In a modern market economy, every enterprise faces an ever-increasing level of competition. In their quest for independence, organizations are trying to concentrate all the variety of business processes (many of which are not core for them) in their hands, “overgrowing” non-core departments.
However, such burdening of an organization with non-core activities often leads to a decrease in the efficiency of its functioning and hinders business development, since the company’s management is forced to pay more attention to these services than to the actual development of the company. In addition, to maintain the functioning of these services at the proper level, it is necessary to allocate a significant part of the budget. The current mechanism for solving this problem is the use of outsourcing. Outsourcing refers to the transfer of functions of non-core divisions included in the structure of an organization to a third-party organization that specializes in performing functions of this type.
The basis for using outsourcing as a strategy for optimizing the functioning of an enterprise is a number of benefits obtained:
· Organizational and managerial. This group includes such benefits as concentrating efforts on the core activities of the organization and freeing up resources for its implementation; transferring part of the risk to the outsourcing company;
· Technological, the main of which are improving the quality of the transferred business process due to their implementation by more competent outsourcing organizations, as well as access to resources that are not available within the company;
· Cost, manifested in cost reduction due to the specialization of the outsourcing company in performing a specific function and increasing business profitability.
Despite the variety of benefits an organization receives when transitioning to an outsourcing strategy, the main one for management, as a rule, is the economic aspect. At the same time, there is currently no single method for determining the economic effect of implemented optimization measures.
A number of studies devoted to the problem of outsourcing have proposed different methods for determining the economic effect. A.N. Gallyamov proposed the following formula for calculating the economic effect of outsourcing(1):
where IEk is the integral effect when outsourcing business process k;
- the costs of implementing business process k on our own, given at the initial point in time based on discount factors vt at the risk-free interest rate;
- the costs of implementing the business process k given at the initial point in time during outsourcing;
ЛСk is the liquidation value of the released funds when transferring business process k to outsourcing;
- an increase in the company’s revenue that occurred due to an increase in quality or its image after the transfer of process k to outsourcing.
A.V. Sofrikov proposed a more detailed formula for calculating the economic effect of using an outsourcing strategy (2):
EiAf=(CiSp-SiAf)+Zif+Iif+Pi, (2)
where EiAf is the actual economic effect from the introduction of outsourcing of the i-th business process;
СiСп is the actual cost of performing the i-th business process using our own resources;
СiАф - fixed cost of performing the i-th business process by an outsourcer;
Zif - actual savings at the beginning of the accounting year, resulting from the reduction of semi-fixed costs when implementing the i-th business process on its own;
Iif - actual profit at the beginning of the accounting year from the sale, or rental, or other alternative use of property involved in the implementation of the i-th business process;
Pi is the profit received as a result of fulfilling orders, the attraction of which became possible as a result of the use of the outsourcing mechanism.
However, in our opinion, this formula can be expanded to more accurately account for the income and costs that an organization encounters when moving to an outsourcing strategy (3):
where IEi is the expected integral economic effect when outsourcing the i-th business process;
Zi0 – costs when implementing the i-th business process using the organization’s own resources;
3i1 – fixed cost of performing the i-th business process by an outsourcer;
Disp - additional income received as a result of leasing, selling or other use of the organization’s property that participated in the implementation of the i-th business process before its outsourcing;
Dikach – additional income received as a result of improving the quality of execution of the i-th business process after its transfer to a more competent outsourcer;
Eiadm – savings obtained as a result of reducing administrative costs associated with the implementation of the i-th business process by the organization;
Drash is additional income received as a result of expanding the scope of the organization’s core activities after outsourcing the i-th business process;
Zcont - costs associated with quality control of services provided and contractual work;
Zvn – one-time costs for implementing an outsourcing project;
α – income tax rate in the form of a decimal fraction;
r- discount rate;
t is the period for which the calculation is made.
In the case of calculating the preliminary value of the integral economic effect, some of the arguments of this function will have the status of “known”, some “assumed” and some “uncertain”:
· “Known” for the organization will be the cost indicators for performing a business process on its own (Zi0) and the amount of administrative costs associated with the implementation of this business process (Eiadm) - values initially known to the organization;
· “Assumed” - additional income received as a result of leasing, selling or other use of the organization’s property involved in the implementation of the business process (Disp), additional income received as a result of expanding the scope of the organization’s core activities (Drassh), costs associated with the implementation of quality control of services provided and contractual work (Zkont), one-time costs for the implementation of an outsourcing project (Zvn) - indicators, the possible value of which the organization can estimate;
· “Uncertain” - the cost of outsourcing services (3i1) and additional income received as a result of improving the quality of the business process (Pikach) - indicators unknown to the organization before market research and tendering.
In the case of a preliminary calculation of the economic effect, when taking into account “uncertain” indicators, their maximum values should be taken into account, at which the use of an outsourcing strategy will remain economically justified.
Bibliography
1. Outsourcing in the development of business partnerships / N.K. Moiseeva, O.N. Malyutina, I.A. Moskvina; edited by N.K. Moiseeva: Finance and Statistics; INFRA-M, 2010. - 240 p.
