B20.3155.20: Global Outsourcing Strategy

(DRAFT updated on October 10th, 2005)

Spring 2006

Prof.  Natalia Levina

Blackboard site: http://sternclasses.nyu.edu

March 21^st, 2006-May 9^th, 2006

Course Overview

Exporting of white collar jobs is receiving increasing attention both at business and political levels. Whether you are a proponent or an opponent of this trend, you need to know how to make sound decisions about your global sourcing strategy. This course focuses on services outsourcing, with special attention paid to Information Technology (IT) outsourcing – currently the largest area of global professional services outsourcing. The course covers two broad areas

-         Global Services Sourcing Landscape: Past, Present, and Future

-         Developing Managerial Competence in Global Sourcing: Strategy and Management

It draws on economic and management theories as well as real world examples from managerial practice. The goal of the course is to help you identify the challenges of global sourcing as well as the costs, risks, rewards, and strategies involved in making sourcing decisions.

Some of the topics covered are:

Ø      Historical and economic perspectives on outsourcing and offshoring.

Ø      Trade-offs among global sourcing models (Domestic Outsourcing, Offshore outsourcing, Domestic In-sourcing Captive Models).

Ø      Types of global outsourcing services (IT, BPO, Infrastructure)

Ø      Developing an outsourcing strategy

Ø      Sourcing in different geographies

Ø      The vendor landscape (local/multinational, niche players/generalists)

Ø      Legal Issues: Contracts, Taxes, IP, Privacy, Compliance

Ø      Critical success factors in managing outsourcing relationships

Ø      Managing distributed work teams: overcoming distance, time, and culture

Ø      Innovating through global sourcing

During the course we will analyze several case studies which highlight various aspects that organizations undergo while developing a global sourcing strategy. The case studies will be based on real world examples and will illustrate the intersection of business rationale with human emotions. The course delivery format will be a mixture of instructor-led sessions and guest speakers from vendor, client, consulting, and legal firms.  As their final project, student groups will be given an opportunity to investigate a topic of their choice pertaining to global sourcing.

The Class

The format of the class will be 50% lecture and 50% class discussion.

Assignments and Grading

Grading will be done on the basis of:

• Weekly memos/case analyses (40%)
• Class and Blackboard discussion (20%)
• Final Paper (40%)

In a spirit of mutual feedback, we are actively looking for your feedback on this course. Please feel free to share your comments anonymously on the Discussion Board or just talk to us informally. We will also collect more feedback in class.

Participation:

This course is based on a model of active learning, with class discussions and exercises playing a central role. Students are expected to read the assigned material, and to carefully prepare for all cases and exercises, before coming to class. Please bring name cards to class to help me learn your names.

Participation is measured by the ability of students to bring quality discussion in the class.  Given that this is a six week course, attendance is mandatory. If you plan to miss more than 1 session, do not register for the class. 

In evaluating your class participation, we will consider (a) whether you regularly contribute to class discussions and demonstrate that you are prepared for those discussions, and (b) the extent to which your in-class comments demonstrate both relevance and insight, help to move the discussion forward, and build upon the comments of others. In other words, we are interested in quality, not just quantity. Absence and lateness will reduce your participation grade. If you are concerned that a difficulty with English or some other situation will interfere with your ability to participate, please discuss this with me during the first week of the course. We will keep track of your participation throughout the semester using a three point scale (0, 1, or 2), and will be glad to provide you with feedback at any time. We recognize that expressing viewpoints in a group is difficult for some people, but it is an important skill for you to develop here at Stern. We will do what we can to make this as anxiety-free as possible. 

Memos

You will be asked to prepare memos on a weekly basis which may involve a case analysis, a reaction to a reading, or some research on the topic.  Each session on Blackboard lists homework assignments. You need to hand these in. They should be typed whenever possible. Unless the assignment specifies that it needs to be submitted through Blackboard, it will be collected at the beginning of class. Late assignments will incur a heavy penalty. If you are absent from class, we need to receive your assignment before the start of class. Assignments will be graded with a check (meets expectations), a check plus (exceeds expectations), or a check minus (falls short of expectations).

Take Home Research Paper:

Students will be asked to write a research paper investigating a topic of their choice pertaining to global sourcing phenomenon.  You can work individually or in pairs. We would expect a more in-depth analysis from a project done by two people. Potential topics include an investigation of a specific outsourcing arrangement, contrasting sourcing decisions made by firms in a specific industry, and economic, political, or social implications of global sourcing across geographies. More research paper topics are posted on Blackboard’s Discussion Board.

Paper Proposal: A one page proposal of the paper is due by Session 6 handed in class^.

Paper Due:  About 15 page double-spaced research paper is due on May 5th electronically submitted to Natalia.

Required Readings

Book: “Offshore Information Technology: Sourcing and Outsourcing to a Global Workforce” by Erran Carmel and Paul Tjia, Cambridge University Press, 2005.

Course Pack with cases and articles

Additional articles and cases available through Blackboard may be assigned for each class.

Recommended Readings available at NYU Professional Bookstore

“The World Is Flat: A Brief History of the Twenty-first Century” by Thomas Friedman, 2005.

Online References:

The following Web sites may be referred to during the class. 

