Operations in Global

Business Strategy
Strategic changes required by
Globalisation
• Compete in several dimensions
• More opportunities in multiple
countries
•
Actions- Global Sources of
Multinational Improving performance in competitive
Stimulus for improvement
response to competition
Sourcing sophisticated products advantage
Specialized knowledge and local
and services experience
Sourcing Commodities Sourcing Commodities Specialized natural and labor
resources
Supply from many operations Supply from many operations local Scope and proximity
local to customers to customers
Supply from concentrated Supply from concentrated Scale and scope economies
locations locations
Distant from customer N/w Supplying
Distant customers
from customer Synergies through network for
learning
International pricing and entry in Strategic response to competition
response to competition
 Configuration
Geographically
Simple global exports
dispersed

customer Multination
s al

Geographica
lly Single one country
concentrate International sourcing
d
Geographica Geographically
lly Supplie dispersed
concentrate rs
d
– Global sourcing is a term used to
describe practice of sourcing from
the global market for goods and
services across geopolitical
boundaries.
– Global sourcing often aims to exploit
global efficiencies in the delivery of
a product or service.
– These efficiencies include low cost
skilled labor, low cost raw material
and other economic factors like tax
breaks and low trade tariffs.
Configuration and
coordination
HQ
Flow of knowledge
Flow of product

Local Oper

Flow and influence

of resources
Customers
 New at Hyde Tools: global
•
sourcing strategy
(Dec. 9) Southbridge, Mass.-based Hyde Tools said its pursuit of "right priced, quality, stainless
http://www.homechannelnews.com/story.aspx?id=159091&menuid=267
steel products" has led it to partnerships with product development firm Proteus Design and
two Chinese manufacturers. The announcement came as Hyde Tools, which has in the past
promoted itself as a "Made in the USA" leader of surface preparation tools, is introducing
three new lines of putty knives and scrapers: "Pro Stainless," "Pro Project" and "Value
Series."
• "Everyone knows in order to supply these price points to meet the profit demands of our partners,
we must product at the best costs available in the global marketplace," wrote Corey Talbot,
VP of marketing and product development, in a letter
• Hyde has entered into two joint product development agreements and manufacturing contracts
with two Chinese manufacturers. The company described each as having more than 20
years experience in tool production. Proteus Design has worked in product development with
clients including 3M, Gillette and Kohler.
• Talbot described the move as part of a new chapter for Hyde, in which it will strive to be "Total
Category Leader" -- which Hyde believes it has achieved to a large extent. The company's
new brochure for the its new lines of scrapers: "New tools, and better margins for our retail
partners."
• The company also shared research on the putty knife and scraper market. It estimates the North
American market for this product category is about 28.8 million units sold per year. The
company's research also shows the vast majority (89%) of professional users are willing to
pay more for a stainless steel putty knife or scraper than for a standard carbon putty knife.
• According to a Hyde spokeswoman, the company continues to manufacturer a significant amount
of products in the United States. For instance, their Black & Silver line of tools are made in
Southbridge, US. But, like most manufacturers, it has been sourcing globally for years. The
company hasn't promoted itself as exclusively "made in America" in about 10 years.
•
• Global Delivery Model involves the
deployment of resources from different
parts of the world to provide maximally
efficient service delivery.
• Global Delivery Model involves having the
right volume of skills and the right skills
mix in the right place at the right time
and the right price point.
• Global Delivery Model gives the advantage
of delivery centers located around the
globe as well as a team working close to
the business using consistent processes.
• Most businesses have now come to expect
Global Delivery to be an integral
component of the solution offered by the
service provider.
 Evolution of the Global Delivery Model

<-------------- Act <------------- Act <------------- Act Global ----------

Maximum Local -----------> Regional ----------> >

GLOBAL

REGIONAL
What Can benefits Can shared
improvements of service
can be made by standardizatio economies Source Source from
implementing n across of scale be from multiple
local businesses and captured? offshore locations / vendo
best practice? geography be location - rs across the
( captive globe
Level of Benefit

achieved?
LOCAL or vendor )
Is
outsourcing
feasible ,
beneficial
and outweighs
additional
risk?
Minimum