2. A.N. Gallyamov Outsourcing in organizing contract work in construction companies., 2006.
3. A.V. Sofrikov Methods and mechanisms for increasing the efficiency of a construction organization using outsourcing., 2008.
Managing a business in today's environment requires making complex decisions in real time. Fierce competition forces managers to actively use all the technological potential available today, attract more qualified labor, and introduce innovations without delay.
The concept of outsourcing as a principle of a new management strategy was created in 1963 by the Electronic Data System (EDS) company, which still specializes in information technology outsourcing, or IT outsourcing. However, outsourcing became an object of scientific research only in the 80s and 90s. last century. It was from this moment that publications began to appear in which, using the construction of various models, economists and practitioners tried to find the optimal strategy for introducing outsourcing, as well as publications devoted to various aspects of the use of outsourcing in a company’s activities. Today, outsourcing has the same importance that was attached to reengineering in the 1990s. Ten years ago, this concept was rarely mentioned, but now outsourcing is as common as the core functions of companies - research and development, production and human resources.
It so happened that those activities that were considered secondary or peripheral were outsourced. Back in the 1950s. Outsourcing for a small company was seen as an opportunity to circumvent many restrictions, and for a large company it was considered a sign of insufficiently good organization of the business and even an indicator of financial trouble.
Over time, a lot has changed. Today, outsourcing is actively used by both large and small enterprises. Many business processes are outsourced (Fig. 1).
Rice. 1. Business processes,frontoutsourced
As the scope of outsourcing expands, the old ones are being replaced by modern concepts, widely used by new generation managers who think in global terms. For them, outsourcing means maintaining a certain freedom of action in terms of the development strategy of key areas, concentration of efforts, organization, obtaining additional leverage, effective cost assessment, speed of response to changes in market conditions - that is, a progressive, modern, flexible approach. A positive image of outsourcing is also created by the business press, addressed to those who make management decisions: publications regularly appear about successful projects, as well as about counterexamples (about the ineffective management of literally “semi-paralyzed” companies with an excessively bloated staff, whose managers do not dare to cut many unproductive divisions and abandon the performance of established routine functions). What progress in just a few decades! Outsourcing is really coming into fashion.
This process becomes educational. Firms are exploring the possibility of attracting outsourcing to those functional units and in those areas of activity that have until now been considered as “untouchable”. Examples include human resources, procurement, customer relations, finance and audit, and warranty services.
In table Table 1 presents the main advantages and disadvantages that are inherent in outsourcing as an element of management.
Table 1.Advantages and disadvantages of outsourcing
|
Advantages |
Flaws |
|
1. Focus on core activity 2. Access to resources and funds that are not available (professional personnel, financial, information resources, production assets) 3. Reducing the cost of outsourced functions 4. Risk reduction through collective investment 5. Quality improvement 6. No need to have mobilization assets or invest in secondary areas of activity 7. Dependence on subjective reasons for the suspension of business processes (employee illness, conflict) is minimized 8. Increasing labor productivity through concentration on main areas and more efficient use of human labor 9. Since the amount of knowledge and qualifications of each specific specialist is limited, using outsourcing, it is possible to attract “collective” intelligence 10. Using other people’s experience and “algorithms” for solving problems 11. Access to the latest technologies |
1. Loss of control over delegated functions 2. Information leak 3. Decrease in quality due to dishonesty of the outsourcer 4. The emergence of dependence on a partner, especially if important functions or functions related to the circulation of funds are transferred to him 5. Complication of logistics processes 6. Social tension and open resistance of outsourced personnel 7. Possibility of collusion between the service provider (contractor) and the employee of the customer company who controls him: prices are inflated, and the difference is divided in half (kickback!) 8. The profitability of a business operator depends on the degree of economic efficiency of the manufacturer 9. Threat of management being disconnected from business practices 10. Limiting opportunities for training and growth of your specialists 11. Use of outdated technologies by the supplier, write-off of old fixed assets, etc. |
Outsourcing as a phenomenon began to develop intensively only in the last decade. Companies, under persistent pressure from shareholders demanding revenue growth, were interested in redistributing resources and directing them to those areas where there were deficits (or to strengthening “core competitive advantages”), as well as to solving strategic problems facing in front of the company. Such tasks can be solved in different ways, including through outsourcing. Along with this, the development of communications and telecommunications (distribution of e-mail, cellular communications, etc.) has significantly simplified the execution and coordination of activities by different structural divisions of the company. When deciding whether to carry out certain functions in-house or use third-party organizations for this, as a rule, the economic effect is first assessed. Let us note four main reasons for the economic nature of the transition to outsourcing (Fig. 2).
Rice. 2. The main reasons for switching to outsourcing
Cost reduction. As a rule, the effect of cost reduction is the main and sufficient condition for transferring part of the functions to a third party. It is necessary to analyze the situation for the most capacious costing items. This may apply to both direct costs - the main production process, and indirect ones. To analyze and determine the feasibility of outsourcing certain functions that reduce costs, you can involve third-party organizations that specialize in strictly defined areas of activity and also have sufficient practical experience.
