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Topic 5 Reading Davenport Notes

Accounting Notes > Strategic Finance, Digitization and Extended Enterprises Notes

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AC310: Topic 5 - Reading - 'The Coming Commoditization of Processes' - (Davenport 2005) - Harvard Business Review

Topic 5: Reading - "The Coming Commoditization of Processes" (Davenport 2005) Introduction

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All processes were generally performed by people within the organization 1970s and 1980s: o Improved processes with total quality management 1990s: o Business process reengineering using new technologies End of 20th Century: o Outsourcing to achieve more rapid benefits Information technology management has typically been the most outsourced function Beginning to see HR, administration, finance and accounting functions being outsourced Companies have begun to internationalize much of their outsourcing o Including service work o Particularly to India, China, the Philippines
? Because of low labour costs Most companies are skeptical of outsourcing, because of risks from lack of process standards Two criteria required for outsourcing: o 1) Faith o 2) Cost Lack of comparability increases the risks associated with outsourcing o Standards make it easier to compare service providers
? Evaluate cost vs. benefit Once costs vs. benefit become so visible o Outsourced processes will become a commodity o Prices will fall dramatically

Three Types of Process Standards

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Variability in how organizations define processes makes it more difficult to contract for and communicate about them across countries Within a company: o Standardization can facilitate communications, enable smooth handoffs across process boundaries o Makes possible comparative measures of performance Across companies: o Can make commerce easier for the same reasons Organizations must evaluate 3 things in addition to cost:

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