Simplificati Standardizati Shared Outsourcing Offshore Global

on on Services Delivery

10
 Drivers for Global Delivery
• Adoption of the Global Delivery Model creates competitive advantages that enables Savings
businesses to fundamentally manage cost, focus on core competencies, improve te
services quality, enhance flexibility, and react quickly to market change.
celAra e
Mange
Cost
Struc ande
Guarnte Cost
aptuCre, Varible
to
Improv SkilsofBred
e ransTfe
Servic Refocus Problems ToBest
/e nda AcesServic
ualitQ
Increa y nal Upgrade
se roviPOperadetio
Flexib
/iltyA Riskto Fix
gilty ransTfe Neds
Aces
-toHigh Resourc
Skiled
Labor Talent
toHigh 11
• Reduced cost of ownership
• Ready availability of resources &
flexibility of deployment
• Risk minimization for critical
operations
• Improved time to market
• World class quality leveraged
•
Advantages of global sourcing, beyond low cost, include:
• learning how to do business in a potential market
• tapping into skills or resources unavailable
domestically
• developing alternate supplier/vendor sources to
stimulate competition, and increasing total supply
capacity.
Disadvantages of global sourcing can include:

• hidden costs associated with different cultures and

time zones,
• exposure to financial and political risks in countries
with (often) emerging economies,
• increased risk of the loss of intellectual property, and
increased monitoring costs relative to domestic
supply.
• For manufactured goods, some key disadvantages
include long lead times, the risk of port shutdowns
 Global Delivery Vendor Landscape
North American & European Vendors are expanding their near shore and offshore
presence, while Asia based vendors are increasing their onshore and near shore
presence

Ire la n d

C anad
a
E a ste rn E u ro p e

U .S .A C h in a

Ja m a ica
P h ilip p in e s
M e xico
In d ia
C o sta R ica

B ra zil
S o u th A frica

A rg e n tin a
E sta b lish e d
E m e rg in g
S h iftin g
14
 Offshoring

O ffsh o rin g is d e fin e d a s th e

m o ve m e n t o f a b u sin e ss p ro ce ss
d o n e a t a co m p a n y in o n e co u n try to
th e sa m e o r a n o th e r co m p a n y in
a n o th e r, d iffe re n t co u n try
A co m p a n y m o vin g a n in te rn a l
b u sin e ss u n it fro m o n e co u n try to
a n o th e r w o u ld b e o ffsh o rin g o r
p h ysica lre stru ctu rin g , b u t n o t
o u tso u rcin g .
 INTRODUCTION:
Outsourcing

Services
C O M PA N Y O U TSO U R C ER
Organization Service
Level Level
Agreement Agreement

 Outsourcing denotes the

continuous procurement of
services from a third party,
making use of highly integrated
processes, organization models
and information systems. 16
 Why do outsourcing?
A cce ss b e st in cla ss
• b u sin e ss p ro ce sse s
H a rn e ss le a d in g
te ch n o lo g ie s
In cre a se e fficie n cie s
E n h a n ce ca p a b ilitie s
E xp a n d se rvice
Fre e u p m a n a g e m e n t tim e
D e cre a se o p e ra tin g co sts
Acquire new skill
Acquire Better mgt
Focus on Strategy
Focus on core function
Avoid major investments
Assist a fast growth situation
Handle overflow situation
Improve flexibility
Enhance credibility
Jump on Bandwagon

 OBJECTIVES
• Ensure highest level of
productivity for the
corporation
• Bring greatest value to the
end consumer

