outsourcing

• TODO complete BSS outsourcing 📅 2023-11-14

• Outsourcing involves the use of external providers to perform business activities.

  • internal business processes and activities that can be done better and at lower cost when given to external vendors.

• The term ‘outsourcing’ is often called business process outsourcing (BPO)

• Outsourcing captures a range of outsourced business processes including:
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• Operations

• human resources

• administrative work

• information technology (IT) - data work, desktop outsourcing and network outsourcing (remotely hosted software applications (Cloud computing)).

• Other types of outsourcing include:

• finance and accounting outsourcing (FAO) :: including preparation of financial accounts and reports, analytics and taxation compliance
  

• knowledge process outsourcing (KPO) :: including the outsourcing of managerial work such as marketing strategy, public relations and management decision making
  

• legal process outsourcing (LPO) :: including paralegal support, legal support (including drafting, research and counsel) and other legal services (such as patents and trademarks).
  

The outsourcing decision

• managers need to assess whether the use of outsourcing is viable.
• The factors that must be considered (by the managers) when assessing whether to outsource are:
  • whether to outsource or not: whether the use of outsourcing is cheaper and more efficient
  • if deciding to outsource:
    • which geographical location is favoured.
    • which vendors to use.
    • details such as
      • the management of the outsourcing contract
      • the length of contract
      • the KPIs and service levels required

outsourcing options

• Creation of shared services centres (SSC)
  • the creation of an in-house centre that performs work for multiple subsidiaries
• Use of ‘fee-for-service’ arrangement
  • low-risk, short-term strategy
  • engaging a supplier for fixed services at a pre-determined price
  • allows the business to test the outsourcing market prior to making a change
• Joint ventures
  • engages an outsourcing services provider
  • the provider is also free to outsource to other businesses in the same industry
• Use of a ‘build-operate-transfer’ approach
  • involves offshore outsourcing & contracting with external organisations
  • The use of contracts that detail agreed levels of service against pre-determined KPIs
  • The relocation of services to a new offshore location (build-operate) is then transferred to an independent vendor that the company contracts.

Advantages of outsourcing

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• Numerous advantages are associated with outsourcing:
  • simplification
  • efficiency and cost savings
  • increased process capability
  • increased accountability
  • access to skill/resources lacking within the business
  • provides a capacity to focus on core competencies, thus improving in-house performance and several strategic benefits.

Disadvantages of outsourcing

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• The disadvantages associated with outsourcing include:
  • the cost and uncertainty associated with payback
  • issues with communication and language
  • loss of control of standards and information security
  • loss of corporate memory and costs associated with IT, organisational change, redesign and management of hierarchies.