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The Black Book of Outsourcing: How to Manage the Changes, Challenges, and Opportunities (Hardcover)
by Douglas Brown, Scott Wilson
| Category:
Strategy, Outsourcing, Globalization, IT |
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¥ 338.00
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| MSL Pointer Review:
A classic outsourcing resource. |
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Author: Douglas Brown, Scott Wilson
Publisher: John Wiley & Son
Pub. in: May, 2005
ISBN: 0471718890
Pages: 384
Measurements: 9.2 x 6.3 x 1.3 inches
Origin of product: USA
Order code: BA00047
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- MSL Picks -
Business Process Outsourcing (BPO) is an emotional as well as a political issue. It represents different things to different people and to different countries. Large MNCs equate BPO with cost effectiveness and business benefits, while the workforce associates it with job losses and layoffs. It has snowballed into a political issue. Governments of countries like the US and Britain claim that BPO not only takes away the jobs from their citizens but also create security issues by offshoring important and sensitive business and other data. For the third world countries like India, China and Philippines, the BPO industry has become a major source of income for its educated class and at the same time brings valuable foreign exchange to the country.
The Black Book of Outsourcing by Douglas Brown and Scott Wilson is a practical guide that gives the necessary information to manage the changes and challenges faced by white-collar workforce of developed countries. It also shows the positive aspects of outsourcing and its overall theme is that even for the developed countries like the USA, outsourcing is good for the economy in the long run.
The language of the book is simple and well paced. It is targeted at a large audience base. This includes the corporate executives who are looking to buy outsourcing services and are in search of proper outsourcing vendors. Secondly, the BPO entrepreneurs who want to establish their own outsourcing firms. It also targets the white-collar job seekers, especially those who have been displaced by the outsourcing phenomena. It guides them how to launch a new career and find a proper job in the new global economy.
The book is divided into three parts. The first part focuses on how to plan, lead and manage the outsourcing initiatives. It educates the reader on the myths about outsourcing, which it claims are based on fear, misinformation and conflicting information. It then reveals the startling truth by claiming that outsourcing is not a threat to the US and European economies, but an opportunity to improve productivity and bring in prosperity. It also warns that if the alarmists are allowed to get away with their misinformation then this opportunity will be squandered.
Entire chapters are dedicated to important aspects like assessing cost, benefits and risks for the outsourcing venture. It also has a chapter on outsourcing options, selecting suppliers and vendors, conducting negotiations and making outsourcing contracts. The book carries an exhaustive 50 plus page vendors' directory to find top outsourcers and a guide on how to avoid common outsourcing mistakes.
The second part of the book focuses on job seekers. It provides the know-how and strategies for success in the new global economy. It teaches them how to market themselves, what are the hot jobs in outsourcing and how to actually find an outsourcing or offshore job. This includes a huge list of outsourcing resources available on the Web.
The third part of the book favors the brave who dare to charge down the entrepreneurial path to outsourcing. It also provides practical tips about how to capitalize on the outsourcing start-up boom and how to start and manage the outsourcing business.
Although the book is for the global audience, many of its tips are relevant for the Indian audience as well. In essence, it gives a convincing argument in favor of outsourcing. It reinforces the arguments with facts and figures and goes on to claim that outsourcing is the best thing that has ever happened to the western world since the industrial revolution.
It makes business sense to outsource the work, which the company is not efficient at or which is too costly or beyond the control management. So the company can focus on its core strengths and have a tight control on the outsourced processes at the same time. Consequently, companies will be able to provide better performance and quality at a lower cost. This, in turn, will lower the cost of goods and services for people around the world and at the same time raise the standards of living in low wage countries. This will allow the Americans and Europeans to have surplus money, which they can spend on buying and creating new products and services. Hence, a win-win situation for all. (From quoting Kumar Kawada, USA)
Target readers:
Executives, managers, entrepreneurs, government leaders, professionals, IT/sourcing practitioners, academics, and MBAs.
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Douglas Brown is President and cofounder of the Outsourcing Management Institute, an outsourcing consulting firm to institutional advisors, prominent corporations, governments, and other organizations. He has served in senior operations management and executive business development positions in Fortune 500 corporations and start-up ventures alike, particularly in the healthcare and IT industries. He lives in Pinellas County, Florida, with his wife Janine and their three children.
