Title: International Management of Services
1International Management of Services
University of Arizona January 2006
Professor Amar Gupta Tom Brown Chair and Senior
Director for Research and Bus. Development Eller
College of Management Tucson, AZ 85721 USA
2History of Evolution
- The Kodak Effect 1989 To IBM, DEC,
Businessland
3History of Globalization
- Earlier in 1963, EDS took over EDP department of
Blue Cross of Pennsylvania - EDS took equity position in System One of
Continental Airlines - EDS purchased by GM in early 80s and spun-off
again - 10 of outsourcing revenue must be ploughed back
into South Australias economic growth!
4Other Significant Developments
- Y2K and EEC
- Policies of governments in emerging economies
- Policies of governments in developed economies
5Outsourcing in Automobile Industry
- Ford Motor Company in 1900s
- Import of Parts from other locations/countries
- Markets versus Manufacturing Locations
- Transition back to the US!
6(No Transcript)
7Outsourcing in Other Industries
- Optics Industry
- Steel Industry
- Impact of Disruptive Technologies
8- Economic Issues
- Analysis of Individual Companies
- Analysis of Industry Sectors
- Analysis of Individual State/Local Governments
- (Case of Indiana vs. Springfield)
- Net Impact to Individual
- Loss of Job vs. Benefits as Consumer, Taxpayer,
Shareholder
9Indiana Example
- Summer of 2003 Tata America Int. Corp,
Accenture, and Deloitte Consulting make bids
ranging between 15.2 million and 38.5
million. No Indiana-based company submitted bid.
Up to 65 contract workers were envisaged to work
alongside 18 state workers. - September 2003 Governor Frank OBannon accepts
lowest bid. - November 2003 Governor Joe Kernan cancels
contract. - Decision NOT related to shortcoming of any type.
- Projected Difference 8.1 million versus
approximately 50 employees. - Decision of Voters in 2004!!
10Springfield Example
- Cost of Drugs Lower Abroad typically one-fifth
to one-half - Better Services for Residents of City and/or
Lower taxes - Model accepted at State Level
- California has adopted slightly different model
CGI etc. - Practices Vary Widely.
11Productivity Issues
- 1 Person
- 10 Persons Co-located
- 10 Persons Distributed
- 10 Persons Distributed
- 1
- 10 X F
- 10 X f
- 10 X f / R
12Distance Tax
- Communications
- Travel
- Maintenance of Duplicate Facilities
- Cultural
- ..
13Medical Transcription Services
- Extended Learning Curve- Eight to Twelve Month
Training Program - Cost US 2500 to 3000/mo versus Indian MT lt
300/mo - Education All have at least undergraduate
degrees - 221 science/medical-based degrees
- 37 doctors
- 17 pharmacists
- Cultural Bagels and Beagles and other cultural
differences
14Results of Major Studies
- 1 spent abroad leads to 1.45-1.47 of value
- Of this, foreign firm receives only 33 cents
- US company receives between much more
- Aggregate benefit to US economy of 16.8 billion
from one sector alone.
15Overall Numbers
- Number of US companies
- Number of Jobs Relative to Overall Size in India
- Percentage of Global Market
16Outsourcing in Other Areas
- Legal P G
- Accounting
- RD
- Teaching My job can be outsourced!
- British Rail
- Italian Passports
17Question for Break
- Think of other examples of globalization
- Think of older examples of globalization
18- Organizational Issues
- Intra-organizational, Inter-organizational, or
Partnership - Degree of Coupling
- Intellectual Property Issues possibility of
taxing IP exports/imports
19 Creation of New Terms and Models
- Outsourcing
- Offshoring
- Globalization
- Near-shoring
- In-sourcing
- Multi-sourcing
- Co-sourcing
20One Consulting Companys View
21Decision Variables
- Magnitude of Project
- Complexity of Effort
- Criticality of Endeavor
- Duration and Potential Repeatability
- Degree of Need for Scalability
- Cost Considerations
- Preference for Host Environments Social,
Economic, Political, Skill-Level, Language
22Potential Locations
23Evaluating Potential for Offshoring
- Temporal and Spatial Considerations
- Balance between Automation and Labor
- Degree of Proximity Needed with Suppliers,
Co-Contractors, and Buyers - Time zone differences (Earlier a bug now a
feature) - Degree of Need for Specialized Expertise
- Trans-border Data Restrictions
- Immigration and other Cross-border Restrictions
(H1B, L1 visas security considerations)
24- Value Addition Models
- By understanding the offshore teams role in
value addition, firms can plan their models
accordingly. Also, as costs get higher, offshore
teams can also move up the learning curve to
higher value jobs. - Low-end
- Mid-range
- High-end
- For the nation, the important issue is not where
companies are based, but where value addition is
based.
25Delivery Models
- Captive center
- Joint venture
- Third party
- Many interrelated issues make different models
right for different firms. For example,
third-party ventures may allow firms to avoid PR
issues of using child labor, or local corruption
practices
26Key Motivators
- Cost
- Skill Levels
- Time to Enter Market
- Economies of Scale
- Local Market Needs
- Opportunity to Concentrate on Bigger Issues
27Key Hurdles
- Lack of Management Support
- Resistance from Employees
- Difficulty in Negotiating Contracts
- Difficulty in Finding Reliable Partners
- Potential Risk to Intellectual Property
- Political or Governmental Interference
28Partnership Models
- Resource Based
- Offshore/Nearshore Development Center
- Build, Operate, and Transfer
- Joint Ventures
- ..
