Sourcing strategy

‘The next layers of value creation – whether in technology, marketing, biomedicine or manufacturing – are becoming so complex that no single firm or department is going to be able to master them alone.’

Thomas L. Friedman, The World is Flat

Outsourcing is the moving of a value-creating activity that was performed inside the organization to outside the organization where it is performed by another company. What prompts an organization to outsource an activity is the same logic that determines whether an organization makes or buys inputs. Namely, does the extra value generated from performing an activity inside the organization outweigh the costs of managing it? This decision can change over time.

A service strategy should enhance an organization ’s special strengths and core competencies. Each component should reinforce the other. Change any one and you have a different model. As organizations seek to improve their performance, they should consider which competencies are essential and know when to extend their capabilities by partnering in areas both inside and outside their enterprise. Service sourcing is another example of the Separation of Concerns (SoC) principle. This time it is a separation of the ‘what’ from the ‘who’.

Case example 13: Service Strategy

During the early 2000s, companies rushed to implement a service strategy based on labour arbitrage: service providers decrease labour costs by making use of less expensive off-shore resource s. The strategic intent is to make a provider’s value proposition more compelling through lower cost structures.

While costs did indeed decrease for customers, providers were unable to make long-term gains to their financial bottom line.

Why?

(Answer in Section 6.5.1)

IT and business service s are increasingly delivered by service provider s outside the enterprise, and by the internal organization. Making an informed service sourcing decision requires finding a balance between thorough qualitative and quantitative considerations. Historically, the financial business case is the primary basis for most sourcing decisions. These analyses include pure cost savings, lower capital investments, investment redirections and long-term cost containment. Unfortunately, most financial analyses do not include all the costs related to sourcing, leading to difficult sourcing relationships with unexpected costs and service issues. If costs are a primary driver for a sourcing decision, include financials for service transition, relationship management, legal support, incentives, training, tools licensing implications and process rationalization, among others.

Дата добавления: 2015-11-14