Scott Wilson is cofounder of the Out-sourcing Management Institute and President of the renowned Outsourcing Career Center, the first international executive search firm serving outsourcing professionals and management exclusively. He is also an entrepreneur and a leading public speaker on outsourcing. He lives in Clearwater, Florida, with his wife Marianne and their two children.
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From the Publisher:
The manager's best friend and secret weapon, this handy guide presents an intelligent overview of the costs and benefits of outsourcing, its uses and applications, and the processes used to manage it. Highly endorsed by industry experts, this book demonstrates how to deal with outsourcing as an emotional and political issue, and provides a wealth of resources for those who want to build a successful career in the outsourcing industries.
Outsourcing gurus Doug Brown and Scott Wilson uncover how to update your business strategies through complete and comprehensive coverage of everything you need to know about effective outsourcing. Outsourcing is a hot topic among business leaders and workers in the global business community. In The Black Book of Outsourcing, Brown and Wilson demystify the subject and show executives and staffers alike how to successfully assess and implement outsourcing, communicate internally and with partners, measure performance, and lead outsourcing transitions.
But more than just outlining best practices, the authors debunk some of the most persistent myths about outsourcing and its effects on the economy, and provide managers with the help they need. Most importantly, they equip you with the wide range of opportunities for professionals in the outsourcing industry, including new certification programs and key outsourcing vendors.
The Black Book of Outsourcing covers every major topic and application of outsourcing, including:
- Outsourcing to meet new business challenges
- Achieving Outsourcing operational excellence
- Building new revenue streams through Outsourcing
- Using Outsourcing to reduce corporate risk
- Developing value-creating Outsourcing relationships
- Building a career as an outsourcing professional
Based on Brown and Wilson's extensive experience working with dozens of companies on every aspect of outsourcing, this book teaches the practical tools and information you need to make smart decisions in planning, developing, implementing and leading effective outsourcing initiatives.
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Overview of the Outsourcing Process
Outsourcing is not a threat to this nation's economy-it is an opportunity to raise American paychecks, productivity, and prosperity. It's an opportunity we will squander if we let the alarmists stampede us into bone-headed solutions. -John Castellani, president of The Business Roundtable to the Detroit Press Club, February 24, 2004
The purpose of this book is to establish guidelines, offer insight, and provide inspiration, so that you will be able to realistically identify, analyze, and maximize outsourcing opportunities. You'll learn how to:
1. Evaluate your business processes.
2. Identify outsourcing opportunities in processes.
3. Select vendors/suppliers/partners.
4. Negotiate successful contracts with vendors.
5. Establish successful working relationships with vendors.
6. Manage a multiple vendor environment.
7. Turn around a failing outsourcing relationship, or, when necessary, replace vendors.
8. Govern vendor relationships on a day-to-day basis.
9. Implement and track service level agreements (SLAs).
10. Anticipate, and avoid when possible, outsourcing problems; solve problems when they do arise.
11. Ensure success.
Outsourcing Terminology
It would be impossible to achieve the objectives just described without first ensuring that everyone reading this book understands the terminology of outsourcing as it is used here (see Chapter 3 and the Glossary). Therefore, we'll begin with two definitions:
Outsourcing.
The act of obtaining services from an external source.
Business process outsourcing (BPO).
Outsourcing as referred to in the corporate environment. BPO occurs when an organization turns over the management of a particular business process (such as accounting or payroll) to a third party that specializes in that process. The underlying theory is that the BPO firm can complete the process more efficiently, leaving the original firm free to concentrate on its core competency.
Outsourcing is essentially a basic redefinition of the corporation around core competencies and long-term outside relationships. These core competencies and outside relationships are identified with two objectives in mind: (1) to bring in the greatest value to the end customer and, (2) to ensure the highest level of productivity for the corporation itself. A number of BPO functions are listed in Table 1.1 on pages 22 and 23.
The benefits of corporate outsourcing are numerous. The following list is not intended to be comprehensive, but to stimulate your enthusiasm for this process:
- Increase sales opportunities.
- Improve corporate image and public relations.
- Prevent missed opportunities.
- Reduce annual costs almost immediately.
- Enable business to focus on core competencies.
- Reduce or eliminate customer complaints.
- Increase customer loyalty.
- Lower costs on projects and events.
- Beat competition.
- Make time and resources available.
Levels of Outsourcing
There are three levels of outsourcings: tactical, strategic, and transformational.
