gamarra: "Supply Chain Strategies Part II" Most IT decisions are high-risk and high-value.

29 Strategic Importance Companys Skills Related to Best External Source Low High Equal Buy/Outsource Make or Buy/ Outsource Tend to make Make Strategic Alliances Source: T. Rands: A framework for managing software make or buy. EJoIS, 1993, pp "Skills" - Skills vs. Strategic Importance

30 Strategic Importance Companys Skills Related to Best External Source Low High Equal Buy/Outsource Make or Buy/ Outsource Tend to make Make Strategic Alliances Source: T. Rands: A framework for managing software make or buy. EJoIS, 1993, pp "Skills" - Skills vs. Strategic Importance Do you have really good IT guys in-house?

31 Summary: Two Relevant Factors Strategic or Not? How good is your IT team? (Compare with the best external source)

32 Strategic or Not? What is "Strategic" IT is not "Strategic" Translation Workflow Benefits Translation Workflow Extensions How to Differentiate? Sample ERP Architecture Strategic Modules

33 What is "Strategic" Goal: Sustainable competitive advantage Sustainable superior margins Examples that are known to work: –Size: Be the biggest –Price: Be the cheapest –Specialization: Be the best in a very specific field A strategy is a long term plan of action designed to achieve a particular goal [...].plangoal Wikipedia

34 IT is not "Strategic" Michael Porter claims IT doesn't provide companies with a competitive advantage: To gain competitive advantage using IS and IT usually needs an element of surprise; the system needs to be out in the market place before competitors make a start in copying the idea Sustaining that competitive advantage requires either: –Converting the technical advantage into brand advantage –Sustaining the technical lead by continuous product and service development Source: " Strategy and the Internet", Michael Porter, Harvard Business Review March 2001

35 Translation Workflow Benefits Strategic for you? no Improved general efficiency by 20% Demonstrate sophistication to customers Improve quality (process standardization) Take more informed project staffing decisions Generic Translation Workflow is not "strategic" (according to Porter)... You may need it anyway to match or exceed your competitor's "operational efficiency". Source: ]project-open[, own elaboration,

36 How do you compete? Brand Salesforce ("presence") Proximity Sales/ Channel Specialization/ Niche Price Service Specialization on field, industry sector, value chain position,... Linguistic Resources Upward Integration High Quality Price Size / economies of scale Capability to execute /Company Size Execution Speed Customer Service One-Stop shop......(?)

37 Translation Workflow Extensions Strategic for you? maybe Support for specialized processes? Managing knowledge in order to allow for synergies in very big company Special way to manage quality You may have to extend your IT application using proprietary functionality in order to gain a sustained competitive advantage.... Source: ]project-open[, own elaboration, maybe Attract better freelancers Manage existing knowledge

38 How to Differentiate? Make ??? (Maximize Value) ??? (Minimize Cost) Buy Differentiation / Strategic value High Low HighCost of (Re)-DevelopmentLow Source: ]project-open[, own elaboration,

39 Make ??? (Maximize Value) ??? (Minimize Cost) Buy! Data Warehouse Engine How to Differentiate? Differentiation / Strategic value High Low Web Server Data base Search Engine Data Warehouse (Config) Pay roll Translation Workflow Timesheet Mgmt. Project Mgmt Recruiting Workflow Skill- DB Accounting Financial Controlling L10n Workflow Knowledge Mgmt. Content Mgmt. Customer Portal CRM Reporting Reporting Engine Workflow Engine Query Workflow Sample Modules from ]project-open[ Support for specialized process HighCost of (Re)-DevelopmentLow Source: ]project-open[, own elaboration,

40 Software Development Templates Trans- lation CRMFinance Controlling HR System Collaboration, Content & KM OO Frame Security Calendar OpenACS Permission Web Server Database Finance Base Payroll Skill Database File storage Online Discussions Incident Workflow Basic Authentication LDAP Authentication Workflow Engine Chat Package Manager Automatic Software Updates PostgreSQLOracle 8iOracle 8i, 9i, 10g9i10g Page Contracts SQL Templates OO Model Object Metadata Localization Framework Contact Mgmt. Reporting Engine Wiki Oracle Intermedia/TextTSearch2 LinuxSolarisBSD Windows + CygWinCygWin Mac OS Operating System Search Engine AOLServer Pound Pound Revers Proxy DynField Object Extensions Platform Services Profiling & Performance Debugging System Application Modules Form Builder Portal & Components Mail Server Integration Content Management Application Services DB-APITCL Quotes & Invoice Payments Financial Reporting Mail Server Integration Customer Web Reg. Marketing Campaigns CRM Tracking Automatic Audits ISDN Tel Integration Project Mgmt. Project & Subprojects Project Controlling Translation Workflow TM Integration Freelance Invoicing Timesheet Invoicing Timesheet Mgmt. Automatic Invoicing Sample ERP Architectur e Full-Text Search Automatic Testing BigBrother BigBrother Sys Mgmt. Other Room Reservation E- Commerce CMS WebDAV SOAP & XML-RPC Surveys Glossary Web-Mail Blog Recruiting Workflow CVS PostfixPostfix/ Sendmail Database Replication Mondrian Data- Warehouse Source: ]project-open[, own elaboration,

41 Software Development Templates Trans- lation CRMFinance Controlling HR System Collaboration, Content & KM OO Frame Security Calendar OpenACS Permission Web Server Database Finance Base Payroll Skill Database File storage Online Discussions Incident Workflow Basic Authentication LDAP Authentication Workflow Engine Chat Package Manager Automatic Software Updates PostgreSQLOracle 8iOracle 8i, 9i, 10g9i10g Page Contracts SQL Templates OO Model Object Metadata Localization Framework Contact Mgmt. Reporting Engine Wiki Oracle Intermedia/TextTSearch2 LinuxSolarisBSD Windows + CygWinCygWin Mac OS Operating System Search Engine AOLServer Pound Pound Revers Proxy DynField Object Extensions Platform Services Profiling & Performance Debugging System Application Modules Form Builder Portal & Components Mail Server Integration Content Management Application Services DB-APITCL Quotes & Invoice Payments Financial Reporting Mail Server Integration Customer Web Reg. Marketing Campaigns CRM Tracking Automatic Audits ISDN Tel Integration Project Mgmt. Project & Subprojects Project Controlling Translation Workflow TM Integration Freelance Invoicing Timesheet Invoicing Timesheet Mgmt. Automatic Invoicing Strategic Modules Full-Text Search Automatic Testing BigBrother BigBrother Sys Mgmt. Other CMS WebDAV SOAP & XML-RPC Glossary Blog Recruiting Workflow CVS PostfixPostfix/ Sendmail Database Replication Mondrian Data- Warehouse Source: ]project-open[, own elaboration, Room Reservation E- Commerce Surveys Web-Mail Nothing but Headaches Possibly(!) Strategic

42 End Frank Bergmann


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