Friday, 18 September 2015

Chapter 19 : Outsourcing in the 21st Century

Chapter 19 : Outsourcing in the 21st Century

Outsourcing Projects

  • Insourcing(in-house development) is a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems.
  • Outsourcing is an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house.
19.1: Common Departments Outsourced by Organizations



19.2:Reasons Companies Outsource



  • Onshore outsourcing-engaging another company within the same country for services
  • Nearshore outsourcing-contracting outsourcing arrangement with a company in a nearby country.Often this country will share a border with the native country.
  • Offshore outsourcing-using organizations from developing countries to write code and develop systems.In offshore outsourcing the country is geographically far away.
19.3: Outsourcing Models and Cost Savings



19.4: Typical Salary Rangers for Computer Programmers



  • Core competencies-many companies have recently begun to consider outsourcing as a means to fuel revenue growth rather than just a cost-cutting measure
  • Financial savings-it is typically cheaper to hire workers in China and India than similar workers in the United States.
  • Rapid growth-a company sustainability depends on both speed to market and ability to react quickly to changes in market conditions.
  • Industry changes-high levels of reorganization across industries have increased demand for outsourcing to better focus on core competencies.
  • The internet-the pervasive nature of the internet as an effective sales channel has allowed clients to became more comfortable with outsourcing.
  • Globalization-as markets open worldwide,competition heats up.
Outsourcing Benefits
  • increased quality and efficiency of a process,service or function
  • reduced operating expenses
  • resources focused on core profit-generating competencies
  • reduced exposure to risks involved with large capital investments
  • access to outsourcing service provider's economies of scale
  • access to outsourcing services provider's expertise and best-in-class practices
  • access to advanced technologies
  • increased flexibility with the ability to respond quickly to changing market demands
  • no costly outlay of capital funds
  • reduced head count and associated overhead expense
  • reduced frustration and expense related to hiring and retaining employees in an exceptionally tight job market.
  • reduced time to market for products or services.
Outsourcing Challenges
  • Contract length-most of the outsourced IT contracts are for a relatively long time period(several years).
  • Competitive edge- effective and innovative use of IT can give an organization a competitive edge over its rivals.
  • Confidentiality- in some organizations,the information stored in the computer systems in central to the enterprise's success or survival,such as information about pricing policies,product mixing formulas,or sales analysis.
  • Scope definition-most IT projects suffer from problems associated with defining the scope of the system.
19.5: Outsourcing Opportunities


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