Thursday 24 March 2016

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 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




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