18
 INTRODUCTION
On the origins of Outsourcing
• 1776 Adam Smith's Wealth of Nations
propagates competitive advantage
through outsourcing. Term
"outsourcing" itself was not in use.
• 18th and 19th centuries : floating
factory ships, the concept of "offshore
manufacturing gets a boost Early
• 20th century Companies like Ford
Motors own everything, even forests
to make rubber for car tyres! General
Motors runs a 2000 people HR and
travel desk to cater to its employee 19
1940s ADP(Automatic Data Processing) Inc
starts with handling payroll outside
companies. Today the $8 billion, 41000
employee payroll expert handles payrolls
for one in six US workers and recently
opened office in India.
1960s Hundreds of call centers spring up in
the US and UK. Convergys, the largest call
centre company started as a captive unit
of Cincinnati Bell. Hived off in the late
1990s.
1970 s US companies from oil majors,
telecom operators, pharmacy firms to
FMCG firms outsource customer care,
telemarketing, payroll and other functions.20
1980- 1990 US and European companies
start shifting work to Ireland, Israel and
Canada. Ireland particularly benefits as
costs are lower and it offers multi
language capability. At their peak the
over 100 call centers in Ireland employ
over 300,000 staff
1990-1999 C. K. Prahalad's core
competency theory expounded in a
Harvard Business School paper. The
basic lessons of the theory - identify
your core competencies, focus on them
and get out of everything else.
American Express, Swissair, British
Airways and General Electric(GE) start 21
1999 The New Telecom Policy of 1999 ended
the state monopoly on international calling
facilities. Though outsourcing of business
processes like data processing, billing, and
customer support began towards the end
of the 1990s when MNCs established
wholly owned subsidiaries.
2000 Third Party players spring up in India.
By 2005 end, over 300 open shop in India
and beyond. Some of them even set up
operations outside. About 45 global
destinations BPOs bandwagon and are
now competing to get a slice of the annual
$300 billion outsourcing pie 22
 INTRODUCTION
Types of Outsourcing

Outsourcing models:
Business
processes BPO: Business Process Outsourcing
BPO
Administrative APO: Administrative Process
processes Outsourcing

ASP: Application Service Provider

AMO Application Development DBRO: Design , Build, Run & Operate
and Maintenance
ADM: Application Develop. & Maintenance

IT- ITO: IT Infrastructure & service

SDO
infrastructure hosting Outsourcing

23
Information Technology Outsourcing (ITO)
The delegation of a significant portion of a

company’s IT operations


Business Process Outsourcing (BPO)

The delegation of a significant portion of a

company’s back office and technology-enabled

operations. BPO is often an updated, re-incarnation
of business process reengineering.


Application Development & Maintenance

Outsourcing (ADM)
The delegation of a significant portion of a

company’s Application Development and

Maintenance work 24
 BPO –Levels
Customized Industrialized

One-to-one One-to-many

low medium high

D e g re e o f in d u stria liza tio n
Custom designed Single service
services leveraging Similar services delivered to
know-how IBM; AFS delivered to multiple clients
client site operations multiple clients simultaneously
payroll providers payments
such as ADP and processors such as
Paychex; Navitaire First Data 25
AMO

26
• Accenture provides a flexible spectrum of services and
arrangements…from simple to complete end-to-end IT
responsibility…and from immediate to well into the
future.
• Starting with a standard approach, we build on the basics
and structure our projects to achieve specific business
results for our clients, carefully considering their size
and complexity.
• the extent of our collaboration through two dimensions:
1: Scope of Services
Companies can select basic application management services

(such as break/fix support) or broaden the responsibility to

include application enhancements, upgrades or
comprehensive application development. Over the course
of time, Accenture will adjust service levels to meet the
client’s changing business needs.
2: Breadth of Applications
Outsourcing arrangements can specify a single critical

application, a group of related applications, or an entire

portfolio of software applications. Accenture will manage
custom or packaged software, including enterprise
solutions such as SAP, Oracle, PeopleSoft and Siebel.
• Accenture’s Application Outsourcing services are tailored
to our client’s needs. Our flexibility is demonstrated by
the fact that we manage hundreds of arrangements that
involve less than 100 people…and many with more than
1,000 people.
 INTRODUCTION
SDO – Service Delivery
Outsourcing
Client Operations Management  Security
- End-to-end security
Security Data Technical Network Desktop Supplier services including
Delivery Centers Support Services Mgmt. Mgmt. firewall management,
capabilities & intrusion detection,
Mobility identity management
and security policy