Tactical Outsourcing
On the first level, tactical, the reasons for outsourcing are usually tied to specific problems being experienced by the firm. Often the firm is already in trouble and outsourcing is seen as a direct way to address problems. Typical examples of "trouble" are: the lack of financial resources to make capital investments, inadequate internal managerial competence, an absence of talent, or a desire to reduce headcount. Not surprisingly, tactical outsourcing often accompanies large-scale corporate restructuring. Thus, many tactical relationships are forged to:
- Generate immediate cost savings.
- Eliminate the need for future investments.
- Realize a cash infusion from the sale of assets.
- Relieve the burden of staffing.
The focus of tactical outsourcing is the contract, specifically, constructing the right contract and, subsequently, holding the vendor to the contract. Traditionally, the expertise for making these arrangements came from the purchasing department. However, there is an emerging expectation that every manager involved in the supply chain process understand and be accountable for the aspects of outsourcing that affect their area of charge. Establishing and maintaining tactical outsourcing relationships, specifically functional or comprehensively, is the responsibility of the entire organizational team. Frequently, the contract was simply a fee for services, with much of the value stemming from the discipline of spending dollars externally. When managers formed successful tactical relationships, the value of using outside providers was clear: better service for less investment of capital and management time.
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Strategic Outsourcing
Over time, as businesses sought greater value from outsourcing relationships, the goals of these relationships changed. Executives realized that, rather than losing control over the outsourced function, they gained broader control over all of the functions in their area of responsibility, hence, were freer to direct their attention to the more strategic aspects of their jobs. Facilities managers, for example, could focus more on infrastructure issues, instead of worrying about staffing janitorial positions. Technology executives could hand over running of the data center to a service provider and turn their attention to serving the needs of internal customers. This logic remains compelling.
To meet the requirement of earning greater value from outsourcing, how it was used and where it was applied had to change. The scope of outsourcing relationships grew significantly, as did the service provider's involvement. By virtue of the increasing dollar value of the relationships, the integrated scope of services, and the length of the new relationships, outsourcing was no longer a tactical tool but a strategic tool. Most important, the managerial mind-set regarding the nature of these relationships matured, from one between buyer and supplier to one between business partners.
Strategic outsourcing relationships are about building long-term value. Instead of working with a large number of vendors to get the job done, in a strategic model, corporations work with a smaller number of best-in-class integrated service providers. These relationships thus evolve from vendor-supplier arrangements (which are often adversarial) to long-term partnerships between equals, with the emphasis on mutual benefit.
Transformational Outsourcing
Transformational outsourcing is third-generation outsourcing (Table 1.2). The first stage of outsourcing involved doing the work under the existing rules; the second stage used outsourcing as part of the process of redefining the corporation. This, the third stage, uses outsourcing for the purpose of redefining the business. To survive economically today, organizations must transform themselves and their markets in an ever more daunting challenge to redefine the business world before it redefines them. To that end, outsourcing has emerged as the single most powerful tool available to executives seeking this level of business change. Those who take advantage of transformational outsourcing recognize that the real power of this tool lies in the innovations that outside specialists bring to their customers' businesses. No longer are outsourcing service providers viewed only as tools for becoming more efficient or better focused; rather, they are seen as powerful forces for change-allies in the battle for market and mind share.
Phases of the Outsourcing Process
The phases illustrated in Figure 1.1 are part of any outsourcing process:
1. Strategy phase. You define the objectives and scope of the outsourcing concept and determine the feasibility of outsourcing before making the decision to proceed. Also, you plan the total effort in terms of time, budget, and necessary resources.
2. Scope phase. You establish baselines and specify the service levels required of vendors. You clarify relationships between the function(s) to be outsourced and those functions that remain in house, to include proper interfaces. You develop the request for proposal (RFP); collect and analyze responses from vendors; and, finally, choose a vendor.
3. Negotiation phase. Negotiations proceed with the chosen vendor until a contract is drawn up and, ultimately, signed by both parties.
4. Implementation phase. This phase marks the transition from in-house provision of services to outsourcing.
5. Management phase. Throughout this phase, you manage the outsourcing relationship with the vendor. It includes the negotiation and implementation of any changes in the outsourcing relationship seen as necessary to ensure a successful outcome.
6. Completion or termination phase. At the end of the contract period, you make the decision either to negotiate another contract with the same vendor or to terminate that relationship and align with a new vendor; and the cycle begins again. Alternatively, a decision is made to bring the function back inside the organization.
