1. Passenger Revenue Accounting SOURCING GUIDELINES: OUT or IN ? Goss & Associates, LLC

2. 2 Table of Contents Goss & Associates, LLC Page Background: What is outsourcing? 2 Components: Inhouse, ASP & BPO 3 Guidelines: Seven concepts 4-9

3. 3 BACKGROUND Outsourcing pioneered the use of measurement for services. Outsourcing pioneered the use of measurement for services. In order to work with other organizations you need the outputs well defined up front. In order to work with other organizations you need the outputs well defined up front. Well-defined agreements with explicit measurable outputs comprise essential elements of outsourcing arrangements. Well-defined agreements with explicit measurable outputs comprise essential elements of outsourcing arrangements. The same principles of measurement can be applied within organizations. The same principles of measurement can be applied within organizations. Goss & Associates, LLC

4. 4 COMPONENTS INHOUSE INHOUSE –You own hardware / computer(s), –Lease or own system(s) –Employee staff to operate F Computer(s) F System(s)/software F Passenger Revenue Accounting (PRA) Goss & Associates, LLC

5. 5 COMPONENTS APLICATION SYSTEM PROVIDER (ASP) APLICATION SYSTEM PROVIDER (ASP) –You outsource all or part of: F Computer(s) F Systems(s) Staff that operates and maintains only the computer(s) and / or system(s)/software Staff that operates and maintains only the computer(s) and / or system(s)/software Goss & Associates, LLC

6. 6 COMPONENTS BUSINESS PROCESS OUTSOURCING (BPO) BUSINESS PROCESS OUTSOURCING (BPO) –You outsource all or part of: F Computer(s) F Systems(s) Staff that operates and maintains the computer(s) and / or system(s)/software software and all or part of Passenger Revenue Accounting Staff that operates and maintains the computer(s) and / or system(s)/software software and all or part of Passenger Revenue Accounting Goss & Associates, LLC

7. 7 GUIDELINES 1. 1. Organizational operations will have to increase the use of internal service levels. These benchmarks along with the interfaces on the inside should look an awful lot like those for outside suppliers as the demarcation of organizational boundaries becomes harder to find. 2. 2. Outside suppliers develop offerings that support organizational functions or outputs. Outsourcing represents an alternative, which can lead to partnerships or joint ventures. Use of these options spurs the creation of other innovations as resources are freed up. Goss & Associates, LLC

8. 8 GUIDELINES 3. 3. The market supplies many things that organizations used to provide just to themselves. Organizations have to work to adapt to these new realities as a result. Management in turn must be very careful about what outputs it seeks to create or reproduce within. 4. 4. Organizations will become much more selective about what activities they choose to conduct in-house. They will need a disciplined approach. A tough evaluation of measurable outputs will be the best gauge to decide which functions should be performed inside the boundaries, as opposed to across them. Goss & Associates, LLC

9. 9 GUIDELINES 5. 5. Remember that with outsourcing, the work still is done. It just is done somewhere else more efficiently by another organization. You have shifted the work to specialists, you have not eliminated it. 6. 6. The costs of going outside the organization to acquire inputs constitute the same costs associated with the management of many internal processes. This applies even more so for the new economy. Costs associated with the coordination process differ across coordination mechanisms (markets or organization). The impact of the choice between hierarchies (operations conducted within the organization) or the market matters a lot. Goss & Associates, LLC

10. 10 GUIDELINES 7. 7. The common make-or-buy decisions that organizations wrestle with demonstrate just one aspect of this calculus. The differences between the market and internal organization must always be compared. No absolute benchmark will ever exist because the alternatives change all the time. The challenge for management will be to select among imperfect alternatives. Management has to choose the best mechanism to coordinate a particular set of transactions at that particular point in time. They will be limited to whatever the market can offer or what they can develop themselves. Goss & Associates, LLC