INTRODUCTION

Nowadays all big organisations are working hard to save their money in businesses
and findings ways to improve the services through cheap and convenient way.
Outsourcing is one of the major reason to save the money and increase the quantity
(economy of scale) and improve service (customer or after sales services) through
cheap way. In business the term “outsourcing” used to share or availing services
outside of the organisation through contracts or agreements.

A precise definition of outsourcing has yet to be agreed upon. Thus, the term is used
inconsistently. However, outsourcing is often viewed as involving the contracting out
of a business function - commonly one previously performed in-house - to an external
provider.[2] In this sense, two organizations may enter into a contractual agreement
involving an exchange of services and payments. Of recent concern is the ability of
businesses to outsource to suppliers outside the nation, sometimes referred to as
offshoring or offshore outsourcing (which are odd terms because doing business with
another country does not mean you have to go offshore[3][4][5][6][7]) In addition, several
related terms have emerged to grasp various aspects of the complex relationship
between economic organizations or networks, such as nearshoring, multisourcing[8][9]
and strategic outsourcing.[10]

Reasons and benefits of outsourcing

Organizations that outsource are seeking to realize benefits or address the following
issues:[11][12][13][14]

• Cost savings — The lowering of the overall cost of the service to the business.
This will involve reducing the scope, defining quality levels, re-pricing, re-
negotiation, and cost re-structuring. Access to lower cost economies through
offshoring called "labor arbitrage" generated by the wage gap between
industrialized and developing nations.[15]
• Focus on Core Business — Resources (for example investment, people,
infrastructure) are focused on developing the core business. For example often
organizations outsource their IT support to specialised IT services companies.
• Cost restructuring — Operating leverage is a measure that compares fixed
costs to variable costs. Outsourcing changes the balance of this ratio by
offering a move from fixed to variable cost and also by making variable costs
more predictable.
• Improve quality — Achieve a steep change in quality through contracting out
the service with a new service level agreement.
• Knowledge — Access to intellectual property and wider experience and
knowledge.[16]
• Contract — Services will be provided to a legally binding contract with
financial penalties and legal redress. This is not the case with internal services.
[17]

• Operational expertise — Access to operational best practice that would be too

difficult or time consuming to develop in-house.
• Access to talent — Access to a larger talent pool and a sustainable source of
skills, in particular in science and engineering.[3][18]
 • Capacity management — An improved method of capacity management of
services and technology where the risk in providing the excess capacity is
borne by the supplier.
• Catalyst for change — An organization can use an outsourcing agreement as a
catalyst for major step change that can not be achieved alone. The outsourcer
becomes a Change agent in the process.
• Enhance capacity for innovation — Companies increasingly use external
knowledge service providers to supplement limited in-house capacity for
product innovation.[19][20]
• Reduce time to market — The acceleration of the development or production
of a product through the additional capability brought by the supplier.[21]
• Commodification — The trend of standardizing business processes, IT
Services, and application services which enable to buy at the right price,
allows businesses access to services which were only available to large
corporations.
• Risk management — An approach to risk management for some types of risks
is to partner with an outsourcer who is better able to provide the mitigation.[22]
• Venture Capital — Some countries match government funds venture capital
with private venture capital for start-ups that start businesses in their country.
[23]

• Tax Benefit — Countries offer tax incentives to move manufacturing

operations to counter high corporate taxes within another country.
• Scalability — The outsourced company will usually be prepared to manage a
temporary or permanent increase or decrease in production.
• Creating leisure time — Individuals may wish to outsource their work in order
to optimise their work-leisure balance.[24]

GlaxoSmithKline plc (GSK) Case Study

GlaxoSmithKline plc (LSE: GSK NYSE: GSK), often abbreviated to GSK, is a

global pharmaceutical, biologics, vaccines and consumer healthcare company
headquartered in London, United Kingdom. It is the world's third largest
pharmaceutical company measured by revenues (after Johnson & Johnson and Pfizer).
[3]
It has a portfolio of products for major disease areas including asthma, cancer, virus
control, infections, mental health, diabetes and digestive conditions.[4] It also has a
large consumer healthcare division which produces and markets oral healthcare
products, nutritional drinks and over-the-counter medicines, including Sensodyne,
Horlicks and Gaviscon.[4]

History
Former GlaxoSmithKline building in Hamburg, Germany

GSK was formed in 2000 by the merger of GlaxoWellcome plc (formed from the
acquisition of Wellcome plc by Glaxo plc), and SmithKline Beecham plc (from the
merger of Beecham plc, and SmithKlineBeckman Corporation).

