Discovering New Outsourcing Opportunities
Som Karamchetty [1]
Abstract
Despite
arguments about the merits and demerits of outsourcing, both the customers and
suppliers have reaped its benefits. In the case of offshore outsourcing, businesses
in the developed have reduced their costs and improved their competitiveness
while the developing countries have gained millions of new jobs and vastly
improved economies. Outsourcing can be done at a whole industrial process level
or at the component process level. Morphological analysis allows us to dissect
a mega-process in a business and look for alternative ways of conducting the
component process and alternative performers. The alternative performers can be
in India
Beginning
with call center operations, the offshore outsourcing phenomenon has now
engulfed IT, and many other high end processes. Healthcare, medical services,
assisted living, and nursing homes are likely to be the next big opportunities
on the horizon. In the next couple of decades, the US India
Introduction
My aim in
this article is to introduce Morphological Analysis as a tool to discover
outsourcing opportunities. I will do this by first describing outsourcing and
by introducing the Morphological Analysis. Indian businesses have been
benefiting from outsourced work from developed countries. Owing to a cost
advantage of 4 to 1 or 3 to 1 in favor of India ,
work is offshored to India
Within India
Several
parties have a stake in such analyses. Businesses want to stay competitive and
make profits. They should conduct an analysis and look for outsourcing opportunities
for some of their component processes. Those businesses, which are looking for
work in their areas of core competence, should conduct analysis of other
businesses for outsourcing opportunities as part of their marketing efforts. Lastly,
governments have a strong interest in such studies, because they are interested
in uniform national development.
Brief Remarks on the Outsourcing Landscape
Diana Farrell,
Noshir Kaka, and Sascha Stürze [2]
quoting from a Nasscom report [3]
stated, “India India
Initially, offshore outsourcing was
restricted to call centers but gradually spread to business processes. A report
in Siliconindia [4] says,
“Seeking to cut costs, companies from the US
and other Western countries have hired about 170,000 workers in India
Information and communication technologies (ICT)
have helped in this outsourcing phenomenon. An educated and English language
proficient workforce in India
After Information Technology and
BPO, India Washington students
struggling in the middle of the night with a math question may get an answer
from a tutor in India
Another area ripe for outsourcing is
the US US and Europe
to look at Indian IT and ITES providers.” Tejaswi further adds, “The US
healthcare industry alone is expected to spend $34 billion to develop
supporting technologies by 2008, against $26 billion last year …”
Outsourcing
of medical procedures is also a lucrative opportunity for India
We could
dwell on thousands of such instances and statements of outsourcing successes.
But, perhaps, the point is made that outsourcing is here and growing strong by
the day.
Outsourcing
Explained
Companies
are in business to make money for their shareholders. They want to minimize
their investment and increase their earnings per share, earnings per employee,
and improve their other measures of corporate performance. Traditionally,
companies performed all tasks in house. Modern managers like to focus on a few
of their core competencies and relegate all other products and services to
others who provide quality products and services at competitive prices.
Therefore,
managers’ first task is to identify their core competencies and develop these
areas in house. Their next task is to identify the secondary and tertiary tasks
and begin to identify reliable, economical, and competent suppliers outside the
company. Such analyses can be done at various levels of granularity and a
number of suppliers selected.
Peter Bendor-Samuel [10]
writes, “As we enter 2006, outsourcing stands at a new inflection point.
Fundamental and seismic changes are altering the structure of our industry. Buyer unrest is causing a change in
outsourcing transactions. They will morph from monolithic mega-deals into
higher value deals with smaller components.” When a large number of mini-deals
become available, many small vendors get opportunities to become new suppliers.
This new
emphasis on mini-deals requires a more rigorous and systematic analysis.
Morphological analysis is a strong method for consideration.
Morphological
Analysis
Zwicky
(1962, 1969) [11]
, [12]
explained the method known as morphological analysis as “total thinking.” [13]
We aim at the totality of solutions to a given problem without prejudice as to
the value of any solution. By enumerating all possible solutions, we can obtain
a large number of alternative combinations constituting solution sets. By
applying this technique to a number of areas, Zwicky obtained patents in such
diverse fields as propulsion systems and explosives.
Next, I will describe a simple example to
explain the application of Morphological Analysis. Most readers are aware of
how a traditional clothes laundry business operates. By analyzing the various
processes in the laundry business, we can look at alternate means of performing
those tasks. Some of these can be kept in-house as core competencies and the
others can be outsourced. For the purposes of this explanation a simple
analysis (previously discussed in the author’s 1996 paper cited already) is
presented here.
