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What is Outsourcing?

What is Outsourcing?. Process. Of subcontract a business function to an external third party. Based on a contract : Term: 3-5 years or 10 years Service descriptions Service levels (measures) Non performance penalties Financial cost breakdowns Clear IP, privacy & other legal conditions.

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What is Outsourcing?

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  1. What is Outsourcing? Process Of subcontract a business function to an external third party • Based on a contract: • Term: 3-5 years or 10 years • Service descriptions • Service levels (measures) • Non performance penalties • Financial cost breakdowns • Clear IP, privacy & other legal conditions

  2. Insourcing Vs Outsourcing Models Multi-site In-House Models Multi-site Out of House Models Off-shore insourcing Off-shore outsourcing Outside Australia in-house IT operations Contract IT services from overseas Providers On-shore insourcing On-shore outsourcing Australia based in-house IT operations Contract IT services from Australia Based Providers Global Outsourcing Trend – 7.21 m https://www.youtube.com/watch?v=dLjKPpXU0CQ

  3. When IT Outsourcing is Most Appropriate

  4. Examples of Types of ICT Outsourced Source: http://www.eu.ntt.com/en/about-us/our-global-strengths/extensive-service-line-up.html

  5. Strategic Outsourcing Maximise Value for Money High Value for Least Costs ICT = Enterprise Resources Offers Cost Advantage Offers Value Advantage Shares Risks Mitigate Risks

  6. Why Outsource? • Service Providers & locations may offer new and advance factor endowments such as: • Skilled people • Strong technology base • Strong knowledge base • Government support • Complementary culture • Cost Advantage • Infrastructure amenities • etc • Lecture presented benefits: • For enterprises: • Reduced IT Costs • Enable enterprise to focus on core business • Facilitates down sizing • For vendors: • Enhanced reputation • Economies of scale • Transfer of skills – learning client problems & operations setup

  7. Why Outsource – Theory 1 Core Competencies • Core Competencies • Strategic service capabilities that bring competitive advantage and : • Are hard to duplicate • Are reusable in many products/services • Give value-adds to customer experience • Non Core Competencies • Like operating functions and services

  8. Why Outsource – Theory 2 Transaction Cost Economies Transaction Costs Of ICT service delivery Production Costs Of ICT service dev & support Cheaper via

  9. Why Outsource – Theory 3 Political Model IT Long term cost-benefits uncertain IT Political power plays

  10. Why Outsource – Theory 4 Resource Based Theory IT Capacity Resources Capabilities strong weak

  11. Why Outsource – Theory 5 Agency Theory Principle Client Agents Vendor Both parties must act in the interest of each other Common goals Risk sharing agreement Transparent operations & management

  12. How – outsourcing modelsTaxonomy 1 IT Function Outsourced Vendors’ ICTInfrastructure Services Vendors’ Software Application Services Operating clients’ On clients’ BOTH

  13. How – outsourcing modelsTaxonomy 2 In-house In-source At least 80% to be deemed in house OUTsource At least 80% to be deemed outsourced Inhouse becomes Outsourcer QUASI

  14. How – outsourcing modelsTaxonomy 3 TOTAL outsourcing Multiple outsourcing Selective outsourcing Because enterprise ICT is complex Partnership Models

  15. How – outsourcing modelsTaxonomy 3 Offshore Locations Local Rural Locations Social responsibility Image

  16. How – outsourcing modelsTaxonomy 4 Some Outsourcing Arrangements Retro Sourcing 1 2.1 2.2

  17. Example Fujitsu ICT Infrastructure Services Source: http://www.fujitsu.com/id/services/ict/

  18. Example - Outsourcing Implementation Plan Source: http://rome-sourcing.com/english/

  19. Managing Outsourcing Controlling the Vendors – 3.54 m http://www.youtube.com/watch?v=MJo_nsDQZNQ Issues & Trends – 5.26 http://www.youtube.com/watch?v=dZlcbGNC_3g Tips for Outsourcing Software & IT – 7.16 m https://www.youtube.com/watch?v=MEtBVTXHv3E

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