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CHAPTER 19

CHAPTER 19. Outsourcing in the 21 st Century. Learning Outcomes. 19.1 Describe the advantages and disadvantages of insourcing, outsourcing, and offshore outsourcing 19.2 Describe why outsourcing is a critical business decision. OUTSOURCING PROJECTS.

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CHAPTER 19

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  1. CHAPTER 19 Outsourcing in the 21st Century

  2. Learning Outcomes 19.1Describe the advantages and disadvantages of insourcing, outsourcing, and offshore outsourcing 19.2Describe why outsourcing is a critical business decision

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

  4. OUTSOURCING PROJECTS

  5. OUTSOURCING PROJECTS • Reasons companies outsource

  6. OUTSOURCING PROJECTS • Onshore outsourcing –engaging another company within the same country for services • Nearshore outsourcing – contracting an outsourcing arrangement with a company in a nearby country • Offshore outsourcing –using organizations from developing countries to write code and develop systems

  7. OUTSOURCING PROJECTS • Big selling point for offshore outsourcing “inexpensive good work”

  8. OUTSOURCING PROJECTS • Factors driving outsourcing growth include: • Core competencies • Financial savings • Rapid growth • Industry changes • The Internet • Globalization

  9. OUTSOURCING PROJECTS • According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger, and more profitable than those that do not”

  10. OUTSOURCING PROJECTS • Most organizations outsource their noncore business functions, such as payroll and IT

  11. Outsourcing Benefits • Outsourcing benefits include: • Increased quality and efficiency • Reduced operating expenses • Outsourcing non-core processes • Reduced exposure to risk • Economies of scale, expertise, and best practices • Access to advanced technologies • Increased flexibility • Avoid costly outlay of capital funds • Reduced headcount and associated overhead expense • Reduced time to market for products or services

  12. Outsourcing Challenges • Outsourcing challenges include • Contract length • Difficulties in getting out of a contract • Problems in foreseeing future needs • Problems in reforming an internal IT department after the contract is finished • Competitive edge • Confidentiality • Scope definition

  13. CHAPTER NINETEENOpening Case Study Questions • What are the benefits and risks associated with outsourcing? • What are the ethical issues associated with outsourcing government applications? • What are the security issues associated with outsourcing government applications?

  14. CHAPTER NINETEEN CASEUPS in the Computer Repair Business • Toshiba is handing over its entire laptop repair operation to UPS Supply Chain Solutions, the shippers $2.4 billion logistics outsourcing division

  15. CHAPTER NINETEEN CASE QUESTIONS • Do you think UPS’s entrance into the laptop repair business was a good business decision? Why or why not? • Explain why Toshiba decided to outsource its computer repair business to UPS • What are some advantages UPS can offer Toshiba in the outsourcing arrangement? • Explain the advantages of forming an outsourcing relationship with a parcel delivery company such as UPS

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