Outsourcing and Offshoring

Purpose of outsourcing/offshoring and its importance to COMPANY-X

Offshore outsourcing is used to source services for non-core COMPANY-X activities from lower cost regions, thus ensuring COMPANY-X's competitive advantage.

COMPANY-X operates, and therefore sources materials and services, in markets where outsourcing opportunities have been identified, expanded and maximised. It is likely that this trend will grow; therefore we need to proactively seek and exploit opportunities to allocate work to strategic suppliers on key parameters:

• Assurance of Supply
• Cost
• Quality
• Service
• Innovation
• Market maturity and competitiveness
• Fit to business requirements

Criteria used to identify outsourcing/offshoring opportunities

As COMPANY-X procures product, goods and services from many thousands of suppliers, it may not always be possible to use outsource/offshore sourcing. However, COMPANY-X Procurement’s intention is to focus on appropriate categories and suppliers using specific selection criteria to successfully exploit appropriate opportunities.

High-level outsourcing success factors include:

• High level senior management sponsorship as a pre-requisite.
• Consensus around a sound and comprehensive sourcing strategy before attempting outsourcing.
• Effective change management and governance plans, essential for sustained value creation and continuous improvement.
• Analytical and experiential skills to understand multiple dimensions of complexities and options created by BPO, offshore, and multi-process outsourcings, and cultural/other client dynamics.
• Tailored and sustainable outsourcing solutions designed to match current and future needs to the individual supplier’s strengths.
• Outsourcing as a win/win proposition for the buyer and supplier. Vehicles for future value creation and capture (defined initiatives, investment models, and gain-sharing principles) beyond today’s baseline cost improvement must be in place.
• Always acknowledging that trust with the outsourcer must be nurtured throughout the process as a key element to success.



Additionally, for outsourcing/offshoring to be successful, steps must be taken to prevent common pitfalls. These include:

• Lack of clear Objectives
• A poorly researched or light fact base
• Poor understanding and communication of work processes being considered for outsourcing
• Poor understanding and communication of the appropriate Key Performance Indicators
• Little to no Governance or Change Management
• Significant variation in deployment methodology leading to process and contractual gaps
• Poor staff communications (particularly if there are staff implications)