Industry insight
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Week 5 framework
particular process. With the process under consideration for outsourcing as the unit of analysis, I find that its entrenchment in the focal firm interacts with the quality of external expertise in informing the emphasis that managers should place on various aspects of the outsourcing capability. The performance of this capability ranges from investing in maintaining a level of “Absorptive Capacity”, developing a culture and processes to manage “Relationship” with the supplier, establishing “Monitoring” systems to audit the progress and performance of the supplier and putting efforts to create live options so as to retain “Flexibility” in relation to the arrangement. When deeply entrenched processes are taken out, the focal firm has to emphasize upon Relationships to ensure that the outsourced process continues to interact with the SO 7,3 244 existing process of the firm with the same level of intimacy as before, despite it going out of the firms’ boundary ( Quinn and Hilmer, 1994 ). When the rate of innovations being generated in the market for such processes is high, it places an additional demand on the focal firm to maintain an understanding, to retain its know-how of the outsourced process, often through continuing to run the process internally as well ( Berggren and Bengtsson, 2004 ) so that a healthy level of Absorptive Capacity is maintained and the firm is able to recognize, assimilate and benefit from the innovations of the supplier ( Bertrand and Mol, 2013 ). When the rate of innovation is low, the focal firm would need to actively invest in building up of capabilities, often through a unit spun off from the focal firm ( Gottfredson et al., 2005 ) to reduce administrative load and demands on time of its managers. When the process being outsourced is loosely connected with the other processes of the focal firm, the key areas of emphasis is maintaining flexibility through short-term contracts and multiple suppliers ( Shi, 2007 ; Quinn and Hilmer, 1994 ). When the rate of innovation is high for such loosely connected processes, boundary spanners need to act as the bridge between the external and internal maintaining the firm’s Absorptive Capacity, while there is need for stable monitoring mechanisms when the rate of innovation is low. The four quadrants of the Outsourcing Matrix (Refer Figure 1 ) correspond to the interaction between various processes which are a candidate for outsourcing, and the capabilities that exist in the market for the focal firm to access. The Matrix informs on the optimal strategy for each quadrant clarifying the vastly different strategies that a particular firm will need to apply for different outsourced processes to effectively manage them. The varied objective of the focal firms pursue through outsourcing requires the firms to gain expertise in managing the outsourcing arrangements ( Kakabadse and Kakabadse, 2000 ) and to be comfortable with varying strategies for varying demands that multiple outsourcing arrangements place on the organization ( Gottfredson et al., 2005 ; Kakabadse and Kakabadse, 2005 ). In summary, thus, there is a need to recognize that the multiple opportunities that external suppliers offer to the outsourcing firm can be best accessed through a nuanced understanding of the process being outsourced, the rate at which innovations are being generated in the market and by using different approaches as these two factors vary and interact. It is this nuanced and strategic approach towards the outsourcing arrangement that would fulfil the potential of outsourcing without compromising the current and future core competencies of the organization. Download 329.89 Kb. Do'stlaringiz bilan baham: |
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