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

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

3. Contents "Make" vs. "Buy" Sourcing Options How to Decide
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"
"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 Buy"
Source: ]project-open[, own elaboration,

6. Customer Organization
The Case for "Pure Make"
100% of the functionality is developed in-house
Ownership
Customer CEO
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
...
Finance &
Admin
Operations IT
Customer Organization
...
Project Mgmt.
Development
Test
Project 1
Project 2
Project 3
Source: ]project-open[, own elaboration,

7. The Case for "Pure Buy"
100% of "the" functionality is developed by a provider
Ownership
Customer CEO
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 Organization
...
Finance &
Admin
Operations IT
Ownership
Provider CEO
...
Project Mgmt.
Development
Test
Provider Organization
Project 1
Project 2
Project 3
Source: ]project-open[, own elaboration,

8. The Case for "Adaptation"
Buy 90% of the functionality and make 10% extensions
Ownership
Customer CEO
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
...
Finance &
Admin
Operations IT
Customer Organization
...
Project Mgmt.
Operations
Project 1
Ownership
Provider CEO
...
Project Mgmt.
Development
Test
Provider Organization
Project 1
Project 2
Project 3
Source: ]project-open[, own elaboration,

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

10. Decision Factors Recom- mendation Theory Decision Process Factors:
Bla bla bla
Core
Com- modity
Anxieties
Satisfaction
Market Test
Outsource
Insource
Smart Source
Decision Factors
Recom- mendation
Theory

11. Summary Decision Factors
Product or service 1
Product or service 2
Product or service 3
Product or service 4
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?
Source: ]project-open[, own elaboration,

12. Decision Factors Example
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?
Decision Factors Example
Standard Translation
Marketing Translation
Workflow
Office Material
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?
Low
High
Very low OK
Good
Bad
Easy
Diff
Same
Med-Bad
Not
Stra-tegic
Med
Mod
Integ
The company creates "value", by training it’s 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
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
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. "Classical" – Value vs. Risk
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
High
Risk
Low
Low
Value
High
Source: I-Ping Chou, Cristal Brun, Augusto Gamarra: "Supply Chain Strategies Part II"

15. "Classical" – Value vs. Risk
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
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
Source: I-Ping Chou, Cristal Brun, Augusto Gamarra: "Supply Chain Strategies Part II"

16. "Classical" – Value vs. Risk
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.
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
Low H
Source: I-Ping Chou, Cristal Brun, Augusto Gamarra: "Supply Chain Strategies Part II"

17. "Skills" - Skills vs. Strategic Importance
Company’s 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

18. "Skills" - Skills vs. Strategic Importance
Company’s Skills Related to Best External Source
Low
High
Equal
Buy/ Outsource
Make or Buy/ Outsource
Tend to make
Make
Strategic Alliances
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

19. "IT Depts." - Strategic vs. Efficiency
Core
Insource
Market Test
Business Value of IT
Outsource
Smart Source
Commodity
Anxieties
Satisfaction
Operational Performance of IT
Source: Adam Murray: Costing, Outsourcing and Contracts 20

20. "IT Depts." - Strategic vs. Efficiency
When to Outsource
reduce head count
service a "commodity"
can’t afford time, $ for new tech
can’t keep good staff
don’t 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"
Source: Adam Murray, Costing, Outsourcing and Contracts

21. "IT Depts." - Strategic vs. Efficiency
Core
Focuses on the experience that an in-house IT department doesn‘t 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
Market Test
Insource
Business Value of IT
Outsource
Smart Source
Com- modity
Anxieties
Satisfaction
Operational Performance of IT
Source: Adam Murray, Costing, Outsourcing and Contracts

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

23. "Integration" - Modular vs. Dependent
Dependent for Knowledge & Capacity
Dependent for Capacity only
BEST
OUTSOURCING
OPPORTUNITY
WORST
SITUATION
CAN LIVE WITH
A POTENTIAL
TRAP
ITEM IS MODULAR
ITEM IS INTEGRAL
Independent for Knowledge & capacity
INSOURCING
OVERKILL IN
VERTICAL
INTEGRATION
Focuses on "modularity" of the product or service
Captures the "dependency" of other systems in the product‘s 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.
Source: Fine & Whitney, "Is the Make/Buy Decision Process a Core Competence?"

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

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

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

27. "Classical" – Value vs. Risk
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
High
Risk
Low
Low
Value
High
Source: I-Ping Chou, Cristal Brun, Augusto Gamarra: "Supply Chain Strategies Part II"

28. "Classical" – Value vs. Risk
Most IT decisions are high-risk and high-value.
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
High
Risk
Low
Low
Value
High
Source: I-Ping Chou, Cristal Brun, Augusto Gamarra: "Supply Chain Strategies Part II"

29. "Skills" - Skills vs. Strategic Importance
Company’s Skills Related to Best External Source
Low
Equal
High
High
Strategic Alliances
Tend to make
Make
Strategic Importance
Make or Buy/ Outsource
Buy/Outsource
Tend to make
Low
Source: T. Rands: A framework for managing software make or buy. EJoIS, 1993, pp

