The Advantages of Outsourcing Brought to you by The Goonies: Barry Hawkey Lynnette Hazard Haley Gaunt Congxiao Bauer

Outsourcing: Focusing on Success Outsourcing can provide many benefitsOutsourcing can provide many benefits Dangerous pitfalls do exist – a careful plan is requiredDangerous pitfalls do exist – a careful plan is required

Advantages Increased attention to core business functionsIncreased attention to core business functions Cost reductionCost reduction Decreased risksDecreased risks Increased securityIncreased security Increased supportIncreased support

Increased Attention To Core Business Functions Outsourcing non-core business functionsOutsourcing non-core business functions Extra time is left to concentrate on core business functionsExtra time is left to concentrate on core business functions Focus on delivering world class competenceFocus on delivering world class competence Concentrate on what’s important for the businessConcentrate on what’s important for the business

Cost Reduction Main reason businesses outsourceMain reason businesses outsource Fixed costs spread out over all clientsFixed costs spread out over all clients Higher expenses occur when a company tries to do EVERYTHINGHigher expenses occur when a company tries to do EVERYTHING

Cost Reduction, con’t Reduction of licensing and maintenance feesReduction of licensing and maintenance fees Reduced prices for resources, materials, and toolsReduced prices for resources, materials, and tools Transfer of assets to vendorTransfer of assets to vendor Can result in large cash paymentCan result in large cash payment

Decreased Risks and Increased Security Share investments with the vendorShare investments with the vendor Experienced vendors are more qualified to implement control and securityExperienced vendors are more qualified to implement control and security

Increased Support Ongoing consulting and guidance from vendorOngoing consulting and guidance from vendor Vendors more equipped with information and knowledgeVendors more equipped with information and knowledge Vendor asset: experience gained through work with many clientsVendor asset: experience gained through work with many clients

Disadvantages Loss of controlLoss of control Loss of skills and expertiseLoss of skills and expertise Vulnerability of strategic informationVulnerability of strategic information DependencyDependency High switching costsHigh switching costs Contract problemsContract problems

Loss of Control QualityQuality service standards service standards performance performance Managing StaffManaging Staff

Loss of Skills and Expertise Outsourced jobs = loss of employees with skillOutsourced jobs = loss of employees with skill Lower staff moraleLower staff morale

Vulnerability of Strategic Information Data lossData loss Compromising network securityCompromising network security Intellectual property and copyright riskIntellectual property and copyright risk Vendor employees obtaining client information = $$$Vendor employees obtaining client information = $$$

Dependency On what? Providing, maintaining, and controlling IT systemsProviding, maintaining, and controlling IT systems Can lead to… Loss of creativityLoss of creativity Competitive advantage to other companiesCompetitive advantage to other companies High switching costsHigh switching costs

Contract Problems Complicated process that involves: Defining needsDefining needs Accommodating problemsAccommodating problems Negotiating costsNegotiating costs Termination vs. RenegotiationTermination vs. Renegotiation

Outsourcing in Japan Today Japanese companies are increasingly making the same strategic decisions as the U.S. and EuropeToday Japanese companies are increasingly making the same strategic decisions as the U.S. and Europe The outsourcing picture is made up mostly of large companies in the banking and insurance industriesThe outsourcing picture is made up mostly of large companies in the banking and insurance industries

Future Trend of Outsourcing Key measure of success or failure: globalizationKey measure of success or failure: globalization The ability for businesses to be flexible and agile in their approach to businessThe ability for businesses to be flexible and agile in their approach to business The ability to respond quickly to market opportunities and challengesThe ability to respond quickly to market opportunities and challenges New position - The Chief Resource Officer (CRO) :New position - The Chief Resource Officer (CRO) : Identifies and administers outsourcing opportunities.Identifies and administers outsourcing opportunities.

Application Service Provider (ASP) Low cost and high convenienceLow cost and high convenience Applications includeCustomer Relationship Management (CRM) or Enterprise Resource Planning (ERP)Applications includeCustomer Relationship Management (CRM) or Enterprise Resource Planning (ERP) Subscribing to an ASP allows a company to avoid purchasing, installing, supporting and upgrading expensive software applicationsSubscribing to an ASP allows a company to avoid purchasing, installing, supporting and upgrading expensive software applications

ASP Large businesses will spend nearly $13 billion on ASPs in 2005, up from $693.5 million in 2000.Large businesses will spend nearly $13 billion on ASPs in 2005, up from $693.5 million in 2000.

Conclusion Global environmentGlobal environment Outsourcing increases your company’s dynamismOutsourcing increases your company’s dynamism Key to successKey to success

Conclusion Is outsourcing right for you?Is outsourcing right for you? Types of businessesTypes of businesses Common problemsCommon problems

Conclusion Keep in mind the basic premise of outsourcingKeep in mind the basic premise of outsourcing Use it to evaluate all plansUse it to evaluate all plans Outsourcing is not a fix-allOutsourcing is not a fix-all

Thank You For Your Time The Goonies Barry Hawkey Lynnette Hazard Haley Gaunt Congxiao Bauer