CHAPTER 19: OUTSOURCING IN THE 21th 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 Price water house Coopers “Businesses that outsource are growing faster, larger and more profitable than those that do not”

Most organizations outsource their noncore 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