GlaxoWellcome

In 1880, Burroughs Wellcome & Company was founded in London by American

pharmacists Henry Wellcome and Silas Burroughs.[5] The Wellcome Tropical
Research Laboratories opened in 1902.[5] In 1959 the Wellcome Company bought
Cooper, McDougall & Robertson Inc. to become more active in animal health. [5] The
Wellcome Company production centre was moved from New York to North Carolina
in 1970 and the following year another research centre was built.

Glaxo was founded in Bunnythorpe, New Zealand in 1904.[5] Originally Glaxo was a
baby food manufacturer processing local milk into a baby food by the same name: the
product was sold in the 1930s under the slogan "Glaxo builds bonny babies". Still
visible on the main street of Bunnythorpe is a derelict dairy factory (factory for drying
and processing cows' milk into powder) with the original Glaxo logo clearly visible,
but nothing to indicate that this was the start of a major multinational company.

Glaxo became Glaxo Laboratories, and opened new units in London in 1935.[5]
Glaxo Laboratories bought two companies, Joseph Nathan and Allen & Hanburys, in
1947 and 1958 respectively.[5] After the Company bought Meyer Laboratories in
1978,[5] it started to play an important role in the US market. In 1983 the American
arm Glaxo Inc. moved to Research Triangle Park (US headquarters/research) and
Zebulon (US manufacturing) in North Carolina. Burroughs Wellcome and Glaxo
merged in 1995 to form GlaxoWellcome.[5] In the same year, GlaxoWellcome opened
its Medicine Research Centre in Stevenage.[5] Three years later GlaxoWellcome
bought Polfa Poznan Company in Poland.[5]

SmithKline Beecham

In 1843, Thomas Beecham launched his Beecham's Pills laxative in England giving
birth to the Beecham Group.[5]
Beechams opened its first factory in St Helens, Lancashire, England for rapid
production of medicines in 1859. By the 1960s it was extensively involved in
pharmaceuticals.

The GSK Headquarters in Brentford

In 1830, John K. Smith opened its first pharmacy in Philadelphia.[5] In 1865 Mahlon
Kline joined the business which, 10 years later, became Smith, Kline & Co.[5]
Subsequently, in 1891, it merged with French, Richard and Company.[5] It changed its
name to Smith Kline & French Laboratories as it focused more on research in 1929.
Years later, Smith Kline & French Laboratories opened a new laboratory in
Philadelphia; it then bought Norden Laboratories, a business doing research into
animal health.

Smith Kline & French Laboratories bought Recherche et Industrie Thérapeutiques

(Belgium) in 1963 to order to focus on vaccines.[5] The Company started to expand
globally buying seven laboratories in Canada and the US in 1969. In 1982, it bought
Allergan, a manufacturer of eye and skincare products.[5] The Company merged with
Beckman Inc. later that year and then changed its name to SmithKline Beckman.[5]

In 1988, SmithKline Beckman bought its biggest competitor, International Clinical

Laboratories,[5] and in 1989 merged with Beecham to form SmithKline Beecham plc.
[5]
The headquarters of the Company were then moved to England. To expand
research & development in the US, SmithKline Beecham bought a new research
center in 1995. Another new research centre at New Frontiers Science Park in Harlow
was opened in 1997.[5]

In 2000, Glaxo Wellcome and SmithKline Beecham merged to form

GlaxoSmithKline.[6]

Mission Statement

Recent developments

In 2001 it completed its purchase of New Jersey-based Block Drug.[7]

On November 16, 2009 the US Food and Drug Administration (FDA) announced that
a vaccine for 2009 H1N1 influenza protection (manufactured by GSK's ID
Biomedical Corp. subsidiary) would join the four vaccines approved on September
15.[8]

In June 2010, the company acquired Laboratorios Phoenix, an Argentine

pharmaceutical company focused on the development, marketing and sale of branded
generic products, for a cash consideration of approximately $253m. [9]

Strategic Plan
References:
a b
"Our company". GlaxoSmithKline plc. http://www.gsk.com/about/company.htm.
Retrieved 25 August 2010.

