CHAPTER 15 : OUTSOURCING IN THE 21st CENTURY



OUTSOURCING PROJECTS
·         Insourcing (in-house-development)
– A common approach using the professional expertise within an organization to develop and maintain the organization’s information technology systems




·        Outsourcing
– An arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house
·         Onshore outsourcing – engaging another company within the same country for services

·         Near shore outsourcing – contracting an outsourcing arrangement with a company in a nearby country

·         Offshore outsourcing – using organizations from developing countries to write code and develop systems

·         Big selling point for offshore outsourcing “inexpensive good work”

·         Factors driving outsourcing growth include;
-          Core competencies
-          Financial savings
-          Rapid growth
-          Industry changes
-          The Internet
-          Globalization

·         According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger and more profitable than those that do not”

·         Most organizations outsource their non-core business functions, such as payroll and IT


OUTSOURCING BENEFITS
·         Outsourcing benefits include;
-           Increased quality and efficiency
-          Reduced operating expenses
-          Outsourcing non-core processes
-          Reduced exposure to risk
-          Economies of scale, expertise and best practices
-          Access to advanced technologies
-          Increased flexibility
-          Avoid costly outlay of capital funds
-          Reduced headcount and associated overhead expense
-          Reduced time to market for products or services

OUTSOURCING CHALLENGES
·         Outsourcing challenges include;
-          Contract length
1.      Difficulties in getting out of a contract
2.      Problems in foreseeing future needs
3.      Problems in reforming an internal IT department after the contract is finished
-          Competitive edge
-          Confidentiality

-          Scope definition

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