Outsourcing

1
Chapter 15

• Outsourcing

2
Learning Outcomes

• Describe the advantages and disadvantages of
  insourcing, outsourcing, and offshore outsourcing
• Outsourcing can give the right combination of
  people, processes, and technology to operate
  efficiently and effectively in the global
  marketplace without burdening time and budget
• Developing strategic outsourcing partnerships is
  increasingly becoming the strategic choice of
  companies looking to achieve cost reductions
  while improving their service quality, increasing
  shareholder value, and focusing on their core
  business capabilities

3
Overview

• This chapter focuses on businesses need to
  undertake every effort to re-think and re-adopt
  new processes, especially the prospective
  resources regarding
• Insourcing
• Outsourcing
• Offshore outsourcing

4
Insourcing

• Insourcing a common approach using the
  professional expertise within an organization to
  develop and maintain the organization's
  information technology systems

5
Outsourcing

• Outsourcing an arrangement by which one
  organization provides a service or services for
  another organization that chooses not to perform
  them in-house

6
Benefits from Outsourcing

• Financial savings
• Increased technical abilities
• Market agility

7
Factors driving outsourcing growth

• Core competencies
• Rapid growth
• Industry changes
• The Internet

8
Developing Strategic Outsourcing Partnerships

• Business process outsourcing (BPO) contracting
  of a specific business task, such as payroll, to
  a third-party service provider
• BPO is divided into two categories
• Back-office outsourcing
• Front-office outsourcing

9
Offshore Outsourcing

• 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

10
Opening Case Study Questions

• Explain the driving forces behind Amazon.coms
  need to keep all IT development and systems
  in-house
• Identify which business process Amazon.com could
  or perhaps should outsource
• Discuss the pitfalls Amazon.com would encounter
  if it decided to outsource its IT department

11
IBM with Pearson

• IBM signed an outsourcing arrangement with
  Pearson, a leading provider of financial and
  business news, to provide the company with
  managed operations services for its mainframe and
  server environment
• As a result of the relationship with IBM, more
  than 70 Pearson employees will join IBM to
  support Pearsons data center operations

12
IBM with Pearson

• Summarize a few reasons why Pearson did not use
  an insourcing approach for its IT needs
• What are some of the advantages that IBM can
  offer Pearson as a result of outsourcing many of
  its critical business functions?
• Explain the advantages of forming an outsourcing
  relationship with an international company, such
  as IBM has with Pearson