Leadership role in
Current Leadership Plan
GSK announces succession plan for
leadership of Consumer Healthcare
business
- Emma Walmsley appointed President, Consumer Healthcare Europe and President Designate, Worldwide
Consumer Healthcare

Issued: Monday 22 March 2010, London UK

GlaxoSmithKline plc (GSK) today announced that Emma Walmsley has been appointed President, Consumer Healthcare
Europe, and President Designate, Worldwide Consumer Healthcare, effective 1 May 2010.

Emma joins GSK from L’Oreal where she has been the leader of their Consumer Products business in China. Previously,
Emma was based in New York where she had global responsibility for the mass-market Maybelline cosmetics business.

As President, Consumer Healthcare Europe, Emma will have operational responsibility for GSK’s European business
and brands, succeeding Manfred Scheske. Within two years, global leadership for the Consumer Healthcare business will
pass from John Clarke, President, Worldwide Consumer Healthcare, to Emma.

Andrew Witty, Chief Executive Officer, GlaxoSmithKline, said: “Under John’s leadership, Consumer Healthcare has
become a key element in GSK’s strategy to deliver sustainable financial performance. Emma’s appointment comes at an
important time as we seek to diversify and further grow this business. It is also continued evidence of our approach to
maintain leadership excellence at GSK through proactive succession planning.”

John Clarke, President, Worldwide Consumer Healthcare said: “In just under three years, Emma has greatly
accelerated the growth in L’Oreal’s China consumer business. She has a strong track record and experience in FMCG
marketing in both established and emerging markets. She joins us from a company which, like ours, has a strong
scientific research base and I look forward to working closely with her over the next two years.”

GlaxoSmithKline plc (GSK), UK

BPO achieves return on investment (ROI)
payback in three years

GSK outsourced its financial services centre, reducing costs and radically improving services offered.
The outsourcing partner was selected after a careful assessment process and a multi-year contract was
signed, which led to GSK being able to attain ROI payback within three years. This noteworthy success
was attributed to the following factors:

• GSK invested heavily in order to ensure a smooth transition

• adequate time was allowed to develop a strong solution and to conduct due diligence
• a good cultural fit was achieved between the partners
• both “transaction-based pricing” and “fixed-price/ FTE-based pricing” were used; mechanisms
to account for inflation and foreign exchange fluctuations were carefully arranged
 • a collaborative roadmap for deployment was drawn up to achieve maximum ROI and maximise
business benefits
• a robust governance model was established at the outset
• service-level metrics were continuously refined with an increasing emphasis on business
objectives. [19]

References:

Lee, Doohee; Sikula, Sr., Andrew. The Utilization of Hospitalists Associated with
Compensation: Insourcing Instead of Outsourcing Health Care Journal of Health
Care Finance, Summer2010, Vol. 36 Issue 4, p17-26, 10p

McCracken, B., (2008), CFOs ‘Rolling Up Their Sleeves’ on FAO, Financial

Executive. Vol. 24, Iss. 3, pp 49-51, Financial Executives International, Florham Park

Sikula Sr., Andrew; Kim, Chong W.; Braun, Charles K.; Sikula, John. insourcing:
reversing american outsourcing in the new world economy. Supervision, Aug2010,
Vol. 71 Issue 8, p3-9, 7p;

A Conjoint
Schwarz, Andrew; Jayatilaka, Bandula; Hirschheim, Rudy; Goles, Tim.
Approach to Understanding IT Application Services Outsourcing.
Journal of the Association for Information Systems, Oct2009, Vol. 10 Issue 10, p748-781,
34p