Information Technology Outsourcing

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Information Technology Outsourcing

• By Andrew Butler
• Michael Cheng
• Carlos Garcia

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Outline

• What is outsourcing?
• Why do companies outsource?
• Who is outsourcing?
• What jobs are being outsourced and where?
• Outsourcing processes.
• Outsourcing consultants.
• Benefits/difficulties of outsourcing.
• Outsourcing and the Western World.
• Outsourcing paradox
• Is it a good thing?

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What is IT? Outsourcing?

• Information Technology
• The development, installation and implementation
  of computer systems and applications.
• Outsourcing
• Contracting with outside professional services to
  meet specific business needs.
• IT Outsourcing-it should be noted that
  outsourcing has existed for a long time, and is a
  commonly accepted business practice.

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Why Companies Outsource

• Companies outsource to
• Seek world class skills abroad while cutting
  costs.
• IT is relieved of time consuming, routine tasks.
• Cost predictability, savings and the ability of a
  company to focus on core competencies.

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Reasons for Outsourcing
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Who is outsourcing?

• There is a variety of companies that outsource,
  but there seems to be trends in IT Outsourcing
• Banks
• Medical offices
• Mortgage Companies
• Software development

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What Jobs are being Outsourced?

• Some typically outsourced jobs have the following
  traits
• - Technical with measurable standards-
  Relatively easy for knowledge transfer- Can be
  done without direct physical contact with
  customers or colleagues.
• Specific IT jobs that are outsourced include
• Research process, IT operations, Medicare, legal
  support services
• Art, animation, editorial and DTP work
• Software development
• Environment services

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Where are they outsourcing to?

• IT Outsourcing can be farmed out to a variety of
  places, but you will find more often than not, to
  developing countries on the rise.
• Bangalore, India (Call centers)
• The Philippines
• Saudi Arabia
• China
• Eastern Europe
• Canada

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Outsourcing Processes

• Once a company has decided to outsource certain
  IT functions, it should consider the following
• What services to outsource.
• Which IT outsourcing firm provides these
  services.
• Evaluate top candidates.
• Checklist.

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Outsourcing Consultants

• IBM and Unisys
• Both IBM and Unisys offers a wide range of IT
  outsourcing solutions for businesses.
• Network Outsourcing Services
• Managed Storage Services
• Managed Security Services
• E-Business Hosting Services
• IBM is a pioneer in IT and Outsourcing IT.
• Unisys is a major competitor to IBM.

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Examples of IT Outsourcing

• Unisys
• City of Minneapolis
• IBM
• ING Bank

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Benefits of IT Outsourcing (Cntd.)

• Improved Service to the Customer
• Outsourced companies can receive tech support
  24/7, with a smaller budget.
• Outsourcing companies generally use standardized
  equipment and methods.
• Saves time and money for the customer.
• When IT is outsourced, it allows a company to
  concentrate on its core competency.
• IT professionals use list of reliable vendors,
  which will improve quality of goods and services
  received.

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Difficulties of IT Outsourcing

• Threats to security and confidentiality
• Sensitive information such as payroll, medical
  records and banking/mortgage records.
• Hidden costs to outsourcing IT.
• This includes the contract between companies, as
  well as legal costs incurred.
• Loss of possible strategic asset or skill
• Could it have been used to create a competitive
  advantage over your competitors?
• Loss of control, and dependence on an IT supplier.

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Confidentiality and IT Outsourcing

• Outsourcing of sensitive information such as bank
  records between countries.
• How do you assure your clients that their
  information is safe and legal?
• Seek out and build a relationship with this
  outsourcing supplier before passing them
  sensitive information
• Only agree to work with a supplier that is
  ISO/IEC 70642003 certified.
• Have periodic audits, and develop COBIT.
• This is a big deal, especially as you see more
  and more companies sending all their information
  systems overseas and offshore

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What does Outsourcing Mean for the Western World?

• Capability Maturity Model
• As IT Outsourcing continues, you will find that
  our abilities will diminish. We will slide
  further down on the Capability Maturity Model,
  due to the outsourcing of our IT know how and
  abilities.
• Many economists have recently conjectured that
  the higher-than-expected IT unemployment numbers
  were not the result of offshore outsourcing.
• Outsourcing has actually had a positive impact on
  the American economy.
• Many western companies have realized that
  outsourcing can improve the quality of much of
  their work by taking advantage of excellent
  workforces abroad.

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What does Outsourcing Mean for the Western World?
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Outsourcing Paradox

• Outsourcing of IT jobs occurs at a rate of
  between 2 and 3
• While the number of jobs being outsourced has
  increased, it is important to note that an almost
  equal number of IT jobs have been created.
• Difficult to measure the loss of IT jobs to
  outsourcing

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Is Outsourcing a Good Thing?

• PROS
• Some Americans don't believe that offshore
  outsourcing is bad for this country. They seem to
  be convinced that we can be strengthened as a
  nation if we are forced to compete in the global
  economy.
• Stimulates trade and creates a stronger economy
  in the U.S. and more jobs in the long run
• A way to get the job done for less money by
• -reducing and controlling company operating
  costs
• -freeing up internal company resources for more
  important purposes
• -improving the company focus and resultant
  productivity
• They consider that what is even more important
  than the welfare of their employees...is making
  money.
• U.S. businesses need to stay competitive

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Is Outsourcing a Good Thing? (Cntd.)

• CONS
• The Loss of jobs in the U.S.
• The problems associated with offshore outsourcing
  are profound and complex
• Outsourcing jobs to places like India and China
  really aren't as substantial as some would like
  us to believe.

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Questions?

• Can you name 2 benefits of outsourcing?
• What are 2 difficulties of when
• outsourcing?
• Why would a company outsource part of its IT
  function?
• Can you name one IT outsourcing consultant and
  one service that they offer?

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References

• http//www.unameits.com/why_it/how_outsource_infor
  mation_technology.jsp
• http//www.a1technology.com/it-outsourcing.htm
• http//www.msnbc.msn.com/id/12393501
• http//www.whomovedmyjob.org/play.texas.holdem.in.
  morgan.county,.indiana.htm
• http//www.unisys.com/services/outsourcing/clients
  /index.htm

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References

• http//www-1.ibm.com/services/us/index.wss/itservi
  ce/so/a1000414
• Baseless Optimism? Computerworld 3/20/2006,
  Vol. 40 Issue 12, p39-39, 1/5p
• http//en.wikipedia.org/wiki/OutsourcingIT_operat
  ions
• http//www.unisys.com/about__unisys/gartner.htm
• http//www.unameits.com/why_it/how_outsource_infor
  mation_technology.jsp
• Principles of Information Systems. Stair, Ralph
  and Reynolds, George p61.