outsourcing

1、Outsourcing,,What is Outsourcing?,Outsourcing - “the strategic use of outside resources to perform activities traditionally handled by internal staff and resources” Dave Griffiths Why Outsource?Provide services that

2、are scalable, secure, and efficient, while improving overall service and reducing costs,Why do Companies Outsource?,Reasons for Outsourcing,Traditional role - reaction to problemReduction and control of costsAvoid lar

3、ge capital investment costs Insufficient resources available Modern role – business strategyAllows company to focus on their core competenciesKeeping up with cutting-edge technologyCreating value for the organizatio

4、n and its customers Building partnerships,What Can be Outsourced?,system integration data network mainframe data center voice network, internet/intranet maintenance/repair applications development e-commerce end-

5、user support system,When to Outsource,PricewaterhouseCoopers Model,How to Implement Outsourcing,Program initiation Opinions and ideas shared to form draft contractProgram implementationTransferring staff Service Lev

6、el Agreement (SLA) Establish communications between partners Actual transfer of the service Establish management procedures Contract agreementContract fulfillment,Problems With Outsourcing,Loss of ControlIncrease

7、d cash outflowConfidentiality and security Selection of supplier Too dependent on service provider Loss of staff or moral problemsTime consuming Provider may not understand business environmentProvider slow to rea

8、ct to changes in strategy,Problems With Outsourcing,,E-Commerce Hosting Solution,WAN bandwidth IT professionalsHardware/SoftwareSecurity issues24/7 support,E-Commerce Hosting Solution,In-HouseActivity costs, in

9、clusive of labor and overheadRaw materials, inclusive of shipping, storage, handling and overheadCost of invested capital + Estimated impact of outsourcing on costs and revenue-------------------------------------

10、---------------------------------Total cost of performing activity in-houseOutsourceProposal for outsourcingAnticipated future pricing adjustmentsAdditional one time costs of outsourcing + Additional on-going

11、 costs of outsourcing-------------------------------------------------------------------- Total cost of outsourcing activity,Database Outsourcing,AreasClinicPreventive CareOn-going support Enhancement CareBen

12、efitsSavings of 25% - 40%Pay-per-gig pricing Off-site data storage Automated Free up server space,Email Outsourcing,Email HostingEmail@yourdomainPOP3 access  IMAP4 access  Outbound SMTPVirus Scanning

13、External POP Access,24x7 Web-based Support  Spell CheckEmail Forwarding  Unlimited Attachment Size   Unlimited Storage Folders  Multiple attachments,“The total cost of ownership for an in-house e

14、mail system is likely to be in the range of $200 to $400 per user per month……. Outsourcing should reduce TCO by 10% to 30%.” Ferris Research, June 2001,Typical Services,Typical Services,Custom WebmailCustomizable, priv

15、ate-label WebMail interface   Wireless WAP Access  Automated User Signups   Integrated Ad Server   Customizable to any language in the world  Programming API's for front and back end sys

16、tem integration,Costs,Web Based Email Services with POP 3 access up to 6 Mailboxes Per Month0-5,000 Mailboxes$0.99 each5,001-7,000$0.90 each7,001-10,000$0.75 each10,001 and up$0.55 eachMinimum Monthly Fee Pe

17、r Domain is $79.00 Large Install - Setup Fee $199.00 at launchOther Options Wireless Access - $0.30 per mailbox per month Outgoing SMTP - $0.20 per mailbox per month purchased in blocks of 50. Design Services - $10

18、0 flat charge for color scheme consulting. $70 per hour for custom design consulting. Additional Storage - Units of 2mb $0.99 per mailbox per month.Acadea has customizable email solutions for schools, universities, go

19、vernment agencies and businesses.,http://www.acadea.com/WebmailPrice.htm,Costs,Example 4: 100 User Multi Server, Multi Location Network In-House Cost,Salary For Sr Level Network Engineer$65,000.00Salary For Software

20、/ Hardware Support Technician$40,000.00Medical Benefits and Payroll Expense    (assume 1 married 1 single)$ 18,100.00Office Space and Expenses$ 10,000.00Continuing Education$ 5,000.00Hardw

21、are Repair Parts$ 10,500.00 ========= $148,100.00Sullivan Data will provide on-sight technician during regular business hours for between $90,000.00 and $100,000.00 annually depending on equipme