30. "Skills" - Skills vs. Strategic Importance
Company’s Skills Related to Best External Source
Low
Equal
High
High
Do you have really good IT guys in-house?
Strategic Alliances
Tend to make
Make
Strategic Importance
Make or Buy/ Outsource
Buy/Outsource
Tend to make
Low
Source: T. Rands: A framework for managing software make or buy. EJoIS, 1993, pp

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. Examples that are known to work:
What is "Strategic"
A strategy is a long term plan of action designed to achieve a particular goal [...].
Wikipedia
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

34. Michael Porter claims IT doesn't provide
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?
Improved general efficiency by 20% no
Demonstrate sophistication to customers no
Improve quality (process standardization) no
Take more informed project staffing decisions no
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? Sales/ Channel Specialization/ Niche Price Service
Brand
Salesforce ("presence")
Proximity
Sales/
Channel
Specialization on field, industry sector, value chain position,...
Linguistic Resources
Upward Integration
High Quality
Specialization/ Niche
Price
Size / economies of scale
Price
Capability to execute /Company Size
Execution Speed
Customer Service
One-Stop shop
Service
...(?)
...

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

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

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

40. Sample ERP Architecture
Application Modules HR
Project Mgmt.
Trans- lation
Other
Sample ERP Architecture
Payroll
Project & Subprojects
Translation Workflow
Room Reservation
Skill Database
Project Controlling
TM Integration
E- Commerce
Recruiting Workflow
Timesheet Mgmt.
Automatic Invoicing
Surveys
Web-Mail
Glossary
Collaboration, Content & KM
Finance
CRM
File storage
Calendar
Finance Base
Contact Mgmt.
Controlling
Online Discussions
Wiki
Chat
Quotes & Invoice
Customer Web Reg.
Freelance Invoicing
Mail Server Integration
WebDAV
Incident Workflow
Payments
Marketing Campaigns
Timesheet Invoicing
Content Management
Financial Reporting
CRM Tracking
CMS
Blog
Application Services
Full-Text Search
Workflow Engine
Reporting Engine
Portal & Components
Localization
Framework
Mail Server Integration
ISDN Tel Integration
Software Development
OO Frame
Security
Package Manager
OO Model
OpenACS Permission
Platform Services
Page Contracts
Profiling & Performance
Templates
Object Metadata
Basic Authentication
SQL Templates
Debugging System
Automatic Testing
DynField Object Extensions
LDAP Authentication
Automatic Software Updates
Automatic Audits
Form Builder
SOAP & XML-RPC
Web Server
System
AOLServer
TCL
DB-API
Pound Revers Proxy
CVS
Mondrian Data- Warehouse
Search Engine
TSearch2
Oracle Intermedia/Text
BigBrother Sys Mgmt.
Database
PostgreSQL
Oracle 8i, 9i, 10g
Database Replication
Postfix/
Sendmail
Operating System
Windows
+ CygWin
Linux
Solaris
BSD
Mac OS
Source: ]project-open[, own elaboration,

41. Nothing but Headaches Possibly(!) Strategic Strategic Modules
Application Modules HR
Project Mgmt.
Trans- lation
Other
Strategic Modules
Payroll
Project & Subprojects
Translation Workflow
Room Reservation
Skill Database
Project Controlling
TM Integration
E- Commerce
Recruiting Workflow
Timesheet Mgmt.
Automatic Invoicing
Surveys
Web-Mail
Glossary
Collaboration, Content & KM
Finance
CRM
File storage
Calendar
Finance Base
Contact Mgmt.
Controlling
Online Discussions
Wiki
Chat
Quotes & Invoice
Customer Web Reg.
Freelance Invoicing
Mail Server Integration
WebDAV
Incident Workflow
Payments
Marketing Campaigns
Timesheet Invoicing
Content Management
Financial Reporting
CRM Tracking
CMS
Blog
Nothing but Headaches
Application Services
Full-Text Search
Workflow Engine
Reporting Engine
Portal & Components
Localization
Framework
Mail Server Integration
ISDN Tel Integration
Software Development
OO Frame
Security
Package Manager
OO Model
OpenACS Permission
Platform Services
Page Contracts
Profiling & Performance
Templates
Object Metadata
Basic Authentication
SQL Templates
Debugging System
Automatic Testing
DynField Object Extensions
LDAP Authentication
Automatic Software Updates
Automatic Audits
Form Builder
SOAP & XML-RPC
Web Server
System
AOLServer
TCL
DB-API
Pound Revers Proxy
CVS
Mondrian Data- Warehouse
Search Engine
TSearch2
Oracle Intermedia/Text
BigBrother Sys Mgmt.
Database
PostgreSQL
Oracle 8i, 9i, 10g
Database Replication
Postfix/
Sendmail
Operating System
Windows
+ CygWin
Linux
Solaris
BSD
Mac OS
Source: ]project-open[, own elaboration,

42. Frank Bergmann frank.bergmann@project-open.com www.project-open.com
End
Frank Bergmann