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business maga zine on innovation, le adership, str ategy and vision
general management
A three-stage strategic vision for creating value through global sourcing
The untapped value
of strategies
global sourcing
Global sourcing enables companies to perform each of
their business activities where it makes the most sense
economically and strategically. It has the potential to
contribute to the creation of competitve advantages.
But it is far from simple. In addition to new management
skills and work practices, it requires a well-thought
strategic vision.
So far, the vast majority of companies that have started to source
business or technical services from
foreign locations have focused on
realizing the immediate benefits of
labour arbitrage in low cost countries. Only few have recognized that
rethinking the global footprint of
value chains through global sourcing strategies has the potential for
dramatic improvements in business
processes and the creation of new
value. But developing competitive
advantages through greater efficiencies and fundamentally transformed business processes requires
a strategic vision for global sourcing
that goes well beyond labour cost
savings. It typically includes three
main stages that companies experiment with through a progressive
process of learning-by-doing.
Stage 1:
labour arbitrages and scale
At first, companies usually source
simple, repetitive and codified
tasks that do not require specific
expertise. The objective is to reduce
labour costs by replacing highpaid employees with cheaper offshore workers. They also discover
that the access to a less-expensive
labour force makes it economic to
april - Mai 2013
scale-up certain activities that traditionally receive less attention. For
instance, due to limited resources,
industrial companies may favour
technical leadership and keep marketing and sales expenses to the
minimum. Through an adequate
global sourcing strategy that combines onshore and offshore teams,
such companies can, with a minimum investment, scale-up existing
efforts and undertake new direct
marketing and sales support activities that will boost revenue.
of outsourcing arrangements versus in-house solutions.
Stage 3: Value creation
The third stage is a profound
rethinking of the way companies see global sourcing - looking beyond a means to do things
cheaper, on a larger scale, or better,
to see it as a means to do new things
and create new value. This involves
leveraging their global service
delivery structure to develop new
knowledge and capabilities, experiment with new business models,
and develop new product and service offerings that were previously
unimaginable. For instance, a
global electronics company developed a new capability in on-line
product design, thanks to a team
of engineers in the Philippines who
interact in real time with clients
from around the world.
But developing a global sourcing
strategy that creates value does
not mean abandoning the benefits
of one stage to move to the next
one. For certain tasks, it may not
make sense to move beyond labour
arbitrages or scale advantages. For
other activities, labour costs may
not be an issue and the objective
may be to redesign the process to
allow a major drop in the time to
market new products. Also, a new
source of value creation today may
become a standard offering that
requires a high focus on cost containment within a few months or
years. As with any strategy, defining a vision for global sourcing is a
dynamic process that requires periodic revision.
Carine Peeters
is a professor
of strategy and
academic director
of the workshops
for successful
outsourcing
at ULB-Solvay
Brussels School.
Executive
summary
Creating value
through global
sourcing requires
After gaining experience and cona strategic
fidence that high quality work can
vision that goes
be done elsewhere, companies can
well beyond labour
cost savings, to
start to rethink the way they operinclude the benefits
ate, and look at how global sourcof scale, process
ing can help them improve through
reengineering, and
the development
the reengineering of certain proof new capabilities
cesses. External providers may play
and business
a key role in that context as they
models. It is also
build their expertise by undertaka learning journey
that calls for a good
ing similar or related activities
understanding of
for different clients. If invited to
the pros and cons
the table, they will be a very good
of outsourcing.
source of suggestions that compaFortunately,
nies should tap into, and partner www.solvay.edu/workshops-succes- executive education
and customized
with. A vision for global sourc- sful-outsourcing
training can help.
ing therefore also requires a good www.solvay.edu/offshoring
knowledge of the risks and benefits http://homepages.ulb.ac.be/~cpeeters/ [email protected]
Stage 2: Process reengineering
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