Table 1
shows ten activities (rows) that constitute a simple laundry business: (1)
transport clothes, (2) receive clothes, (3) ticket clothes, (4) bag clothes,
(5) ship clothes, (6) receive clean clothes, (7) deliver clothes, (8) transport
clothes, (9) receive payment, and (10) deposit payments in bank. Alternate ways
of accomplishing or persons responsible for each of these activities are
illustrated along each row in the table. In this example, there are 3 x 3 x 4 x
4 x 4 x 3 x 4 x 4 x 5 x 4 = 552,960 combinations. This large number shows the
power of the method. As seen in this example, Morphological analysis consists
in listing all the components that make up the process. This is shown as
activities along the first row. Then we examine alternate ways of performing
the component task or who might perform it and list them along the
corresponding row. In the example, we enumerated 3 to 5 ways of doing each
task. We could have thought of more ways, but for the sake of simplicity in
illustrating the method, only a few alternatives are selected. We can pick any
element along each row and form a sequence of component operations to run the
business. If we lack innovative thinking, we conclude that there is only one
way of doing this business. With innovative thinking, we can come up with many
alternatives. We follow the enumeration phase with an evaluation phase. It is
possible that some of these options might be eliminated during detailed
analysis for technical, political, cultural, or economic reasons. Awareness of
a large number of alternate options gives you an advantage over your
competitors.
Note that
in the traditional laundry service sequence, the customer drops the clothes
with a clerk, is given a receipt, and later picks up the clean clothes from the
clerk, paying by cash. In another sequence, the clerk picks up the dirty
clothes from the customer’s home, bags them, transports them to a washer,
brings the clothes back to the customer’s home, and collects cash; this is old
fashioned by today’s standards. The case, in which the customer does everything,
including washing, is a trivial case where no laundry as a business exists.
Although
this is a simple example, I hope that the reader is convinced that a systematic
analysis has two steps: (1) identifying the component processes that make up
the chain or sequence, and (2) devising alternate ways of performing the
component processes. Once the business process is broken down into component
processes, we can look for which processes can be outsourced to which
suppliers. It is also possible that if a component process (or activity) is
outsourced to India , it
might be done differently than it would have been done had the component
process (or activity) been retained in the US
If one
examines the processes (5) and (6), the dirty clothes are shipped to some place
(not specified in the example) and cleaned clothes are received from there. Clothes
washing function can be outsourced to any place depending on the availability
of washing facilities, skills, and economics. Examining this possibility by
this method is new but the process itself is not new. Many hospitals in San Francisco in California
send their linen to Gilroy Delhi
We need not
go too far to find good examples. Excellent stories were written about Mumbai’s
Dabbawallas [14]
and management Guru’s have analyzed their methods. All Dabbawallas do not
travel with their Dabbas, which contain fresh and hot meals prepared by
suburban housewives for their husbands working in the offices in Mumbai.
Perhaps, we can transition the Dabbawallas’ method to moving clothes to and
from rural areas. Or we can outsource the process to the Dabbawallas. The idea
here is not to dwell on clothes washing but to illustrate the importance of
analyzing a business process in detail in order to seek alternative suppliers
or discover outsourcing opportunities.
Urban
to Rural Outsourcing
Urban infrastructure problems of big Indian cities like Benguluru are well chronicled. As the wealth of the residents of a city increases, costs of real estate and general cost of living go up. People with modest incomes will not be able to afford to live in cities. Some of these people may have to move to cheaper towns and rural areas along with their jobs. Central and state governments and chambers of commerce and industry might undertake studies to decide which business processes can be outsourced. Morphological analysis comes in very handy.
Urban infrastructure problems of big Indian cities like Benguluru are well chronicled. As the wealth of the residents of a city increases, costs of real estate and general cost of living go up. People with modest incomes will not be able to afford to live in cities. Some of these people may have to move to cheaper towns and rural areas along with their jobs. Central and state governments and chambers of commerce and industry might undertake studies to decide which business processes can be outsourced. Morphological analysis comes in very handy.