Converting fixed costs to variable costs. There are two aspects of motivation. Firstly, by using the ready-made infrastructure of another organization, overhead costs are reduced (the costs of supporting the activities of one’s own departments are reduced, for example, the costs of capital construction and wages). Secondly, there is a redistribution of risks, some of which are transferred to the involved organization. Thus, outsourcing contracts stipulate that payment for work performed by the outsourced organization will depend on specific results. In addition, there is an opportunity to minimize payments by exceeding sales volumes by the involved organization.
More efficient execution of functions. Regardless of the range of services offered (maintenance of labor accounts, development of local computer networks, routine maintenance of buildings, etc.), a third-party organization will deal with its area of work more professionally. At the same time, the reduction in costs will be due not only to the impact of an increase in the volume of work performed, but also to the use of alternative approaches to organizing such a process. It is known that specialization ensures competence. It is especially important that a highly qualified company can promote the professional growth of people with specific abilities, for example, the ability to write advertising slogans. In particular, working on orders from his clients (in this case, advertisers), such a specialist will actively develop in the field of his professional interests, finding application for his very specific knowledge in those areas that may have a fairly distant relationship, for example, to advertising activities. Taking into account such points, an advertising agency can simultaneously conduct an advertising campaign aimed at selling computers, cars or clothing. As a result of a deep understanding of the mechanism of creation and the impact of advertising on potential clients, phrases are compiled that will not just become an empty phrase for potential clients, but will turn them into active buyers.
Another reason that contributes to increased efficiency when turning to outsourcing is a rational approach to solving a problem, carried out from the outside (gives the company a chance to reconsider its own methods of organizing work, that is, it implies a review of priority tasks and the procedure for their implementation from the zero starting point).
Release and reallocation of resources. In this case there are also two aspects of motivation. The first of them is the redistribution of resources (working time, effort, fixed assets, space, money, etc.) to achieve alternative goals that are currently most significant for the company. Freeing up resources so they can be maneuvered to solve more pressing or life-changing problems removes major barriers to success.
Recently, the business press has begun to focus on one more aspect. Often a situation arises when the company's management, having a good understanding of how work needs to be organized in their organization in order to obtain the desired results, is unable to overcome internal resistance. The interests of a company, especially a large one, are multifaceted and ambiguous, and that is why outsourcing is increasingly attracting attention.
Despite the existing shortcomings, the concept of outsourcing allows you to increase the efficiency of activities under rapidly changing conditions, which is typical for the modern economy, with increasingly complex technological solutions and increasing requirements for the quality of both the production base and the competence of personnel, on the one hand, and the need to reduce costs for increasing the competitiveness of the enterprise - on the other.
Thus, outsourcing is a response to the requirements of maximum flexibility, adaptability to changing market conditions and a modern element of effective management.
The feasibility of outsourcing: the use of outsourcing in the supply of a clothing enterprise
In order to survive in the conditions of modern competition, enterprises must constantly adapt to the environment, monitor changes in the external environment, change (primarily in the direction in which they can best realize their capabilities), focus attention on those business processes that perform qualified. Changes in the forms and methods of enterprise management pursue the goal of a fundamental rethinking and radical transformation of business processes to increase operational efficiency and the level of competitiveness.
As a result of the fact that the supplier of outsourcing services is an organization specialized in the type of business under study, the quality of products increases and management resources are concentrated by reducing the number of management objects.
However, before a final management decision is made to transfer the business under study to outsourcing, management needs to analyze the so-called downside of outsourcing, based on the criteria for refusing to transfer the business to outsourcing.
Factors of refusal to transfer business to outsourcing
The main and main factor in refusing to use outsourcing is the potential monopoly on the part of a possible supplier of outsourcing services, since the performance of outsourcing functions by a monopolist can lead to an unreasonable and sharp increase in the price of outsourced products or services.
The lack of reliable service providers in this business sector carries additional risks that should not be allowed in the ongoing business process of an organization.
A decrease in efficiency below the required level promises the organization a significant increase in the time it takes for the outsourcing company to provide services, which slows down the process of main production.
The “Increase in costs” factor indicates the danger of a multiple increase in the cost of manufacturing your own products. However, in this case, you need to make an adjustment for the quality and percentage of the ratio between the cost of your own part and its market price.
In the presence of the negative factors described above, the problem of cutting off non-core industries (businesses) can be solved, for example, with the help of foreign outsourcing companies. At the same time, the higher price of products will be compensated by greater competitiveness, lower levels of defects, and improved performance characteristics.
When transferring a business to outsourcing, an important and responsible step is the formation and signing of an outsourcing contract. For the successful implementation of outsourcing transactions, especially international ones, at the stage of developing and concluding an agreement on the transfer of functions, it is necessary to carefully work out and take into account in the contract all the key issues and problems of outsourcing.
Example
Let's consider the use of outsourcing at the modern industrial enterprise LLC Sewing Firm Leader in Omsk (the enterprise was founded in 2002).
Today the company is known in many cities of Siberia, the Urals and the Far East. The retail network in Omsk is widely developed, there are branded stores, the main functions of which include studying and generating consumer demand. The company produces outerwear: men's and women's assortments, as well as clothing for schoolchildren.
