outsourcing. outsourcing – an arrangement by which one organization provides a service or services...
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Outsourcing
Outsourcing
Outsourcing – an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house
Outsourcing
Typically, the outsourced process or function is a noncore business activity
The worldwide IT outsourcing market will reach $164 billion by 2005
Offshore outsourcing – using organizations from developing countries to write code and develop systems
According to Forrester Research, nearly half of all businesses use offshore providers, and two-thirds plan to send work overseas in the near future
Insourcing
Insourcing – a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems
Most organizations outsource theirnoncore business functions, such as payroll and IT
Outsourcing growth drivers
Globalization The Internet Growing economy and low unemployment
rate Technology Deregulation
Outsourcing Benefits
Increased quality and efficiency Reduced operating expenses Outsourcing non-core processes allows businesses to focus on
their core competencies Reduced exposure to risk Access to outsourcing service providers economies of scale and
expertise and best-in-class practices Access to advanced technologies Increased flexibility Avoid costly outlay of capital funds Reduced headcount and associated overhead expense Reduced frustrations and expense related to hiring and retaining
employees in an exceptionally tight job market Reduced time to market for products or services
Who’s Who in Offshore Outsourcing
Big selling point for offshore outsourcing “inexpensive good work”
Canada
India
Ireland
Philippines
China
Malaysia
Mexico
Argentina
New Zealand
Ukraine
Outsourcing Challenges
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 Competitive edge Confidentiality Scope definition
Future Trends
Companies should look for value-based pricing rather than the lowest possible price
Multisourcing – a combination of professional services, mission-critical support, remote management, and hosting services that are offered to customers in any combination needed