We hope to: Get a working definition of outsourcing Understand how this supports the strategic plans And when it may not Figure out what makes something a good candidate for outsourcing Or, issues to be aware of with outsourcing

We hope to: Understand how we can increase our chances for outsourcing success Understand cloud computing Understand the relationship between cloud computing and outsourcing

A Core Business Process A business process that: Provides customer benefits Is difficult for your competition to duplicate May be leveraged across many products or markets Usually requires a skill set unique to a company

Core Business Process examples SONY and electronics Honda and engines Cars, motorcycles, mowers, etc. Infomercial companies

Outsourcing Offloading something you used to do yourself to another company You of course pay them to do it When the other company is on your soil, it is called outsourcing When the other company is on foreign soil, it is called offshore outsourcing or offshoring

Outsourcing Can be an entire division All IT is outsourced to IBM Can be a single department Can be a single person The receptionist at a small company

Reasons to outsource

Supporting strategic plans Outsource when you can save money Many outsource manufacturing to China Outsource what you don’t do well A small marketing firm may outsource accounting A small CPA firm may outsource their marketing

Supporting strategic plans Outsourcing should give you an upgrade They should do it better than you Outsourcing frees up people power so you can focus on what you do well Allows you to leverage your core competencies

So how successful is this? Estimates will vary widely, depending on: The scope, the industry and individual circumstances But we only get this completely correct about half of the time

So how successful is this? EvaluationPercent Successful 50% Neutral 33% Disaster 17%

Issues with outsourcing In general, think about what can happen when you let someone else: Do your housecleaning, take care of your car, walk your pet dog or pick up the ingredients for your next dinner party These same pitfalls can happen when you outsource in business

Issues with outsourcing Quality problems Mattel and their China problem Legal issues Usually stemming from poorly worded documentation But what happens when a new regime comes into power, on either side? Is your company free from lawsuits?

Issues with outsourcing Negative publicity Offshore call centers not responding Outsourced entity may not have the same culture Security issues Overall loss of control Poor documentation can be a cause of this

Issues with outsourcing Cultural issues It’s ‘good enough’ over here! We’re never on time over here Debt passes through

Evaluation of outsource companies What factors do you use?

Evaluation factors Proven experience Reputation Knowledge of the industry Price Level of technology Review SAS 70 audits

Successful outsourcing summary: Educate upper management Carefully select what to outsource Spend the time checking out the outsourcing options Consider the non-technical factors National education levels, government Put the time into the contract

Successful outsourcing summary: Agree to a set of benchmarks Could trigger an opt-out clause Actually measure the output Agree to arbitration beforehand

Test your knowledge Find something in your current organization that could be outsourced Explain what it is Explain why it could be outsourced Explain why you think it ISN’T currently being outsourced