The activities of Sewing Firm “Leader” LLC show positive dynamics of results. At the same time, the company has problems:
One of the profitable components of the assortment is school uniforms, the seasonal demand for which requires an almost doubling of production and sales in the third quarter. It is impractical to produce ahead of schedule and accumulate school uniforms due to the diversion of working capital into finished product inventories;
production capacity utilization for the year is slightly above 70%;
insufficient provision of raw materials in terms of completeness, rhythm, quality, which affects the volume of production and the efficiency of use of production capacity, as well as the expansion of the range of products.
Currently, for LLC Sewing Firm Leader, supply is a significant problem, which is caused by the inability of the supplier to supply raw materials in the required configuration in small batches at the required time. Establishing logistics is an urgent need for the enterprise. The emerging problem with logistics, in particular, is caused by a wide range of products and volumetric packaging (assembly of materials in a package of sewing items), and in addition, the rapid change of assortment, which, in turn, is replicated by the number of models, colors, structure of raw materials, etc. . P.
The enterprise is forced to work with more than 30 suppliers of raw materials (at the same time, periodic supply disruptions occur - both in completeness and in terms of timing), purchase large quantities of raw materials, freezing their working capital in it (which are mostly borrowed) from three to six months. Since the enterprise rents warehouses, the costs of storing raw materials increase, which negatively affects the final efficiency of the enterprise.
In this situation, for the management of Sewing Firm Leader LLC, there is an urgent need to consider the issue of outsourcing the supply function, at least in terms of providing raw materials for the production of school uniforms, since the output of these products accounts for more than half of production volumes, the products are used unchanged demand, but unsatisfactory supply causes disruptions in the rhythm of production and fulfillment of contractual obligations, which leads to both direct losses of profit and indirect ones - penalties for short supply of finished products, freezing of funds in raw materials and materials. The freezing of funds occurs due to the fact that the production of school uniforms requires the supply of raw materials in the required configuration in small quantities and on time, but suppliers offer supplies mainly in the amount of the enterprise’s annual needs. At the same time, the enterprise is forced to enter into supply contracts with a large number of suppliers (from 5 to 10 for each type of component), which significantly complicates the coordination of deliveries on time and in the required configuration, leading to a constant increase in both the staff of the supply department and the number of tasks personnel to ensure timely deliveries.
Supply functions at the enterprise are performed by four people. The bulk of their working time is spent searching for and coordinating the actions of numerous suppliers of raw materials and supplies. But in modern conditions, achieving the optimal supply option is almost impossible, since each supplier specializes in a specific range of raw materials.
In addition to time costs, the enterprise has high costs for numerous business trips, payments for long-distance and mobile calls, Internet, etc.
At present, direct costs and indirect losses in organizing the supply function have been calculated as accurately as possible. During this stage, the following types of costs were identified:
· managers' salaries. Four managers are involved in supplies, the average salary of each is 15 thousand rubles;
· insurance premiums - 26,4 %;
· social payments. The annual amount of social payments is 10 thousand rubles. per manager;
· rental of workplace space. The company rents office space at a price of 500 rubles. per month for 1 m2; the standard area per workplace is 4 m2; the total rentable area for four managers is 16 m2;
· computers. The price of one computer is 25 thousand rubles; all four managers are provided with personal computers;
· software. The price of a software package for the procurement department is 7 thousand rubles. for one computer;
· long-distance negotiations. According to reporting data, the payment for negotiations of the supply department is 36 thousand rubles. in year;
· Internet. According to reporting data. The procurement department's expenses for the Internet amount to 38 thousand rubles. in year;
· travel expenses. According to reporting data, travel expenses of the supply department amount to 132 thousand rubles. in year;
· mobile connection. According to reporting data, the procurement department's expenses for mobile communications amount to 27 thousand rubles. in year;
· studies, seminars. Purchasing department managers undergo advanced training once every two years. Tuition fee from leaves 8 thousand rubles. per manager;
· stationery. According to reporting data, expenses for office supplies in the supply department amount to 16 thousand rubles. in year;
· depreciation of fixed assets. Depreciation charges for fixed assets used in the supply department (tables, chairs, filing cabinets, etc.) amount to 12 thousand rubles. in year;
· promotion. Annual costs for product promotion activities amount to 60 thousand rubles.
The total amount of annual costs for organizing the supply process by type is presented in table. 2.
Table 2. Annual costs of organizing supply
|
Costs by type |
Amount, thousand rubles |
|
Managers' salaries | |
|
Insurance premiums | |
|
Social payments | |
|
Renting workplace space | |
|
Computers | |
|
Software | |
|
Long-distance negotiations | |
|
Internet | |
|
Travel expenses | |
|
mobile connection | |
|
Study, seminars | |
|
Stationery | |
|
Depreciation of fixed assets | |
|
Promotion | |
The following types of losses were identified as indirect at the enterprise:
lost profit due to non-fulfillment of the production plan. According to reporting data, annually due to enterprise downtime due to late delivery or incomplete delivery, the plan is not met by 15%. Last year, such losses amounted to 147 thousand rubles;
fines for short delivery of finished products. In the reporting year, fines paid for short-delivery of finished products due to enterprise downtime due to unsatisfactory supply amounted to 210 thousand rubles;
bank interest for the use of borrowed funds. The amount of funds allocated to repay a bank loan taken to replenish working capital frozen in inventories (forced purchase of a large batch of raw materials and materials) amounted to 132 thousand rubles.
