Chapter 19 > 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

# Onshore outsourcing – engaging another company within the same country for services

# Near shore outsourcing – contracting an outsourcing arrangement with a company in a nearby country

# Off shore outsourcing – using organizations from developing countries to write code and develop systems

# Big selling point for offshore outsourcing “inexpensive good work”

#Factors driving outsourcing growth include;

 - Core competencies

-  Financial savings

-  Rapid growth

-  Industry changes

-  The Internet

-  Globalization

#  According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger and more profitable than those that do not”

#  Most organizations outsource their noncore business functions, such as payroll and IT

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

OUTSOURCING CHALLENGES

#  Outsourcing challenges include;

-  Contract length

1.  Difficulties in getting out of a contract

2.  Problems in foreseeing future needs

3.  Problems in reforming an internal IT department after the contract is finished

-  Competitive edge

-  Confidentiality

-  Scope definition