 Data Centers
- Remote and on-site
managed server hosting
Sales Support and Mobilization - Data centers


 Technical Support
Hosting  - Help desk, desk-side and
self-service support
 - Global hubs
Technical Support 

Network Services
- Managing data and voice
Services Network Management networks
-
Desktop Management and Mobility
Security Operations
- PC, laptop, hand-held,
distributed
Desktop Management & Mobility 

 Supplier Management
Messaging & Collaboration
 - Identifying, qualifying,
contracting and managing
strategic suppliers 28

 INTRODUCTION
Sourcing of Outsourcing

• Off-Site –Local service providers

• Near Shore –Proximity cross-border
service providers
• Off-Shore – Remote Cross-border
service providers

29
 RUNNING OUTSOURCING
Framework
K e y Prin cip le s

Common Objectives & Goals D e live ry M o d e l is b a se d o n

se ve ra l ke y co m p o n e n ts
Governance •C o m m o n o b je ctive s & g o a ls
•E n d -to - E n d g o ve rn a n ce
stru ctu re
Projects Reporting & Status Tracking

Methods, Standards, and Tools

•M u lti-le ve l te a m o rg a n isa tio n

LOCAL

Common Processes
•Le ve ra g e d co re co m p e te n cie s
a n d skills

Contract
•Fo rm a lise d S LA s, O LA s,

NEAR-SHORE
•Fo ru m fo r e n g a g in g m u ltip le
so u rce s in th e ke y p ro ce sse s
o f co m m u n ica tio n ,
co o rd in a tio n a n d in te g ra tio n
•O p tim ize g lo b a l re so u rce s
OFF-SHORE
•E n co u ra g e co lla b o ra tive
w o rkin g
•Le ve ra g e te ch n o lo g y to e n a b le
b u sin e ss stra te g y
Outsourcing Technical
Client company Skill Pool + …
Support •E sta b lish e s a sin g le p o in t o f
re sp o n sib ility fo r e n tire 30
re la tio n sh ip .
Verticals in India

31
Levels of Outsourcing: Tactical,
Strategic & Transformational
• Tactical
– Specific problem of firm
– Troubles like : lack of finances,
inadequate internal managerial
competencies, talent crunch, desire to
reduce headcount
– Done for corporate restructuring
– Benefits: Generate immediate cost
savings, eliminate need for future
investments, realize cash infusion from
sale of assets, relieve burden of
staffing 32
 Strategic Outsourcing
• Building long term values
• Get the job done in a strategic model
• Managerial mindset matured for
relationships
• From buyer & supplier to business
partners
•

33
 Transformational
outsourcing
• 3rd generation outsourcing
• Redefining the business
• Transform themselves and their
markets
• Innovations that outside that
specialist bring to customer ‘s
business


34
 Transformational vs
Traditional
• Business focus • Operational focus
• Centered on creating • Centered on cutting cost
value • Assist in establishing
• Assist in managing control
uncertainty • Aligns with basically
• Harmonize with strategic unchanged business
goal process
• Based on fashioning a • Based on external
n/w of partnership in specialists realizing
the connected global higher performance
economy for the client than
• Business cost and internal non specialist
reengineering resource
facilitate perpetual • Remove noncore
value creation functions from the
business to provide a35
• one time discharge of
Decision making for
Outsourcing
 Monitoring the evolving
outsourcing environment
Conflicting information surfaces
To make effective decision about a
process
Tremendous growth & wide range of
services makes it complex
---------------