Indirect annual losses due to unsatisfactory supply are presented in table. 3.
Table 3. Indirect annual losses due to unsatisfactory supply
The total cost of organizing the supply function was 1,511 thousand rubles. But since the transfer of supplies is calculated only in terms of school uniforms (two managers), then to calculate the feasibility of transferring this function to outsourcing, the costs of organizing supplies in the amount of 756 thousand rubles were taken into account. Taking into account indirect losses, the total amount of costs taken into account was 1245 thousand rubles.
The next step was to determine the cost of the outsourcer’s services on the market.
The analysis made it possible to determine the preliminary cost of services of possible outsourcers. In the market, their services were determined by a rate ranging from 5 to 10% of the transaction amount under the contract for the supply of materials. Since the annual need for raw materials for school uniforms is 5,850 thousand rubles, the outsourcer’s services could range from 292 thousand rubles. up to 585 thousand rubles. At this stage, the costs of delivering services were taken to be equal to the transport costs of the current period, and therefore were not taken into account in calculating the overall economic effect.
A preliminary calculation of the total economic effect in this case was carried out at the maximum cost of services - 10%, that is, 585 thousand rubles. Under these initial conditions, the preliminary economic effect amounted to 660 thousand rubles. (1245 thousand rubles – 585 thousand rubles).
The preliminary calculation showed a positive overall economic effect in the amount of 660 thousand rubles. At the same time, the company was able to free up two supply service specialists and reduce the number of types of work performed by the remaining employees.
Thus, we can say that the introduction of outsourcing at Sewing Firm Leader LLC made it possible to concentrate management resources on the core business by reducing the number of management objects, freeing up enterprise resources, while increasing the quality of both the supply function and efficiency activities in general.
A. N. Romanova,
Assoc. State Educational Institution of Higher Professional Education "RosZITLP", Ph.D. econ. sciences
S. A. Studenikina,
Assoc. GOU VPO "RosZITLP"
Outsourcing services have received wide worldwide recognition in various fields of activity: information technology, finance, legal support, administrative tasks, sales, etc.
In international business practice, this term defines a sequence of organizational decisions, the essence of which is the transfer of some functions or activities previously independently implemented by the organization to an external organization or, as they say, to a “third party.”
The term “outsourcing” to define a new management concept was coined in 1989, when Eastman Kodak hired third parties to purchase, run and maintain its information processing systems.
The introduction of the term “outsourcing” into management theory is associated with the use of resources from external organizations or providers (from the English to provide - “to provide services”) in the field of information technology. Many experts believe that outsourcing has become widespread due to the development of information systems and technologies, and attribute the beginning of the “era of outsourcing” to the 60s. XX century, namely by 1962, the date of founding of the Electronic Data System Corporation (EDS).
The Russian market for outsourcing services in the IT sector is developing at a very fast pace: since the 2000s. it showed stable growth, revenue growth in the IT outsourcing segment exceeded the growth rate of the IT industry as a whole, and in the period from 2005 to 2006, the volume of exports of services increased by 80% (from $1 billion in 2005 to $1.8 billion . in 2006).
Today, there are several types of outsourcing in world practice (Figure 1)
Figure 1. Types of outsourcing
Currently, the dependence of modern enterprises of any scale on information technology has increased. As a result, IT from auxiliary production, which was primarily responsible for information support of the enterprise’s business processes, moves into the category of main production.
Thus, given the ever-increasing share of information technology costs in the overall cost structure of an enterprise, it is necessary to introduce more effective management methods to reduce costs and improve the quality of products (goods and services)
Outsourcing could be such a solution.
Considering the concept of outsourcing, let us turn to the world experience of its use, namely to the contents of the ITIL library and the description of outsourcing of IT services in this library.
In the ITIL library, the term outsourcing is interpreted as - (ITIL Service Strategy) The use of an external service provider to manage IT services.
It should be noted that ITIL is a special case of the more general concept of ITSM (IT Service Management) - Information Technology Service Management.
ITSM – (IT Service Management, IT service management) is a subset of the ITIL library that describes a process approach to the provision and support of IT services. This part of ITIL has become most famous due to the fact that the provision and support of IT services is the primary task of IT departments and specialized IT companies, which are often faced with insufficient maturity of these processes and the need to measure and control the quality of services.
Let us consider, as a model of an IT outsourcer, the typical structure of an integrator providing external management services for IT functions in the established Russian market of IT services. The structure of the enterprise is shown in Figure 2.
Figure 2. Outsourcer structure
Let's imagine the work of an enterprise's IT infrastructure as a set of IT services, each of which is a business process.
Using the process approach allows you to calculate the operating costs of an enterprise for IT infrastructure and compare the specific operating costs of an enterprise with the cost of providing an IT service support service by an IT outsourcer. If the cost of an outsourcer’s services to support an IT service is less than the company’s costs for a similar function, then it is economically feasible to switch to outsourcing. This transition condition can be represented:
D=X*(R+Q)/T-A<0 (1)
where X is the estimated labor costs for IT service in hours;
R – employee’s monthly salary;
Q – the amount of indirect costs per employee;
T - number of working hours per month;
A – cost of outsourcer services to support IT services.
