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Monday 25 December 2017

CHAPTER 15

Chapter 15 – Outsourcing in the 21st Century

OUTSOURCING PROJECTS

Ø Insourcing (in-house-development) – A common approach using the professional expertise within an organization to develop and maintain the organization’s information technology systems
Ø Outsourcing – An arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house

 


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

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

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

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

 


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

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

Ø Most organizations outsource their noncore business functions, such as payroll and IT

 


OUTSOURCING BENEFITS

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

OUTSOURCING CHALLENGES

Outsourcing challenges include;

Ø Contract length
· Difficulties in getting out of a contract
· Problems in foreseeing future needs
· Problems in reforming an internal IT department after the contract is finished

Ø Competitive edge
Ø Confidentiality
Ø Scope definition



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