To match specific needs one must meet

correct services with correct supplier
------------------

Outsourcing vs supplier relationship

Outsourcing vs consulting

38
 Identifying Companies
outsourcing needs
• Address the strategic interest and
goals of the company
• Specify the service to be provided
and identify the reason to consider
outsourcing
• Place the decision in a neutral
framework
•
 Decision making foundation

• Set strategic direction

• Identify company’s core
competencies
• Develop a list of supplier /vendors for
consideration
• Appoint an outsourcing process
implementation & governance
team

40
 Primary considerations

• Strategically enhance core

competency
• Addressing issues with employee,
union and community
• Finding lowest cost for best value
• Recognizing impact on internal
operations

41
 What's driving your
outsourcing decision
• Accelerate reengineering benefits
• Gain access to world class technology
• Release resources for other purposes
• Reevaluate problematic functions
• Improve company focus
• Make capital fund available
• Lowering operating cost
• Minimizing risk
• Gain access to resources not available
internally
 Problems
• Unclear expectations regarding
outsourcing initiative
• Lack of outsourcing project
understanding
• Inaccurate analysis for cost benefit
and internal external resources
• Hard to quantify soft cost and benefit
 Competitive labor markets
• High cost labor
– US,UK,Canada,Singapore,Ireland,Aust
ralia
 Low cost labor
• Low quality workforce, education,
technology
– Philippines
– Hungary
– Mexico & Chile
• High quality workforce, education
echnology
– India, Eastern Europe &China
 Getting to the core of
outsourcing
• Rule of thumb: Do not launch
outsourcing process with functions
that are core to it(CORE
COMPETENCIES)
• Sr mgt commit to concept
• Mgt reserve special time to ensure
smooth transition
• Training
• Flexibility
•
 Key Questions
Preprocess
 Cost,Quality &Time
questions: Questions:
• Symptoms causing • Reduce cost –long
to consider short term?
outsourcing? • Build vs buy ROI?
• Key cause & • Feasibility?
constraints? Strategy Questions

• Business objectives
and benefits of •
outsourcing?
• Big Pticture?
 Foundations
• Getting started-which process to be
outsourced
• Shared vision
• Establish effective
• Performance measures
• Clear communication mechanism
• Expect the unexpected
 Turning vision to reality

• Hands on approach
• Clearly communicate vendor
expectation
• Ensure end to end business delivery
• Empower outsourcing governance
team
• Seek quick win
• Account for geographic , cultural &
time difference
• Performance due diligence
• Define service level requirement
• Conduct benchmark audits
•
 Implementing strategic
sourcing
• Strategic sourcing: Dynamic delivery of
internal & external business oriented
resources and services to ensure
business objectives are met
• 3 lessons:
– Most outsources services are not
commodity services
– Some functions are best performed in
house to retain competitive advantage
– Outsourcing relationships must be
flexible and evolve with company’s
business
 Strategic sourcing start ups
• Assess internal capability
• Research the market
• Shop solution
• Model governance

 CONTROL
• CRO
• Clearly state your company’s objectives
• Understand service providers goal
• Understand the nature of the deal
• Practice problem prevention
• Articulate roles and responsibility of both
the parties
• Set up effective service level mgt program
• Launch communication program that
includes your company ,your service
provider and your user base
•
 PAPER WORK INVOLVED
• Charter • Resource plan
• Cost Benefit Analysis • Procurement plan
• Assumptions & • Risk management
Constraints plan
• Project scope • Quality plan
statement • Project schedule
• Critical success • Budget
factors
• Change
• Communication plan Management
• Work breakdown • Implementation
structure checklist
• Role & responsibility • Feedback
matrix
 Lost control
• Process costly to bring back
• Inevitable changes costly
• Cut in staff damage morale
• Time to manage the contract make it
more expensive
• Product quality degraded due to
lowering cost philosophy
• Many clients with service provider ;not
up to expectation
• Public response to layoffs
•