Accordingly, if D>0, then it is more profitable to use the services of an outsourcing company.
The enterprises that form the basis of modern business can be represented as a large set of organizational structures.
For these reasons, we examine the structures of typical enterprises of each category in connection with the IT infrastructure. To solve the problem, within each structure it is necessary to determine such quantitative values as: the number of workstations, the number of configuration units and the number of IT personnel.
The number of automated jobs is one of the classification characteristics of enterprises. The number of workstations plays a decisive role in calculating the scale and performance of the IT system as a whole.
Taking into account the analytical data provided by the Perimetrix Analytical Center, the level of computerization in modern enterprises today is 35%-55% of the total number of personnel. Consequently, the number of automated jobs at enterprises of categories A, B and C is distributed as follows - Table 1.
Thus, thanks to the research, quantitative values were obtained for the ratio of the number of personnel and the number of automated workstations for the enterprises under study, which makes it possible to begin assessing the enterprise’s costs for IT services.
A very important economic criterion for choosing an effective method of IT services for an enterprise is the cost of services of information management systems, which depends on numerous factors of the external and internal environment, including methods of providing IT services. In this regard, in order to justify a rational form of servicing business entities based on creating their own IT infrastructure or transferring IT service functions to external management, it is necessary to evaluate the costs of the enterprise in the conditions of using these alternatives.
Since basic services constitute the main part of the IT infrastructure of any enterprise, they will be considered in the form of a service in this work.
To calculate the cost of a basic IT service, standard methods of attributing costs to the cost of services are used:
The calculation method determines the total cost of a service by dividing costs into direct and indirect. In this case, direct costs are attributed to the service in full, and indirect costs are distributed in proportion to the values of factors influencing the behavior of these costs.
The marginal method allows you to obtain information about the cost without taking into account management expenses. The basis of the method is the division of costs into fixed and variable, depending on the influence of the volume of services provided on the dynamics of costs.
The method of functional cost analysis provides management information not only about products, but also about the activities of the enterprise as a whole. The method is based on determining the cost of a service by analyzing the processes and resources, functions involved in the creation and provision of the service.
Using a combination of the described methods allows you to most accurately calculate the cost of IT services.
Having determined all the cost elements, taking into account their classification, we calculate the cost of the IT service by adding up all the costs.
The proposed methodology for calculating costs per unit of enterprise service is presented in the form of a block diagram in Figure 3.
Figure 3. Flowchart of the methodology for calculating enterprise costs for IT services
A comparison of the average prices for services to support one Basic service by outsourcers, and the costs of enterprises of various categories per unit of service by their own IT service, presented in the table, allows us to justify the feasibility of transferring the IT infrastructure to external services.
| CategoryPrev | Estimated number of automated workstations, pcs. | Number of Basic IT services per 1 workstation, pcs. | Costs for 1 Basic IT service, rub/month. | Price offer of IT outsourcers, rub. | Total price of IT outsourcers to support Basic IT service, rubUmes. | Average price of IT outsourcers to support Basic IT service, RUB/month. | ||||
| X | Y | Z | X | Y | Z | |||||
| A | 42 | 10 | 156 | 84 100 | 44 100 | 32 900 | 200 | 105 | 78 | 128 |
| IN | 142 | 10 | 92 | 222 000 | 124 100 | 111600 | 156 | 65 | 78 | 100 |
| WITH | 350 | 10 | 56 | 448 000 | 171 500 | 265 000 | 128 | 49 | 76 | 84 |
The research results presented in the table can be used as primary information for making a decision about switching to outsourcing.
The final decision on outsourcing IT services is made based on a study of the impact of the main costs on the economic component under various outsourcing scenarios for enterprises of categories A, B, C
This work solves the problems of research and development of a methodology for assessing the economic efficiency of outsourcing IT services in relation to typical enterprises of categories A, B, C. In particular, the problem is being solved - assessing the economic efficiency of outsourcing IT services using the method of discounted cash flows and financial modeling.
A flowchart for assessing economic efficiency indicators for outsourcing IT services is presented in Figure 4
Figure 4. Flowchart of the algorithm for assessing indicators of economic efficiency of outsourcing IT services
Thus, the first step is to classify enterprises by type: small (A), medium (B), large (C). Then the number of IT personnel is determined using a methodology taking into account the IT attributes inherent in a typical enterprise, such as the number of workstations and the number of configuration units. The next step is to calculate the costs of supporting IT services. IT service costs include costs for IT equipment, IT personnel, rental of premises, costs for organizing data transmission channels, voice telephony and other costs.
The next step is to calculate quantitative indicators of the economic efficiency of outsourcing IT services using simulation modeling. Simulation modeling allows you to analyze financial and economic efficiency under various IT outsourcing scenarios:
Scenario 1: An enterprise maintains a fully staffed IT department.
Scenario 2. An enterprise outsources part of its IT services (partial outsourcing).
