CHAPTER 19: 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

            While, this picture below show the reasons companies outsorce

·         Onshore outsourcing – engaging another company within the same country for services

·         Nearshore 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

·         Factors driving outsourcing growth include:

–     Core competencies

–     Financial savings

–     Rapid growth

–     Industry changes

–     The Internet

–     Globalization

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

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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