OUTSOURCING IT

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OUTSOURCING IT

• Mike Vu
• Chinh Dang
• John Gilligan
• Rex Santa Cruz
• Athena Lim

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What is Outsourcing IT?

• The exporting of IT-related work from the
  United States and other developed countries to
  areas of the world where there is both political
  stability and lower labor costs or tax savings.

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No Child Left Behind Act of 2001

• United States ranked No. 18 out of 24 nations
• About 1.2 millions students drop out every year
• 17 of 12th grade students scored at the
  proficient level in 2000
• Better education in math and science

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Porters Five Forces

• outsourcing labor and productions a company can
  save 30-70 in expenses
• competitive advantage over rivals
• services or product that a company has would
  offer a lower price and offer a higher quality
• threat of substitutes
• product that is cheaper and better in quality
  than everyone else

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Porters Five Forces

• buying power
• company can afford more products and the company
  can be a major player in the industry
• Supplier Power
• concentrating its required materials at a lower
  cost
• Barrier to Entry
• Makes it harder for other companies to enter
  because of the higher entrance cost

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Porters Value Chain
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• Cheaper advancements in technology will help with
  companies primary activities.
• Parts of the companys primary activities are
  being outsource to cut cost.
• When cost is lower it is passed on to the
  customers.
• A better customer relationship at a lower cost
  and better quality

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Outsourcing is not as bad as it seems

• Adds 214.2 billion to the U.S. GDP
• Creates 317,000 new jobs
• Cost savings are more attractive to investors

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Outsourcing I.T.

• After 9/11, Computer economic slowdown, these
  effects caused a declined the purchase and
  software develop of computers. During this point
  of time, software companies loss almost 25 of
  sales.
• By 2015, 3.3 millions I.T. jobs would be
  outsources to India or China.
• In 2000 to 2003, many of the programmer salaries
  were 130,000. Currently, programmer salaries
  are 40,000, but there are some programmers are
  out of the job.

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• Many of them in I.T. started in this profession
  because they lost their jobs because of
  outsource. They went back into schools or a
  trade trying to start a new career without fear
  of being outsourcing.
• According to, Economists Ashok Bardhan and
  Cynthia Kroll of the University of California at
  Berkeley estimate that in July of 2003 between
  25,000 and 30,000 IT (information technology)
  positions were outsourced to India alone.
• 500,000 jobs lost due to corporations sending to
  many third world countries after 2009?

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What companies are risking?

• One problem companies would faced when
  outsourcing are geographic locations
• Second issue facing American corporations, if the
  countries went under some sort of natural
  disaster, or social uprising, or lack of
  communications between corporate headquarters
  and the faculty located in the country
• Final risk facing American consumers, are their
  personal information safe?

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Unemployment

• Persons are classified as unemployed if they do
  not have a job, have actively looked for work in
  the prior 4 weeks, and are currently available
  for work
• As of August, 605,000 jobs were lost
• Unemployment rate rose to 6.1
• Board of Labor and Statics
• 25,000 people applied at the new Wal-Mart in
  Chicago . Only 325 positions are available
• BLS implied outsourcing is creating JOBS!

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Opportunities and Advantages
for ITO vendors - Enormous Employment
Opportunities -Encouraging Wage
increases -Market Share -Overall Growth of
the developing country
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Because of its resources, India has become
one of the most important global off shore
destinations primarily because of the rising
number in English speakers.
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Potential Opportunities
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Disadvantages for ITO vendors
Effect on local economy? India
7 Philippines 3.5 Argentina 4
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• Q Do ethics play a role in outsourcing work?
• A Though business relationships are more
  economic in nature, their moral and ethical
  dimensions have an equal impact on profitability.
• - Ranjini Sivaswamy

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We have to stop providing tax breaks for
companies that are shipping jobs overseas and
give those tax breaks to companies that are
investing here in the United States of America.
Obamas stance on outsourcing better education
better job training better job
opportunity H1-B Visa Program tax benefits for
companies that DONT outsource
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Outsourcing IS vs. IT

• Dependence and Exit Barriers
• Physical IS Security
• Logical IS Security
• Legal Ties and Consequences

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Physical IS Security

• Loss of control of physical security
• Now requires assessment of outsourcing firm based
  on one question
• Does the Outsourcing Firm have the underlying
  firms best interest at hand?

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Dependence Exit Barriers

• Set contract between two parties exist
• Firm must turn over control of IS
• Functions may not always be executed upon
  contract termination
• Changes cant always be done w/out consent of
  both parties

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Logical IS Security

• Most risky concern associated with outsourcing
• Increased number of users of systems
• Increase chances of system being breached
• OF obtains access to all information
• Trade Secrets, software, customer info.
• Leads to a loss of confidentiality

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Legalities Liabilities

• Outsourcing is not considered fiduciary
• The party entrusted isnt responsible for
  services that are delivered upon termination
• No specific obligations are needed to be
  fulfilled
• Contracts are signed on an As-is basis
• All liabilities held against originating firm

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Why IT and not IS?

• IT outsourcing indicates lower risk
• IS deals with the business side of organizations
  rather than technology
• Reduction of operational costs arent worth the
  liabilities downfalls

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Questions or Comments?

• Please feel free to contact our call center in
  New Dehli at 1-43-583-43242 for your concerns!
• and THANK YOU!

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