Scenario 3. The company outsources all IT services (full outsourcing).
The modeling results allow us to find the best result for outsourcing IT services for each enterprise of categories A, B, C.
We will carry out computer simulation modeling of the economic and investment activities of enterprises using the instrumental Russian development Project Expert. The sequence of calculations in the Project Expert program is presented in Figure 5.
Figure 5. Sequence of calculations in the Project Expert system
By using the “What if” module in the Project Expert program, you can visually compare the calculated criteria (NPV, IRR) for all scenarios for using IT services outsourcing.
Figure 6. Comparison of NPV criterion
Figure 7. Comparison of IRR criterion
The use of the NPV criterion is theoretically justified, and in general it is considered the most correct measure of investment efficiency.
But it is also necessary to determine what impact the randomness (uncertainty) of the input data has on the behavior of the model and key performance indicators.
This problem is solved using Monte Carlo simulation. Based on the modeling results, a statistical analysis is carried out, which consists of determining the degree of influence of random factors on the project performance indicators.
As an example, Figures 8 and 9 show sensitivity analysis graphs for NPV and IRR.
Figure 8. Dependence of NPV on changes in factor variables for the objects under study
Figure 9. Dependence of IRR on changes in factor variables for the objects under study
The conducted studies showed that for the considered enterprise models, the most significant variables influencing the sensitivity of NPV and IRR indicators are sales price and direct costs, which determines their choice as stochastic variables for simulation. It is these parameters that are used when forming the financial model of the project and calculating its performance indicators.
A graphical interpretation of the results of calculating the stability of the NPV and IRR parameters to changes in selected stochastic variables is shown in Figures 10 and 11
Figure 10. Dependence of NPV on changes in factor variables
Figure 11. Dependence of IRR on changes in factor variables
The best financial stability to random changes in parameters is demonstrated by enterprises operating under the scheme of partial and complete outsourcing (scenarios 2 and 3).
Risk calculations were carried out in the Project Expert system using the parameters “sales price” and “direct costs” using the Monte Carlo method.
The Monte Carlo method is a simulation method. It was first proposed for assessing the risk of a stand-alone investment project in 1964 by D. Hertz, who described the approach used by his consulting firm to evaluate the expansion project of a chemical concern. The idea of the method is to combine sensitivity analysis and probability distributions of model factors. Instead of creating separate scenarios (best-case, worst-case), in the simulation method the computer generates hundreds of possible combinations of factors, taking into account their probability distribution.
The lowest risks of not receiving the expected value of the financial indicator were noted for enterprises operating under partial and full outsourcing scenarios (scenarios 2, 3), this is due to the lesser dependence of enterprises on direct costs. The financial stability of an enterprise with the highest possible ratio of fixed and variable costs is most stable to fluctuations in the external environment, as visually demonstrated by the graphs in Figures 12 and 13.
Figure 12. Dependence of R NPV on the variation of selected parameters
Figure 13. Dependence of R IRR on the variation of selected parameters
From the research results it follows that enterprises that outsource IT services (outsourcing model, scenarios 2 and 3) demonstrate better financial stability than under scenario 1. The best performance in all cases is demonstrated by enterprises operating under a partial outsourcing scheme, which allows us to consider this outsourcing scenario as the optimal distribution of IT service management functions.
Outsourcing as the transfer of traditional non-key functions of an organization to external performers, theoretical aspects of its use, types and forms. History of the development of outsourcing in Russia, features of application in enterprises, problems and solutions.
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The material was prepared based on data from the Institute of Industrial Engineers.
Based on research conducted by Tarikere Niranjan, Doctor of Business Management (Department of Logistics Management, Swiss Federal Institute of Technology) and Professor, Doctor of Science in Supply Management Shashank Rao (Nova Southeastern University, Florida) clearly demonstrates all the benefits and risks of this tool and proposes its own way of assessing its effectiveness.
In the modern world, globalization is gaining momentum: ties between companies are strengthening; due to increasing competition, there is a growing desire to optimize their own production and use resources in the most efficient way, for which companies often transfer some of their business functions or tasks to third parties. The concept of outsourcing has been around for a long time, but practitioners still have differing opinions regarding its benefits and disadvantages. In order to develop a holistic understanding of this tool and use it competently, you should move away from the usual focus for every manager solely on the financial side of the issue and learn to think globally.
Outsourcing as a production management tool is not new at all. In the early 19th century, Britain imported cotton from the United States, manufactured the cloth, and exported it overseas, most notably to India, then a British colony. The UK retained up to 75% of financial profits. A modern example is the Nike company, which outsourced the functions of production, sales and distribution to another company, concentrating its energy and resources on what constitutes the company's main competitive advantage - design.
According to the analytical company Gartner Inc., almost 65% of companies have a standardized approach to selecting outsourcing companies for almost every business process. However, despite the incredible prevalence of outsourcing and the rich history of its application, the adequacy of this tool to the interests of the company still remains a controversial issue. And there are many opinions about whether it is worth resorting to it at all.
Pros of outsourcing
The popularity of outsourcing undoubtedly has its reasons. First of all, any company strives to reduce costs, and competent outsourcing allows you to optimize the company's work by concentrating on core business processes and not being distracted by auxiliary ones.