29Decision-making dependencies for individual work
3 scenarios
(a) Autonomous
(b) Semi-Autonomous
(c) Heavily-interdependent
- Three scenarios for decision making - This
really is a continuous scale, based on how
interdependent the tasks are Examples -
Autonomous call center - Semi-autonomous
hierarchy of experts (tv repair, etc) -
Heavily-interdependent software development -
Important thing is to assess the knowledge
interdependencies first, for two reasons 1) know
how to setup outsourcing structure for existing
operations 2) determine if new knowledge
dependencies can be made, leading to new
organizations
30Organizational models for heavily-interdependent
teams
(a) Flat Organization
(b) Geography-specific
(c) Task-specific
Organizational models for heavily-interdependent
decision making teams. By addressing the
heavily-interdependent scenario, one can deal
with the complexities of relatively simpler
scenarios. Another axis to consider while
considering appropriate decision support systems
is the nature of the organization. In a flat
organization, all decision-makers, regardless of
task or geography, can be deemed to belong to a
single organization. In other cases, additional
layers of hierarchy exist within the overall
organization. Based on the degree of importance
played by the geography or the task, one can
visualize the three cases depicted in figure 3,
to filter decision making input and output
through either the geography or task group.
31Example Organizations/Projects
32 - Strategic Issues
- Roles of Government Agencies when to
encourage/discourage? - Evolution of Enclaves infrastructure,
training, security - Growing Digital Divide political risk of
have-nots in unstable countries
33- Technical Issues
- 24-Hour Knowledge Factory
- Automated Translations on a real-time basis to
open outsourcing to non-English markets - Surmounting Differences in Accents and Tones of
Voice - Transformations and Mediations meaning of
rear-ended - Wireless Grids (Wirelessgrids.net) - open rural
areas to outsourcing
3424-Hour Global Knowledge Factory
35Knowledge Acquisition
- Involves acquiring information from human beings,
paper based documents, sensors, and other
traditional media - May need to be done on a one time basis, periodic
basis, or continuous basis - Driven by society, organization, or application
36Two concurrent approaches to knowledge-based
design
- MATE
- Fully integrate all stakeholders into design
process in an efficient and user-friendly manner - Collect and process expense and utility data
using virtual methods
- SSPARCy
- Examine relation between changing expense and
utility functions and design parameters - Provide designers with more concrete method of
expressing design rationale
- Result
- Efficient communication across multiple
locations - Innovative ways of collecting,
processing,presenting and interpreting design
information
37Dynamic Web-based Interface for Knowledge
Acquisition
38Decision Rationale Module
Decision Archival Module
Decision Rationale
Attribute Definition
Decision Parameters
Utility Interview
Utility Function
Utility Measures
Attribute Values
Architecture Diagram for KNOWFACT
39Trusted Agents
- Can access all the information from multiple
databases held by participating organizations. - Will provide only subsets of information to other
organizations on a need-to-know basis. - Can be used to access data that one finds hard to
reach, such as the Medicorp data that the
research group utilized. - Will play increasingly valuable role in
- interorganizational data flows.
40Knowledge Management
Bottleneck
Sources
Receivers
S1
R1
Pesetas
French francs
S2
R2
US
Sm
Rn
41Knowledge Discovery
- Human beings are good at visualizing in 2 or 3
dimensions - Neural networks can perform good visualization in
more dimensions - Peaks and valleys predicted with good learning
ability, when signal to noise ratio is above a
particular threshold
42Neural Network Based Approaches
- Neural Networks mimic the broad parallelism that
characterizes the human brain - Ideal for detecting trends that even human
experts may find very difficult to identify - In the case of Medicorp data, neural network
data mining techniques could reduce inventory
levels from 1 billion dollars to 500 million
dollars. - Neural Network based data mining techniques
appear - ideally suited for large data-analysis oriented
applications - 50 reduction in carrying costs while leaving
- operational readiness level unchanged!!!
43Wireless Grids Virtual Organizations
- Three aspects to consider when defining possible
virtual organizations - Grid Computing Services versus Wireless Grid
Services - Wireless phones versus Wireless Grids
- What isnt being done right now.
Grid Computing Technology
Wireless Technology
Wireless Grid Services
44Grids for Virtual Organizations
45Virtual Enterprises?
- The Virtual Enterprise is a network of several
companies, which contribute their core
competences and share resources such as
information, knowledge, and even market access in
order to exploit fast-changing market
opportunities. The relationship can be long or
short term. - Virtual Enterprise Computing Grid Computing
46Design Challenges for Virtual Enterprises
- Decentralized Control
- Accounting
- Preference Specification (Service Discrimination)
- Ease of Use
- Security
- Heterogeneity
- Cost vs. Performance
- Low Overhead
- Complementary Resource