MIT’s Profit Project: web.mit.edu/outsourcing

ZDNet Outsourcing Cases: http://itpapers.zdnet.com/search.aspx?&scid=99&dtid=3

InformationWeek: www.informationweek.com/

CIO Magazine: www.cio.com/

CIO/ WebBusiness Magazine:  webbusiness.cio.com/

ComputerWorld: computerworld.com   

NeoIT: www.neoIt.com

Gartner: www.Gartner.com

Forrester: www.forrester.com

Nasscom: www.nasscom.org

Russoft: www.russoft.org

TPI: www.tpi.net 

Equaterra: www.equaterra.com

Blackboard Site:

This course is hosted on the Stern Blackboard site. http://sternclasses.nyu.edu.  Online discussion board would be used extensively for discussions outside the classroom.

Schedule:

Topic Outline:

Session 1: Globalization of Service Delivery: Economic and Political Perspectives

The session will focus on giving a historical perspective on outsourcing. Economic theories and studies addressing globalization questions will be discussed. We will wage in on the debate on the pros and cons of global sourcing (offshoring).

Questions Considered:

-         What is going on and why?

-         Does US economy benefit from offshoring?

-         Should politicians do something about this phenomenon and, if so, what?

Session 2: Sourcing Models: Benefits and Risks

This session will discuss various types of services that are or could be sourced globally.  We will consider risks and rewards associated with using different types of sourcing models (Domestic Outsourcing, Offshore outsourcing, Domestic Insourcing, and Captive Models).

Questions Considered:

-         When should or should not a firm outsource services?

-         What kind of work is offshorable?

-         What are the risks and rewards of offshoring?

Session 3: Geographies

There are multiple locations available for global sourcing. In this session we will discuss the maturity of various geographical locations worldwide.

Questions Considered:

-         What are the comparative advantages of different countries?

-         Why do certain countries dominate certain areas of services?

-         How does the offshore/onshore ratio effect sourcing outcomes?

-         What are the advantages of near shoring?

-         Will China and Russia pose a serious threat to India in the next 5 or 10 years?

-         What role do regulatory environments play in different type of sourcing work?

Session 4: Vendor Landscape

Vendor landscape is varied in terms of firm sizes, areas of specialization, and office locations. In this session we delve into various criteria that are used for evaluating vendors

Questions Considered:

-         Should a firm focus on choosing a country or a vendor first?

-         Is it better to choose a local or a global provider?

-         What are the key criteria for evaluating vendors?

-         Does CMM-5 or ISO-2000 always mean you will get high quality services?

-         What are the tradeoffs between generalist and niche providers?

-         What are the vendors’ strategies in providing services to clients?

Guest Speaker: Vendor Representatives

Session 5/6: Developing an Off-shoring Strategy

This week’s sessions will focus on challenges and steps involved in developing a long term outsourcing strategy. We will discuss the differences of developing an IT outsourcing strategy from development of a BPO strategy. We will work with real-life cases.

Questions Considered:

-         Why should the firms develop an offshore strategy?

-         How does one develop an offshore strategy?

-         What can or should be outsourced and when?

-         Which sourcing model should be selected?

-         Which contract structure is best suited for different types of services, given vendors’ and clients’ capabilities and experiences?

Guest Speaker: Business Consultant

Sessions 7/8:  Managing Outsourced Relationships

This week’s sessions will focus on detailing the complexities involved in managing outsourced projects. 

Questions Considered:

-         What are the critical success factors in building and managing outsourced relationships?

-         What does it take to do knowledge transition and change management well?

-         What are the roles and responsibilities in governing the relationships?

-         How to take care of security and privacy concerns?

-         What are the implications of changing the relationships if the client is not happy with it?

Guest Speaker: Managing Director or CIO in charge of Sourcing in Financial Services Firm

Session 9:  Managing Distributed Teams

Distributed work now is part of any global corporation whether it is outsourcing to 3^rd party vendors or is using captive centers. We will focus on work issues pertaining to team building and everyday work coordination.

Questions Considered:

-         What are the challenges in distributed teams vs. face-to-face teams?

-         Which collaborative technologies can help virtual work?

-         What role, if any, do cultural differences play?

-         Are face-to-face meetings necessary?

-         Which processes help distributed teams?

Sessions 10: Legal Issues

Any outsourcing strategy is incomplete without considering legal issues. We will discuss five legal aspects of global sourcing: taxation, contracting, IP, data privacy, and compliance.

Questions Considered:

-         What are critical legal dimensions of outsourcing and offshoring?

-         What should be discussed in a contract or an SLA?

-         Does using a 3^rd party vendor have a higher IP-related risks than insourcing?

-         What are legal concerns with data privacy in a global context?

-         What does Sorbanes-Oxley mean for global sourcing?

Guest Speaker: Legal Expert

Sessions 11:  Innovating through Sourcing

We will consider how sourcing strategy can be used as a competitive differentiator and how firms can learn to innovative across country and organizational boundaries.

Questions Considered:

-         Can strategic advantages be gained from sourcing globally?

-         Can firms produce innovative products and services through global sourcing?

-         What does it take to innovate across boundaries?

Session 12: Wrap-Up

Students will be given an opportunity to synthesize their learning. We will discuss long-term implications of global sourcing for countries, organizations, and individuals.