At the same time, some experts believe that savings are not only not always observed when transferring certain business functions to other organizations, but are not the main goal. The motive for turning to outsourcing should be, first of all, strategic goals. The company's focus on its core mission leads to a significant increase in the quality of the goods or services provided by the company. This is also facilitated by the outsourcing company’s specialization in its own narrow-profile function. By distributing responsibilities across specializations, the overall results are better.
But one of the most significant advantages of outsourcing is flexibility and competent risk management. By transferring part of your business functions to an outsourcing company, you automatically transfer to it the associated risks, which it will deal with on an equal basis with you. At the same time, an outsourcing company, which usually has a number of clients in different sectors of the economy, survives economic crises more easily and allows you to maintain the quality of your goods and services at the proper level.
Weaknesses and risks
Outsourcing also has its opponents. And not without reason. No tool can work flawlessly - outsourcing is no exception. One of the main threats is dishonest companies. Having transferred part of its functions to a third party, the client company does not see the need to preserve human and material assets designed to perform this function. This solution, although it allows the company to reduce unnecessary costs, makes it dependent on the outsourcing company and therefore vulnerable to external pressure. In addition, there are often situations when former partners, having received the necessary springboard, begin to compete with their client.
When calculating the savings from outsourcing any business function, one cannot fail to take into account transaction costs - finding a partner, ensuring proper communication and control, especially when it comes to offshore outsourcing. When all associated costs are taken into account, the estimated savings may not be as significant as expected. Lack of control and transparency of transactions can also increase their riskiness.
According to a study conducted by the American Management Association, three-quarters of the companies surveyed reported that outsourcing did not meet their expectations, and every second company at least once returned an outsourced function to its own organization.
Efficiency mark
Today, the struggle between supporters and opponents of outsourcing is being waged with varying degrees of success, but there is no longer any need to argue about its applicability - it has taken its place in the toolkit of managers. Therefore, the main question is not whether outsourcing has a right to exist, but where is the safe limit?
A lot of work has been devoted to the impact of outsourcing on a company’s income and expenses, and most of them still consider financial parameters to be the main indicators of success - return on assets, return on shares, return on products sold or its equivalent. Typically, managers focus on short-term - albeit often very attractive - results, ignoring the delayed effect.
The problem is that financial indicators cannot be considered reliable enough to determine the effectiveness of outsourcing. Upon closer examination, the cause-and-effect relationship that is sought to be drawn between outsourcing and financial performance turns out to be too implicit, overloaded with other variables. We must not forget about intangible factors, such as, for example, the level of qualifications of our own personnel, which decreases when a number of functions are transferred to a third-party company. Although this indicator will not be reflected directly in financial statements, it will always have a serious long-term effect.
Parameters based on data about the end consumer should be considered more accurate: turnover, potential sales growth, consumer satisfaction and loyalty. It is these factors that have a decisive impact on the success of the company in the long term. However, the vagueness of these parameters does not allow for accurate calculations of how outsourcing will affect the company's work.
To understand to what extent a company relies on outsourcers, it is necessary to start by identifying its key functions and calculating how many of them to shift to third parties.
To obtain a more accurate assessment, each of the business processes can in turn be divided into smaller segments. For example, logistics consists of purchasing goods, supply, transportation, storage, etc.; The customer support function can be broken down into public relations management, website creation, complaint analysis, etc.
Having broken down the main functions into smaller ones, we move on to the second stage - evaluation. For this, a binary system is used: we accompany each function with a code - 0 if it is performed by the company itself, 1 - if it is outsourced. The total amount will give an idea of the volume of outsourcing, and when compared with the maximum possible, it will allow us to determine what share of business processes is carried out by contractors.
Five Dimensions System
As already mentioned, assessing the effectiveness of outsourcing based solely on financial indicators is too short-sighted, depriving the company of objective conclusions. To deeply analyze the benefits and disadvantages of outsourcing, companies should rely on five interrelated dimensions that determine its success in the long term.
- Contacts to sales conversion rate is the number of sales made relative to the number of contacts made.
- Sales volumes and growth.
- Consumer satisfaction - to assess this parameter, you can use any available tools depending on the industry - surveys, rating systems, etc.
- The desire of consumers to purchase a product or service again.
- Customer retention is the company's ability to maintain stable relationships with existing customers.
According to a study conducted among 260 companies using outsourcing, the highest efficiency rates were observed in companies with an average level of outsourcing - no more than five to ten tasks. Moreover, efficiency was higher at all five of the above-mentioned levels. The effectiveness assessment was carried out a year after contacting outsourcing companies in order to assess the delayed effect of this tool.
The results of the study prove that with a moderate amount of outsourced functions, the company achieves much more significant results at every level, even in the short term.
In the long term, these results will have a positive impact on the financial position of the company. In addition, the combination of positive parameters can have a synergistic effect and further strengthen the company's position.
Of course, each organization chooses its own path in accordance with its economic situation, focus and market position. The main recommendation that is relevant for any company is not to focus solely on the financial side of the issue and the prospect of reducing costs in the short term.
Natalia Konoshenko
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