22、nt chosenhttp://www.sullivandata.com,Global Production, Outsourcing, and Logistics,Where should production be located and should they be concentrated or dispersed?What should be the long-term strategic role of foreign

23、production sites? Should the firm abandon a foreign site if factor costs change, or is there value to maintaining an operation at a given location even if economic conditions change?Should the firm own foreign productio

24、n or should production be outsourced?How should a globally-dispersed supply chain be managed?Should the firm manage the logistics or outsource their management?,Dell Case: Question 1,What are the advantages to Dell of

25、 having manufacturing sites located where they are? What are the potential disadvantages?,Answer,Dell’s manufacturing sites are in Brazil, China, Malaysia, Ireland, and the U.S. Advantages of these locations are that so

26、me of them are low cost (Brazil, China, Malaysia and, relatively, Ireland), they have educated work forces that are highly productive, and they are near large regional markets.,Dell Case: Question 2,Why does Dell purchas

27、e most of the components that go into its PC from independent suppliers, as opposed to making more itself? (Does does little more than final assembly of components into PC),Answer,Dell outsources because it enables Dell’

28、s business model to be successful. Dell’s comparative advantage is in pricing, customization and rapid order fulfillment, all advantages gained through supply chain management and logistics. By outsourcing, Dell does n

29、ot carry risks connected to inventory such as obsolescence, Dell can maintain flexibility in its manufacturing, and Dell has lower coordination costs than if it were vertically integrated, producing its own parts. Outso

30、urcing allows Dell to focus on what it does best.,Dell Case: Question 3,What are the consequences for Dell’s cost structure and profitability of replacing inventories with information?,Answer,Dell has been able to achiev

31、e the lowest inventory levels in the industry. In 2004, that was only three days of inventory on hand, compared to 30, 45, or even 90 days’ worth at competitors. This is a critical advantage in the computer inventory, w

32、here component costs account for 75 percent of revenues and typically fall by 1 percent per week due to rapid obsolescence. Replacing inventory with information has contributed greatly to Dell’s business model; it is th

33、e cornerstone of their cost structure. Reducing inventory also reduces the need for working capital. In sum, replacing inventory with information boosts profitability.,Dell Case: Question 4,Do you think that Dell’s mod

34、el can be imitated by other PC manufacturers and manufacturers in other industries?,Answer,Yes, Dell’s model can be imitated, but the managerial skills are difficult to build. Other companies who are trying to replace i

35、nventories with information include Wal-Mart, Target, Best Buy, and Circuit City. Auto manufacturers also have been making strides in this direction.,Dell Case: Question 5,What factors might make it difficult for other

36、PC companies to adopt Dell’s model?,Answer,The chief factor that makes it difficult for other PC firms to adopt Dell’s model has to do with managerial know-how. Knowing what to do is simple. Knowing how to do it is imm

37、ensely complicated.,Dell Case: Question 6,What is the source of Dell’s competitive advantage? How secure is this advantage?,Answer,Low cost is the source of Dell’s competitive advantage. Dell seems to be able to counter

38、 competitive challenges, which evidences management capability. This indicates a relatively secure advantage, but because it is imitable, it is not tremendously secure.,Dell Case: Question 7,What are the potential risks

39、 associated with Dell’s global supply chain strategy? How can these risks be mitigated?,Answer,There are many risks associated with Dell’s supply chain management. If the transportation links are disrupted (work stoppa

40、ges, terrorism), Dell’s approach will be affected. Also, they are vulnerable to problems their suppliers have. Dell is also vulnerable to IT issues: hacking, system failures. Their competitors would be facing the sam

41、e issues, though. The risks that need most to be mitigated are the supplier ones because they would not be shared by competitors. These can be mitigated by integration with the supplier, and Dell has integrated with th

42、e supplier’s supplier as well.,Global Production:Group Discussion,You are Apple, Maytag, Toyota, and Sony. How will you coordinate your production activities for the iPhone, the Maytag Neptune Washer, the Prius, and th

43、e Sony Playstation Portable?Where should production be located and should they be concentrated or dispersed?What should be the long-term strategic role of foreign production sites? Should the firm abandon a foreign sit

44、e if factor costs change, or is there value to maintaining an operation at a given location even if economic conditions change?Should the firm own foreign production or should production be outsourced?How should a glob