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Concept of The Scale

The document discusses the concept of scale in relation to outsourcing. It states that sufficient scale depends on three factors: the service provider's capabilities, the requirements of the job being outsourced, and the client's needs and decisions. The scale must match the service provider's ability to complete the work, handle the required volume and complexity, and respond to potential changes in client demands. Both the client and service provider must also consider risks from taking on work that is either too large or small relative to their overall operations.

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279 views2 pages

Concept of The Scale

The document discusses the concept of scale in relation to outsourcing. It states that sufficient scale depends on three factors: the service provider's capabilities, the requirements of the job being outsourced, and the client's needs and decisions. The scale must match the service provider's ability to complete the work, handle the required volume and complexity, and respond to potential changes in client demands. Both the client and service provider must also consider risks from taking on work that is either too large or small relative to their overall operations.

Uploaded by

Alias
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Explain the concept of Scale

Number of employees like manning complement, head count, full time


requirement FTE.
Sufficiency of scale depends on the following:

 Service provider
 Requirement of the job
 Client
Service provider - When a client considers a service provider, the client will
look at its hardware, software, and people-ware capabilities. If the service
provider has a favorable performance track-record to boot then this would be
additional points to influence the decision of the client. All the information
gleaned about the service provider will be reviewed many times over, since
the client will be entrusting the successful delivery of a function or process
that supports the core of their business. Not to mention, it will come at a
substantial investment on their part.

Requirements of the job - With this second item, the service provider
Requirements can be described through volume capacity of
transactions, complexity of the job and expected cycle-time for job completion.
Of course, the final or ultimate judge to determine readiness of hardware,
software, and people-ware of the service provider is the client. Requirements
of the job could potentially change as the demands from the client change.

Client – The client can freely make decisions that will directly impact the
service provider’s hardware, software, and people-ware capabilities. For
example, the client decides to route additional volume to the service provider.
The service provider’s response to this increase in volume is by up-scaling the
head-count of personnel and acquiring additional computers. Conversely, the
opposite could be true as well. The client could opt to reduce the volume
directed to the current service provider. Now the service provider is caught in
a pretty pickle as they now have excess manpower and assets that potentially
will become idle. However increasing volume is only one scenario. The client
could direct volume of a totally different nature.
Scale in Relation to Workforce
Right scale depends on client percentage of outsourced roles to total
staff, for risk management and control. A 500-person Finance organization
may want to limit initial outsourcing to say 10% or 15%. A large company with
experience in outsourcing may opt to outsource the entire technology group
from data centers to application development to help desk to a provider
especially if core business is non-IT.
Sufficiency of scale depends on the service provider for risk management. A
15,000-FTE provider in a single location may prefer engagements of at least
500 FTEs a 5% is normal buffer of resources, can be ramped up easily or
absorbed in other clients when contract ends.

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