There will always be some aspects of the outsourcing arrangement that will be unpredictable and thus will evolve over the life of the contract. However, there are key deliverables and activities for a sound BPO relationship each step of the way. These include the prerequest for proposals phase and postcontract governance. Without these, you and your colleagues may find yourselves saying, "Outsourcing didn't work for us." To ensure you do not become one of the failure statistics, use the time wisely before you sign a contract, to integrate your own best practices into the terms of your outsourcing deal.
Remember, outsourcing providers are partners to whom you give significant managerial discretion as to how to deliver the service they offer; it is they who will manage the day-to-day delivery of that service. To generate the value you define, it is essential that these partnerships become long-term relationships. You want your partners to understand your business in depth, so that they can meet your requirements today and develop better ways to service your firm in the future. In sum, managing the outsourcing relationship is one of the most important tasks undertaken by executives today.
Monitoring the Evolving Outsourcing Environment
As the outsourcing environment evolves, not surprisingly, conflicting information surfaces as to how to make an effective decision about the process. This decision is complicated by the growth of the outsourcing market and the wide range of services now available. To evaluate their options accurately, companies must first be able to identify their reasons for outsourcing and then specify costs and benefits of the process. Managers must also be able to match their specific needs with both the correct service and the correct service supplier. Let's examine the possibilities:
- Outsourcing versus supplier relationships. As previously defined, the term outsourcing applies to an activity formerly done by an organization internally. Outsourcing relationships replace or substitute the services of an external provider for current internal capabilities.
- Outsourcing versus consulting. Many companies concurrently position themselves as offering both consulting and outsourcing services. Unfortunately, they don't clearly distinguish between the two, and in the process confound the situation. The difference would seem to be clear-cut: Consultants advise companies on how to do something; outsourcing providers "just do it." However, sometimes a consultant will also deliver a business service or product, hence acting like a provider; other times, an outsourcing provider will advise, hence acting like a consultant. Generally, the distinction is easy to make. Most professional services firms fall into one of three categories: consultants, providers, or some combination of the two.
- Outsourcing versus out-tasking. Outsourcing relationships are high value-add, robust, and ongoing-that is, they are not a one-time only deal. In contrast, out-tasking refers to turning over a narrowly defined segment of business to another business, typically on an annual contract, or sometimes a shorter one. This usually involves continued direct or indirect management and decision making by the client of the out-tasking business. Out-tasking is an emerging concept. Out-tasking defines the boundaries necessary to explain to a workforce that it is being evaluated for possible outsourcing. With the uncertainty of today's business climate, facility managers are reluctant to discuss an outsourcing possibility until the benefits are certain. At that time, the concept of out-tasking seems to make the explanation easier and is restrictive enough to help employees understand the overall and final effects of out-tasking. For example, hiring an outsourcing vendor to set up your new human resources technology, a manufacturer to handle production when demand exceeds capacity, or an overnight delivery service to deliver urgent packages. As explained in the preceding discussion on phases, outsourcing relationships are high-level, contractual relationships for a fixed period of time, usually measured in years, and they are assumed to be continuous. Provider and user often work to define the service delivered; there is frequent interaction and communication between user and provider. The outsourcing service is customized to the needs of the user. (Chapter One)
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| View all 11 comments |
Thomas J. Donohue (President and CEO, United States Chamber of Commerce) (MSL quote), USA
<2006-12-27 00:00>
The Black Book of Outsourcing moves beyond the rhetoric and offers specific strategies for those choosing to outsource and for those whose careers have been impacted by outsourcing. Outsourcing is a reality. This book shows companies and workers alike how to turn it into an opportunity. |
Robert Reich (Former U.S. Secretary of Labor, Clinton Administration) (MSL quote), USA
<2006-12-27 00:00>
This book will help you gain an understanding that in the new global, high-tech economy, there's no cruising altitude. |
Ward Holland (VP, Strategic Initiatives and Corporate Development, Wachovia University) (MSL quote), USA
<2006-12-27 00:00>
This is, without question, the most comprehensive publication on outsourcing. It's destined to become the most regarded source of essential outsourcing information and practice. The Black Book of Outsourcing is the most important outsourcing investment you can make. |
Joseph P. Quinlan (Chief Global Economist, The Johns Hopkins University) (MSL quote), USA
<2006-12-27 00:00>
An exhaustive, in-depth look at one of the most pressing competitive issues of our time. Required reading for all executives who hope to survive in the global economy. |
View all 11 comments |
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