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

•   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 noncore business functions, such as payroll and IT

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