Outsource or Not

1. Outsource or Not COMP301 Information Systems Analysis and Design

2. What is outsourcing? • A company requests the services of an outside party to fulfil a function or functions that involve computer systems • Application development • Maintenance of applications

3. Markets vs hierarchies • Large corporations lends to have hierarchical structures with their own data processing department • applications developed largely in-house • Advanced in IT breaks and flattening the structure (become a mixture of teams and sharing of responsibilities)

4. Markets vs hierarchies • Flatter organization and cross company relationships tends to employ outsourcing • A shit towards the market to get the job done

5. Markets vs hierarchies • Existing system not compatible • Resistance from MIS people

6. Why outsourcing? • Reduce risks (certain types of applications) • Get away from vertical integration (less problems if fails) • Get optimal talent • Replace services that are not doing well • Quicker solution (usually) • Using more advanced solutions

7. Pure outsourcing • Total project is developed outside • Require expertise not available in the company • End user driven (they prefer to go outside) • Isolated systems • Senior management driven (funding concern)

8. Pure outsourcing • Good co-coordinator in-house (who can shepherd (look after) the project well, and maintain smooth relationship with other groups and systems • Having little or no liability for the outside company (if the system fails, limited liability only)

9. Pure outsourcing • Short in duration (less than one year) • Small project teams (6 – 12) project team for one year • Already developed software outside, and only some customization, core programs already available

10. Pure outsourcing - example • Sun workstation for financial information display and analysis • Investment company are • Not familiar with the sun workstation • Always have delays in projects • Lack of commitment • Strong negative response to new and unfamiliar technology • Consultant to assess what should be done, and how much would be the cost

11. Pure outsourcing - example • Conduct a feasibility study • Technical aspects present • Business effects discuss • Project done in phases • A short pilot phase for testing • Four months to complete • Project team with four experienced consultants

12. Pure outsourcing - example • Approved by the investment company's president • Need co-operation among the staff in the company (especially data processing department)

13. Pure outsourcing - example • Why this application is successful? • Project is independent • Requirements are well defined • Liability is not a question • Nature of project can permit development outside • Prototype approach (with testing) • Not available expertise in the company • Cost of training existing people's skill sets is too high • Organizational culture is too political (battles over priorities and responsibilities and resources)

14. Pure outsourcing - example • Control over the costs • Control over the time frame • Control over the people • Minimum disruption • Experienced development • Clear understanding of what will happen

15. Characteristics of pure outsourcing • LOW in technology • Expertise within the company • Effect on existing day-to-day business • Knowledge needed in existing hw/sw and business processes in the company

16. Characteristics of pure outsourcing • LOW in project management • Size of proposed project team • Length of proposed project • Liability for outside developer • Size of proposed project

17. Characteristics of pure outsourcing • LOW in business focus • Expertise within the company on business subject matters combined with new technology • Expertise on existing business and applications within the company

18. Characteristics of pure outsourcing • HIGH in Organization • End-user sponsorship • Senior Management Support • (not generated from EDP department)

19. Hybrid outsourcing • If the new systems affect current operations of the transaction sytems in the company • Large amount of liability

20. Hybrid outsourcing - example • Billing system for a major domestic bank • Hire a new experienced staff to conduct an feasibility study • Recommendation is to develop a new system

21. Hybrid outsourcing - example • A new operation system, a new machine, new skill sets • New hire become the project manager • A mixed of in-house and outsider's help

22. Hybrid outsourcing - example • A combined team of in-house and outside people

23. Hybrid outsourcing - example • LOW to HIGH in project management • Size of proposed project team • Length of proposed project • Liability for outside developer • Size of proposed project

24. In-house development • Confidential nature of the data • Work done directly involved with users • All skills and knowledge are available in house (training or promoting) • Data and procedures were guaranteed confidentially and all liability rested with the company • Fear of losing control

25. Who gets the outsourcing project? • Hiring the right people is critical to success • Locating the correct skill sets to the project • Experience and track record (successful development of similar projects before)

26. Extra services provided by the outsourcing company • Fully test the system • Installation, training and provide technical and administrative support • Provide technical, administrative and user documentation • Provide system maintenance and technical support at additional costs if needed