Outsourcing
Issues in outsourcing.
Outsourcing
What happens in outsourcing?
What the reasons for outsourcing?
How do you manage an outsourcing
agreement?
Outsourcing
The purchase of a good or service that
was previously provided internally
Farm out data center operations
(facilities management)
Farm out tasks and services
Farm out systems development
May transfer IS function to vendor
Determinants of
Outsourcing Success
Core vs. commodity
Partner vs. vendor
Tight vs. loose contract
Success: Economic, Technical,
Strategic, Overall Satisfaction with
Contract
Primary Reasons for
Outsourcing
Technological considerations
Cost Savings
Strategic considerations (infrastructure
building - quickly)
Human resource considerations
Mandated by central office/Acquired by
another company
Consolidate Data Centers
Efficiency
Cash Infusion
Aha!
Need tight contracts
May be successful for core
functions… especially if linked to tight
contract
Can have successful partnerships
Outsourcing
Disadvantages
Reliance on vendor/partner
Loss of control
Considerations about
security/confidentiality
Evaporation of cost savings
Loss of competitive advantage
Slight of hand with employees
Outsourcing strategies
DECISION
CRITERIA
Core
Competency
“MAKE”
PRESSURE
Often core*
“BUY”
PRESSURE
Often
support*
Security/
Very
Confidentiality confidential
Not highly
confidential
Software
Availability
Software
available for
common
problem
Unique
application
Outsourcing strategies
DECISION
CRITERIA
Partners
Time Frame
IT
Professionals
“MAKE”
STRATEGY
“BUY”
STRATEGY
No reliable,
competent,
motivated, or
financially stable
partners
Time available for
development
Suitable partners
available
Available inhouse
Not available inhouse
Available time
too limited