Strategic Global Outsourcing and Offshoring
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Week1-ModuleIntroductionAB.pptxModule introduction
BNM748 Strategic Global Outsourcing and Offshoring
Dr. Aleksandre Asatiani
Dr. Ali Bigdeli
Aleksandre (Alex) Asatiani
Lecturer in Information Systems, department of OIM, Aston University
M.Sc. & PhD Information Systems Science. Aalto University School of Business, Finland
Dissertation: Impact of Cloud Computing on Business Process Outsourcing
Experience in industry-academia collaborative projects on outsourcing and digitalisation
Published on outsourcing and virtual teams in leading information systems outlets such as Information Systems Journal and Journal of Information Technology.
Ali Bigdeli
Senior Lecturer in Industrial Service Innovation
Director of Research, The Advanced Services Group, the centre of excellence in research and practice on servitization and advanced services at Aston Business School.
Interested in the organisational change and business model innovation brought about when organisations move towards providing capabilities rather than just selling products.
Extensive experience in working with multinational manufacturing companies incl. Goodyear, Cisco, Daimler-Benz, DHL, Emerson, Yanmar, and Ishida.
Contact details
Aleksandre Asatiani:
Email: [email protected]
Office phone: 0121 204 3785
Office location: ABS 260
Appointments through WASS
Ali Bigdeli:
Email: [email protected]
Office phone: 0121 204 3384
Office location: ABS 259
Appointments through WASS
Module basics
Module aims
Assess the role that sourcing plays in shaping business and IT strategy in a global context
Evaluate sourcing decisions and engage in outsourcing/offshoring initiatives
Discuss how emerging technologies are changing the landscape of outsourcing
Gain hands-on experience in executing an outsourcing project
Module outline
Overview of the state of global sourcing
Sourcing models and sourcing decisions
Country attractiveness
Robotic Process Automation and Artificial Intelligence in the context of outsourcing
Servitisation
IoT and digitalisation
Global virtual teams
Innovation in outsourcing
Final presentations
Module organization
Lectures + seminars
Every Monday
9:30AM - 12:30AM
Adrian Cadbury Lecture Theatre – ABS 0.05
Readings: Textbooks, articles, case studies
Collaborative group work – real life outsourcing project using online freelancers. Presentations during last session
Module assessment
Team work = 30%
Outsourcing project presentation during the last session of the module (25%)
Case study analysis presentations during seminars (5%)
Individual assignment = 70%
Case analysis based on the concepts covered during the module
Questions so far?
The state of the global sourcing 2019
Why are you here?
Learning objectives
By the end of the session you should be able to:
Define key terms in outsourcing
Identify the key drivers and risks of global sourcing
Discuss present market trends in the global sourcing market
What is outsourcing?
Outsourcing implies contracting with a third-party provider (that could be physically located anywhere) for the management and/or completion of a certain amount of work, for a specified length of time, cost and level of service (Oshri et al. 2015).
Two typical outsourcing scenarios to distinguish:
| Outsourcing project | Outsourcing service |
| One-off task (usual length: 3-18 months) | On-going service provision (usual length: 36+ months) |
| Example: Development of a new application | Example: customer service via call centre |
What can be outsourced?
Business and IT services value chain
Source: Center on Globalization, Governance & Competitiveness – Gereffi and Fernandez-Stark (2010)
IT outsourcing example
Source: Peynot (2007)
More terminology
Offshoring typically refers to the relocation of organizational activities to a wholly owned subsidiary (1) or to an independent service provider in another country (2).
(1) “Captive” or “in-house” model of service delivery: where the work is offshored to a center that is owned by the organization
(2) “Offshore outsourcing” model of service delivery: where the work is offshored to an independent third party
More ‘sourcing’ Terminology
Outsourcing
Offshore outsourcing, nearshore outsourcing, onshore outsourcing, insourcing, rural sourcing, domestic sourcing, out-tasking, crowdsourcing , cloud services, impact sourcing, backsourcing, multi-sourcing…
Best-sourcing, right-sourcing…
Offshoring
Captive offshoring, nearshoring or onshoring
Shared services, virtual captive
Best-shoring, right-shoring, re-shoring …
Global ITO & BPO market trends 2016-2020
The Global IT Services Market US$ 657 billion (2016) with 2.6% CAGR
As-a-Service models are growing
Global BPO Services Market (2016) US$ 336 billion with 4% CAGR
Industry specific: HR 6%, F&A 7%, CRM 3.8% CAGR.
Banking and Insurance - $100b. with 4.1% CAGR
Traditional/As-A-Service balance is 3:1 with 2.4% growth in Traditional and 8% growth in As-A-Service
Source: LSEOU/Everest Group/HFS, 2016
20
In your opinion, which functions are most popular for outsourcing?
Distribution of outsourcing expenditures by ITO and BPO functions
Source: Survey of 150 leading in the UK and USA by Loughborough Centre for Global Sourcing and Service, 2014
What are the main drivers of outsourcing?
Key drivers of outsourcing
Source: Survey of 150 leading in the UK and USA by Loughborough Centre for Global Sourcing and Service, 2014
Key drivers of outsourcing
Source: Lacity, M. C., Khan, S. A., & Yan, A. (2016). Review of the empirical business services sourcing literature: An update and future directions. Journal of Information Technology, 31(3), 269-328.
