Read the summary and the most important questions on Lecture 5.8: Outsourcing

• 1 Outsourcing

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• What are the 4 types of outsourcing?

  – Contract manufacturing 

  – BPO: Business Process Outsourcing 

  – ITO: Information Technology Outsourcing 

  – Innovation Outsourcing 

• 2 Benefits

• What are the benefits of outsourcing?

  • Gain access to expert performance 

  – Provider has refined knowledge in a specific function 

  • Scale economies 

  – Cost efficiencies 

  • Maintain focus on core competencies 

  
  

• 3 Outsourcing models

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• What are models for outsourcing? 

  • Offshoring 

  • Captive Offshoring 

  • Reverse Outsourcing 

  • Nearshore Outsourcing

  • Home Shoring 

  • Farm Shoring 

• 4 Outsourcing: Reasons

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• What are some reasons for outsourcing?

  • Cost savings 

  • Hone core competencies 

  • Capabilities of outsource providers  

  • Technology developments 

  • Mitigate HR costs and management issues  

  • Other general trends 

  – Globalization 

  – Competitive intensity 

  – Time/Cost pressures

• 5 Outsourcing: Risks

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• What are some risks of outsourcing?

  • Cost Savings Don’t Materialize  

  • Quality Concerns 

  • Dependence on Vendor  

  • Dilution of Competitive Advantage 

  • Risk of Fostering New Competition  

  • Public Backlash 

• 6 Outsourcing: Contingency Approach

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• What are some contingency factors to outsourcing?

  • Criticality of business function 
  

  • Nature of the business process 

  • Task characteristics 

  • Vendor capabilities 

  • Governance

• 7 Outsourcing: Criticality of the Business Function

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• How do you define mission-critical business processes?  

  Focus on developing core intellectual property and skills and keep it in-house

• How do you determine criticality for incremental innovation and non-critical processes? 

  By using your commodity knowledge and skills and outsourcing

• 8 Outsourcing: Nature of Business Process

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• A Standardized Process is considered  _______ when involved in Captive offshoring or selective outsourcing.

  complex

• A Customized Process is considered  ______ when done with Selective Outsourcing or Automation.

  simple