MIT Sloan Management Review

Although many organizations initiate business process outsourcing to reduce costs or acquire new skills, it can evolve into much more. Sometimes, service providers deliver substantial long-term improvements to the client’s operating efficiency and strategic performance. But these improvements seldom happen unless clients and providers implement a process that combines acculturation across organizations, a method for generating ideas, adequate funding and a system for managing change.

Online crowdsourcing platforms are growing at double-digit rates and are starting to attract the attention of large companies. Just as cloud computing offers unconstrained access to processing capacity and storage, the “human cloud” promises to connect businesses to millions of workers on tap, ready to perform tasks and solve problems that range from the simple to the complex. The article explores four new human cloud models: The Facilitator model, The Arbitrator, The Aggregator, The Governor.

In a recent interview with the website InnovationManagement, open innovation expert Henry Chesbrough discussed his new book, Open Services Innovation, and the importance of service innovation in general:

“We know a lot about how to innovate new products, new processes, and new technologies, but know far less about how to innovate

The increase in outsourcing and offshoring of complex work has resulted in innovation efforts that require coordination across cultural, geographic and legal boundaries. If that coordination is mishandled, companies can find themselves needing to make multimillion- or even billion-dollar changes. The complexity of the task makes midcourse corrections likely. Managers must anticipate and adapt their processes in order to reduce risk and, ultimately, cost.

Best practice in product development (PD) is migrating from local collaboration to global collaboration. Global product development (GPD) represents a transformation for business, and it applies to a range of industries. The objective of this article is to present frameworks that can help companies address strategic and tactical issues when considering GPD. The concepts have been developed through discussions with more than 100 companies in 15 countries in North America, Europe and Asia.

Depressed about the state of the real-world economy? Maybe you should attend tomorrow's Virtual Goods Summit 2008, an event in San Francisco looking at the growing business of buying and selling "virtual goods" in online games and on social-networking sites — for real-world money.

What used to be a matter of finding and purchasing goods and services at the most favorable price has changed. At some companies, procurement has become closely intertwined with strategic decision making and board policy at the highest levels of the organization.

Information technology remains a terrible bottleneck to growth in most companies, mainly because executives focus on the wrong remedy for their IT problems

Despite the commoditization of information technology, companies are growing increasingly dependent on it for strategic advantage.

Many manufacturers have established product development activities in different countries around the world. Yet their senior managers often struggle to tie those decentralized organizations into a cohesive, unified operation that can efficiently drive growth and innovation. New empirical frameworks may help unlock practices with which managers can deploy well-coordinated global product development strategies.

It takes a tremendous amount of detailed management on both the client and supplier sides to realize the expected benefits of offshore outsourcing of IT work. Here are 15 best practices that can accelerate learning and make the strategy eminently worthwhile.

Successful outsourcing of back-office business functions requires knowing not only your company’s needs but also the 12 core capabilities that are key criteria for screening suppliers.

There is a consensus among futurists that business is the only institution capable of providing effective global stewardship. As a result, a good deal of attention is being paid to mapping the future performance of businesses and the economies in which they operate.

The more companies outsource, the more they approach virtual organization, with knowledge centers interacting through mutual interest and electronic systems. To mitigate the risks associated with reduced authority, companies must develop “best in world” capabilities, leverage the capabilities of others and innovate constantly. The author shows how to slash innovation cycle times and costs by 60%-90% and develop the full potential of intellectual outsourcing.

As managers experience more volatile marketplaces, global competition, shortened product life cycles, customer pressures for tailored offerings and tighter performance standards, they increasingly depend on new information systems.

What has led to the development of Japan’s particular method of subcontracting? Theories that have attempted to explain Japanese subcontracting have critical shortcomings. A combination of political, economic, technological, and strategic factors has resulted in subcontracting’s growth and survival.

While outsourcing might be attractive for some parts of a value center, it is not a substitute for crafting a strategy to leverage IT resources for business success. An effective strategy framework recognizes four interdependent sources of value from IT resources and the approaches for managing each source.

When Eastman Kodak turned over the bulk of its IT operations to three outsourcing partners in 1989, outsourcing was a $4 billion a year business.1 Today, that number has grown to nearly $40 billion a year, according to the estimates of industry watchers Frost & Sullivan.

While outsourcing IT has been a trend in the 1990s, it is not a new phenomenon. For example, systems development has been sourced from outside through application packages or software houses for many years.

Long-term sustained management of a strategic alliance is turning out to be the dominant challenge of effective IT outsourcing. From a relatively unusual entrepreneurial activity, IT outsourcing has recently exploded across the global corporate landscape.1