Overview of posts April/May 2009

I have been blogging for a little bit more then a month now and wrote some 30+ posts in that period. I don't think I can keep up this high frequency but will try. However, I plan to provide monthly overview of the postings of the previous month, divided in a couple of categories. This should prevent readers looking for certain information to work their way through the whole list... The categories I want to start off with are:

Sourcing, its risks and opportunities. This post describes the outlines of a framework aligning value creation (e.g. increase productivity) and outsourcing. I argue that an outsourcing engagement should primarily be steered on output performance (e.g. value drivers) and less on activities. Measuring value also means discounting expected future cash flows, but many companies still use one Weighted Average Cost of Capital (WACC) to calculate the NPV of outsourcing initiatives and other (des)investment decisions. This despite the higher average inherent/gross risk level of outsourcing decisions. This post provides guidelines to for a more sophisticated approach.

A couple of other posts are on different types of risk and how they relate to outsourcing. One of them is about legal and compliance risk. This post also looks into compliance risk, but provides guidelines to implement a control framework to monitor regulatory compliance by a third party more efficiently. A widely used and misused control/assurance tool within the outsourcing world is the SAS 70 report and its successors ISA 402 and ISAE 3402. You can read more on these types of assurance reports here and here. Besides legal and compliance risk are project and financial risk also important risk categories that have to be considered when outsourcing (not to forget operational and strategic risk, more on those in future postings).

Sourcing, an economic crisis perspective. Many third parties are also feeling the effects of the economic crisis and it doesn’t matter whether you are part of the first outsource wave (products) or second wave (services). There are only a few service providers which will show record figures in 2009 and most of them are in the area of Legal Process Outsourcing. More on this subject here. In another post I give a couple of examples where U.S. companies lay off people more easily than over here in Holland, and I wonder whether a fundamental different view on managing 'human resources' is also holding back offshore outsourcing in continental Europe.

For those companies which seriously consider outsourcing as one of the tools to whither this storm I summed up a couple of do's and don'ts here. Many companies have already existing outsourcing contracts and early renegotiation or the an exit and transition to another vendor could potentially be very beneficial as third parties are fighting over any contract out there in the market. Could it be an option for your company too and can European companies get a better deal than Americans? Some companies are even hit so badly by the economic crisis that they are forced to sell off any assets they can, including shared service centres. When is this a good idea and when not?

Sourcing, looking in the crystal ball. The third wave of outsourcing is about countries and companies securing access to food and other basic resources. Does this mean that whole countries should now be considered to be a 'supplier'? In another posting I give my thoughts on the the ability of Africa to become the next big continent for offshore outsourcing. Although there are countries that are positioning themselves as serious alternatives for upcoming Asian destinations, do I have little hope for the majority of the African continent.
In this post I sum up some of the financial results of some Tier 1-2 players and try to make some projections for the rest of 2009. Insourcing as opposite to outsourcing is another movement in the market which might, or might not gain momentum in the near future. I mean what do you think: the economic crisis drives companies a) to lower thier risk profile thus less outsourcing, or b) lower their cost thus more outsourcing. Who wins? What about the role of strategy?

Sourcing, background info and theories. The total newby to outsourcing can read a bit on its incubation here. How today's global trends influence decision making related to the sourcing of products and services is discussed here and here. These posts describe how shared services and outsourcing can help companies act more effectively and efficiently in today's economic rat race.
The terms 'purchasing', 'procurement', 'sourcing' and 'outsourcing' are not always easy to distinct from each other, but I gave a try here. In this posting I wrote on how a procurement function may add more value to the organisation. Organising procurement as a process instead of a department and increasing the capabilities of the procurement officers lead and facilitate complex sourcing engagements are two of the main recommendations.

Hhhmm, I think the material posted here should provide the average student enough material to write at least two papers and half a thesis. Anyway, more will follow soon.