At the mega level, the laundry
business can be a good candidate to move to rural areas as discussed in our
earlier example. Now, we consider another case and ask if we can move parts of
the food business to rural areas. One finds an example in midday meal
preparation for school children being outsourced to Naandi Foundation. [15]
“Naandi created the world’s largest
central kitchen at Hyderabad
Many
businesses in Indian cities serve hot lunches to their workers. Would
outsourcing such meal preparation to village based businesses be feasible and
economically viable? If not, can we do an analysis of the component processes
and evaluate if some component processes can be outsourced. For example, it may
turn out that peeling and cutting vegetables can be carried out economically in
villages near the farms where vegetables are harvested. Transporting smaller
quantities of prepared vegetables is easier and cheaper than transporting large
quantities of vegetables.
Think
for a moment how vegetables are marketed in Indian cities even today. Farmers
in villages harvest their vegetables and carry them to cities and hawk them
from street to street. This is a very inefficient method of using a farmer’s
time and energy. There should be no need for a farmer to go with his vegetables
and return home with cash proceeds of the day. Vegetables or processed
vegetables could be transported to the city and delivered to individual homes
following the Dabbawala model.
Future
Opportunities for Outsourcing
The 2005 US White House Conference on Aging [16]
discussed the implications of the next wave of America India
As one examines the outsourcing trends, from call centers
and business process outsourcing (BPO), the market moved to Information
Technologies. This market is now moving to research and development and product
and process innovation. As described in earlier sections, the big opportunities
are in the health care and aged homes fields. If we merely use these phrases,
they are the mega-deals and the small entrepreneur will wait for the big
companies to grab the opportunities. In a proactive stance, small entrepreneurs
can perform a Morphological analysis of the healthcare and aged homes sectors
and prepare to bid on the component processes, where he/she is competent. Such
an analysis will indicate to governments what education and training schemes
will prepare the future Indian work force to stand up to the challenges of the
emerging outsourcing scenario. Young people need not rest their hopes on IT
alone but gain knowledge and skills in the component processes within the
healthcare and aged homes businesses of the near future.
The pot of gold at the end of the rainbow is within the
reach of the prepared.
Table1. Array of activities in an illustrative laundry
business
ACTIVITY
|
ALTERNATIVES
|
|||||
1
|
Transport
Clothes
|
Customer
|
Laundry
|
Mail
|
||
2
|
Receive
Clothes
|
Clerk
|
Machine
|
Washer
|
||
3
|
Ticket
|
Clerk
|
Machine
|
Card
|
None
|
|
4
|
Bag
Clothes
|
Clerk
|
Machine
|
Customer
|
None
|
|
5
|
Ship
Clothes
|
Clerk
|
Customer
|
Mail
|
None
|
|
6
|
Receive
Clean Clothes
|
Clerk
|
Mail
|
Customer
|
||
7
|
Deliver
Clothes
|
Clerk
|
Machine
|
Mail
|
None
|
|
8
|
Transport
Clean Clothes
|
Clerk
|
Mail
|
Customer
|
None
|
|
9
|
Receive
Payment
|
Clerk
|
Machine
|
Bank
|
Card
|
Mail
|
10
|
Deposit
in Bank
|
Clerk
|
Card
|
Mail
|
None
|
|
[2] Source: http://www.mckinseyquarterly.com/article_page.aspx?ar=1660&L2=1&L3=106&srid=17&gp=0#foot1
[3] Source: Strategic
Review 2005, National Association of Software and
Service Companies (Nasscom).
[4] Source:
Silionindia Marh 18, 2004, “India
[5] Source: Gene Sperling,
“How to Refloat These Boats” The Washington
[6] Source: “After BPO, legal works moving to India
[8] Source: Indian IT to
take care of US healthcare” The Economic Times, http://economictimes.indiatimes.com/articleshow/1161656.cms
[10] Source: Peter
Bendor-Samuel, CEO, Everest Group, “Why
Outsourcing Is Poised for a Sea Change” http://www.outsourcing-analyst.com/2006-everest.html
[11] Zwicky,
F., (1962), Morphology of Propulsive Power, Society for Morphological Research,
Pasadena , CA
[12] Zwicky,
F., (1969), Discovery, Invention, Research: Through the Morphological Approach,
Macmillan, Toronto
[13] Source:
Som D. Karamchetty, “The Application of Morphological Analysis to Discovering
New Forms of Business,” Entrepreneurship, Innovation, and Change, Vol. 5, No.
3, 1996, Pages 203 to 216.
[14] A
typical source: Mumbai’s Dabbawallas – a complete management workshop, http://www.pagalguy.com/index.php?categoryid=15&p2_articleid=252
No comments:
Post a Comment