OUTSOURCING OPERATIONS: THE UNANTICIPATED INTRICACIES/DETAILS

Scope of outsourcers : Data processing & telecommunications Data processing & telecommunications Client networks Client networks Computer maintenance Computer maintenance Call centers Call centers Customer service departments. Customer service departments.

Routine data processing functions are the core of a service oriented corporate strategy. Routine data processing functions are the core of a service oriented corporate strategy. Issues of the development of new systems: user participation, need for continuous monitoring Issues of the development of new systems: user participation, need for continuous monitoring

Dynamic interfaces between outsourcers and clients Some strategic questions : Will outsourcer’s requirements delay user’s ability to introduce frequent & major changes in products/methods? Will outsourcer’s requirements delay user’s ability to introduce frequent & major changes in products/methods? How willing & able is the outsourcer to make changes in standard operating practices & how quickly & at what cost? How willing & able is the outsourcer to make changes in standard operating practices & how quickly & at what cost?

The Financial Trap of Outsourcing : Cost cutting / cost savings / Profitability Cost cutting / cost savings / Profitability Profit sharing on loss revenue Profit sharing on loss revenue Some Hidden Costs of Outsourcing Operation: Contract flexibility needed for operations Contract flexibility needed for operations It may not be a lifetime contract, but divorce is tough It may not be a lifetime contract, but divorce is tough

Seek Partners, Not Just Vendors The main criteria for partnership : An outsourcer who doesn’t simply ‘package’ its service or accept what clients say they want. An outsourcer who doesn’t simply ‘package’ its service or accept what clients say they want. A contractor who will continue to explore the cost saving possibilities inherent in technological advances. A contractor who will continue to explore the cost saving possibilities inherent in technological advances.

Client Failures to Educate Outsourcers Client must be willing to put together a cross functional team and willing to learn a great deal about what outsourcers might do and how to do it. Client must be willing to put together a cross functional team and willing to learn a great deal about what outsourcers might do and how to do it.

Outsourcer – Client Coordination Knowledge of the coordination issues. Knowledge of the coordination issues. The downtime issues. The downtime issues. Specifying response time and performance objective. Specifying response time and performance objective.

Client / Outsourcer Interdependence is Usually Understated. Documentation of procedures for internal coordination. Documentation of procedures for internal coordination. Failures to interlock or coordinate properly, can create enormous costs. Failures to interlock or coordinate properly, can create enormous costs. Astute/smart clients select a contractor who already is working with sophisticated users in their industry. Astute/smart clients select a contractor who already is working with sophisticated users in their industry. ASSIGNMENT : p.112 – p.119 Best Travel Service and Alton Magazine

Learning how to make continuous improvements Ensure that ongoing operations coordination is effective. Ensure that ongoing operations coordination is effective. Maintain high quality and effectiveness. Maintain high quality and effectiveness. More attention given to customer retention / renewals. More attention given to customer retention / renewals. New incentives to contractor for making / suggesting changes that improved service quality. New incentives to contractor for making / suggesting changes that improved service quality.

Critical Dimensions of Outsourcing Operation : Very experienced outsourcers will developed routines that will not be totally compatible with existing client systems. Very experienced outsourcers will developed routines that will not be totally compatible with existing client systems. Most operations have more complex dimensions than are usually appreciated. Most operations have more complex dimensions than are usually appreciated. Be careful that the team that courts your business is not overselling (& over committing). Be careful that the team that courts your business is not overselling (& over committing). The client also needs to keep in mind the possibility that some competitive advantages will be lost. The client also needs to keep in mind the possibility that some competitive advantages will be lost.