1. Strategic Outsourcing (on OLC)
Business Plug-In B13
Strategic Outsourcing (on OLC)

2. LEARNING OUTCOMES
Explain the business benefits and challenges of outsourcing.
Identify the three primary outsourcing options.
Summarize a list of leading offshore outsourcing countries.
Summarize a list of up-and-coming offshore outsourcing countries.
Summarize a list of rookie offshore outsourcing countries.
Describe the future trend of multisourcing and how it can support a business need for outsourcing.

3. INTRODUCTION
Outsourcing—An arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house
Typically, the outsourced process or function is a noncore business activity

4. THE OUTSOURCING PHENOMENON
According to PricewaterhouseCoopers, “Businesses that outsource are growing faster, larger, and more profitable than those that do not”

5. THE OUTSOURCING PHENOMENON
Most organizations outsource their noncore business functions, such as payroll and IT

6. THE OUTSOURCING PHENOMENON
Outsourcing growth drivers
Globalization
The Internet
Growing economy and low unemployment rate
Technology
Deregulation

7. OUTSOURCING BENEFITS Outsourcing benefits include:
Increased quality and efficiency
Reduced operating expenses
Outsourcing non-core processes allows focus on core competencies
Reduced exposure to risk
Service providers economies of scale, expertise, and best practices
Access to advanced technologies
Increased flexibility
Avoid costly outlay of capital funds
Reduced headcount and associated overhead expense
Reduced frustrations and expense related to hiring/retaining employees
Reduced time to market for products or services

8. OUTSOURCING OPTIONS
Onshore outsourcing—Engaging another company within the same country for services
Nearshore outsourcing—Contracting an outsourcing arrangement with a company in a nearby country
Offshore outsourcing—Using organizations from developing countries to write code and develop systems

9. OUTSOURCING OPTIONS

10. OFFSHORE OUTSOURCING
Three categories of outsourcing countries: leaders, up-and-comers, rookies

11. THE LEADERS
Canada
India
Ireland
Israel
Philippines

12. THE UP-AND-COMERS
Brazil
China
Malaysia
Mexico
Russia
South Africa

13. THE ROOKIES
Argentina
Chile
Costa Rica
New Zealand
Thailand
Ukraine

14. THE CHALLENGES OF OUTSOURCING
Outsourcing challenges include:
Contract length
Difficulties in getting out of a contract
Problems in foreseeing future needs
Problems in reforming an internal IT department after the contract is finished
Competitive edge
Confidentiality
Scope definition

15. FUTURE TRENDS
Outsourcing is becoming less of a cost-saving strategy and more an overall context for business
Outsourcing is approaching commodity status
Companies should look for value-based pricing rather than the lowest possible price
Multisourcing—A combination of professional services, mission-critical support, remote management, and hosting services that are offered to customers