This 5 minutes video shows my personal global sourcing business plan for Renren. And the video is made up of 5 sections. The rationale, benefits & risks, preferred options, budget & schedule and process governance.
Renren means everybody and is one of the largest social networking sites in China. Renren workes with more than 1,000 third party companies and more importantly Renren is developing a brand-new social gaming industry. The social gaming is its biggest driver of traffic and revenue. And Gaming’s immense popularity has opened up new business channels for advertising. Renren’s OPI is far more aggressive than Facebook in terms of monetization. It grew ad revenues by more than 100 percent in each of the last two years.
The oportunity and driver for this sourcing business plan is that Make Renren to be the next big Google ad words. Renren needs to create powerful and innovative ads system to gain more revenue and optimize its search engine function. Renren requires to a better platform to build up its relationship with 3rd party application partners. In addition, Renren is planning to launch e-commerce services as a social networking website. Moreover, an aggressive aim is that Renrn plus Google plus Apple would achieve Facebook’s huge traffic and Apple’s high profitability. The aggressive aim depends on the perfect combination of 3 organizations. Google is good at ranking algorithms, computing and warehouse. Apple is good at innovative culture and customer centered design and development. Renren is good at tailoring facebook features to adapt to Chinese flavor.
Next, let’s look at the benefits and risks for Renren’s sourcing business.
The benefits would be More Revenues and Huge Savings from offshoring: More revenue of 4.25 million euros per year and savings of 1.14 million euros anually. It’s a Win-win deals and International market; Expertise: Goolgle’s ads words, Apple’s succesful 3rd pard applicaton relationship in iPhone, SourceEdge’s professioanl e-commerce and location advantage in Indian. Innovation: Renren would be a trendsetter rather than a loyal follower of facebook.
The risks would be Law/Government: Audit and control, and host government laws and regulation in China is significantly different to USA. Culture differences: Renren’s censorship is fairly strict, especially to sensitive keywords in the blogs. Time zone makes interaction difficult. Worst scenario: Have no expected results, just like have no outsourcing. Apparently, the benefits outweigh the risks, which are the reason why Renren should outsource.
After Renren decides to outsource, there is plenty of problems are waiting for to be answered. So What to outsource and how to outsource? Decisions and Knowledge gaps. Yeah, it’s all about decisions and selections. Before the informed decision can be made, the decision tree is utilized to optimize the sequence of outsource activities, locations and providers and models. After a series of analysis and research have been done, the final decision comes. Renren should outsource ads and search engine to Google and 3rd party applications to apple. E-commerce services to SourceEdge. The Outsourcing models were selected are offshore and multi-vendor, captive, and time and materials model.
And next is to make a timeline to carry out the plan mentioned above. Here we can see there are 7 main stages and it takes 71 days in total.
Next is about cost which contains both non-monetary and monetary cost. But in the video, we just focus on money cost as the time is pretty limited. The once-off cost is 36,450 euros, the fixed cost is 3,645 euros and the variable cost is 3,470 euros.
Finally, it is process management. The outsourcing project becomes complex involving various vendors, sourcing arrangements, and geographical locations, the process management is designed in a way that can offer a clear status of how the project going on both in terms of milestone reviews, financial report, and relationships between Renren and its vendors. More details are included in the business plan report.
Thanks for listening.