PRINT
EMAIL
COMMENT
BUZZ UP
DIGGEXECUTIVE POLL
Bernard Madoff, convicted of running an $65 billion Ponzi scheme, was sentenced to 150 years in jail. What’s your take on his punishment?
OUR PREMIUM CONTENT
The Kiplinger Agriculture Letter
The Kiplinger California Letter
Kiplinger's Biofuels Market Alert
Kiplinger's Retirement Report
SUBSCRIBER HELP
CURRENT LETTER
Overhauling
Financial Regs
PREVIOUS ISSUES
Knowledge@Emory is an electronic newsletter of Emory University's Goizueta Business School. It is part of the Knowledge@Wharton network, run by the Wharton School of Business at the University of Pennsylvania, which explores current issues, trends and practices in business. Almost any business seeking to cut costs these days – and in this environment, what company isn't -- is considering outsourcing a variety of functions overseas. But it's a huge mistake to think that just making that shift will mean big savings. It takes work, planning and know-how to ensure that real savings are realized -- and, especially, to make sure that lasting damage is not done by unscrupulous contractors or partners.
Companies have had to earn their savings by taking on a whole new set of risks and managerial challenges. For the losers of this gamble, kinks in the supply chain, lost intellectual property and disgruntled customers are some of the consequences of offshore projects gone wrong, says Knowledge@Emory, an electronic newsletter of Georgia's Emory University's Goizueta Business School. But, the article, entitled, "Navigating the Risks and Challenges of Offshoring," also says years of experience has helped identify common pitfalls and best practices that can avoid them.
Knowledge@Emory focuses on three key areas. The first they refer to as shirking, by "delivering an inferior product" due to not using the promised level of quality in workers or materials. Second is misappropriation of assets, where a contractor uses a company's knowledge or designs for their own profit. The last is "service locking," where a firm becomes so dependent upon a single provider "that the company loses its bargaining power with the contractor."
Shirking can be addressed by making expectations of a level of service and experience of workers a part of the contract. Companies can create an incentive for contractors not to cut corners by agreeing to a remedy -- most likely an increase in the money be paid -- if a contract turns out to be less profitable than expected. Looking for vendors that have been in business for a while -- after a while establishing and keeping a reputation for honesty overrides the desire to make a quick buck. Finally, prevent contractors from getting the upper hand in long-term relationships by not relying too heavily on any one firm and by having them share in investments needed to carry out a contract.
In other words, the bottom-line is to make sure your vendors have a stake in your success -- and a price to pay for getting sloppy or greedy.
POSTED BY: Shiri (June 27, 2008 01:43 PM)
so, exactly why stealing jobs from fellow citizens should be successful and profitable?
POSTED BY: Ishani Mitra (June 30, 2008 03:10 PM)
Excellent observation. A word of caution for all outsourcing companies would be definitely to make sure that the offshore service provider is a trusted one and adheres to strict confidentiality procedures. The OutSorcerer blog is quite an interesting read on how to manage a virtual assistant effectively.
E-Mail Article
Print Article