Key drivers of outsourcing
Costs savings
Reduce operating costs
Access ad-hoc technologies without capital investment
Reduce permanent staffing level
Access to skills and resources
Access global talent and specialised resources
Free internal resources to focus on key competency
Focus on core business
Improve effectiveness (time to market)
Standardisation and access to innovative processes and practices
Consolidation
Process optimisation
The maturation of offshore sourcing work
(Source: Carmel and Agarwal, 2002)
Now some bad news
Diminishing returns
Increasing income levels in major outsourcing countries (Poland, China, India, Philippines)
Combined with…
Stagnant wages in the Western Europe and the US
Emerging technologies
Automation and smart technologies
Robotic Process Automation
Artificial Intelligence and Machine Learning
Alternative to outsourcing leading to backsourcing
Outsourcing risks
| RISK CATEGORY | SAMPLE RISKS |
| Business | No overall cost savings Poor quality Late deliverables |
| Legal | Inefficient or ineffective judicial system at offshore locale Intellectual property rights infringement Export restrictions Inflexible labor laws Difficulty obtaining visas Changes in tax laws could significantly erode savings Inflexible contracts\Breach in security or privacy |
| Political | Backlash from internal IT staff Perceived as unpatriotic Politicians threaten to tax US companies that source offshore Political instability within offshore country Political instability between the home country and offshore country |
| Workforce | Supplier employee turnover Supplier employee burnout Inexperienced supplier employees Poor communication skills of supplier employee |
| Social | Cultural differences Holiday and religious calendar differences |
| Logistical | Time zone challenges Managing remote teams Coordinating travel |
Source: Oshri et al. (2015); Willcocks and Lacity (2006)
Future outlook
BPO and ITO spending continues to increase
Focus is changing from costs to value
Emerging country competition is accelerating
Popularity of cloud computing/as-a-service models is growing
Captive centres are declining as outsourcing partnerships are growing
Digital innovations will impact outsourcing (e.g. Robotic Process Automation and Artificial Intelligence)
32
Break (10 minutes)
Student teams
| Team 1 | Team 2 | Team 3 | Team 4 | Team 5 | Team 6 | |
| Menghua Wu | Norah Al Khalifah | Jaspreet Singh Bains | Rachid Byhy | Lin Cao | Dylan Van Tornhaut | |
| Waldeysse Damiao | Jessica De Paula | Bowen Yu | Tong Wei | Qidong Lu | Yi Gu | |
| Andrea Gualtieri | Puroom Kang | Rakshanda Hossain | Mengyao Jin | Hehua Wang | Sanchit Garg | |
| Zijie Ma | Brecht Lambrichts | Haodong Li | Jawaher Alqahtani | Yuanhao Wang | Jack Whittaker | |
| Jie Ying Lee | Feyikunmi Ogunyeye | Feng Xiong | Aryan Maniyar | Fang-Hsing Miao | Naseehah Ummer | |
| Team 7 | Team 8 | Team 9 | Team 10 | Team 11 | Team 12 | Team 13 |
| Saad Almalki | Rishabh Angara | Ralph Chigwida | Shiqing Fan | Fei Ge | Wanting Jiang | Brynjar Sigurðsson |
| Xin Dong | Yiming Zhu | Margot Roux | Shehvaar Khan | Rex Kimona | Lisa Okhaifo | Mubasher Ahmed |
| Shengzhi Xu | Mamata Pehlwani | Elroy D'Souza | Danqiong Li | Lasharn Rubie-Frederick | Jiyu Li | Yuanpei Wu |
| Ikram Mohemmed | Zhiting Li | Yuen Ying Yeung | Poe Lucas | Paul Olegario | Osazuwa Ozigbo | Yuanze Wu |
| Camille Jullien | Andrew Thegeya | Gaurav Kalair | Safeenah Waziri | Haizhen Yuan | Yang Yao | Yida Zhang |
Team Assignment
Complete a real software development outsourcing project
Build an application
Application should be:
Useful to a the whole team or someone in the team
Or it can be a fun project
Interactive and should accomplish a specific task
Websites, logos, artwork, designs are not acceptable
Examples from previous years:
Cross-platform world clock app
Body Mass Indicator
Remake of Pacman video game
Come up with a project idea
Consider:
Scope of work
Deliverables you expect
Risks and mitigation strategies
Develop ‘request for bids’ including:
Project specifications
Expected deliverables
Post the project for bidding
Outsourced work marketplaces:
Freelancer.com
Elance.com
Upwork.com
Fiverr.com
Etc…
Maximum amount you are allowed to spend is £50 per group (or equivalent in other currency)
£50 does not sound much, but you should be able to attract a good number of bids
Do not reveal to you supplier that this is a study project! We want the project to be completely real.
Select the supplier
Review bids
Evaluate and select the supplier
Use module readings and look for additional sources to evaluate potential suppliers
Complete the project
You need to make sure the deliverable is ready before your assignment submission and presentation
Start working on the project right away
It is possible that you will experience challenges – you need to be ready for them
It is ok to have challenges throughout the project This assignment is not about delivering the perfect piece of software, it is about learning
Deliverables (for the module)
End result of the outsourced work (deliverable from your supplier)
Presentation slides accompanied by notes (to be submitted)
In-class presentation – 15 minutes (10 min presentation + 5 min Q&A):
“request for bid” description and deliverables as defined to your supplier (please include the exact text as posted on a freelancer site)
Risks and mitigation strategies
Overview of bids received
Supplier selection criteria
Brief overview of outsourcing process, including any issues and challenges
Deliverable demo
Summary of what you have learned
References
Next week…
Lecture: Sourcing models and sourcing decisions
Chapter 2 from the outsourcing handbook
Dedrick, J., Carmel, E., & Kraemer, K. L. (2011). A dynamic model of offshore software development. Journal of Information Technology, 26(1), 1-15.
Seminar: Teams present case solution for Aydarum case study
Carmel, E., & Káganer, E. (2014). Ayudarum: an Austrian crowdsourcing company in the Startup Chile accelerator program. Journal of Business Economics, 84(3), 469-478.
