Information Information Technology Technology OutsourcingOutsourcing

By: Andrew ButlerBy: Andrew Butler

Michael ChengMichael Cheng

Carlos GarciaCarlos Garcia

OutlineOutline

What is outsourcing?What is outsourcing? Why do companies outsource?Why do companies outsource? Who is outsourcing?Who is outsourcing? What jobs are being outsourced and where?What jobs are being outsourced and where? Outsourcing processes.Outsourcing processes. Outsourcing consultants.Outsourcing consultants. Benefits/difficulties of outsourcing.Benefits/difficulties of outsourcing. Outsourcing and the Western World.Outsourcing and the Western World. Outsourcing paradoxOutsourcing paradox Is it a good thing?Is it a good thing?

What is IT? What is IT? Outsourcing?Outsourcing? Information TechnologyInformation Technology

– The development, installation and The development, installation and implementation of computer systems and implementation of computer systems and applications.applications.

OutsourcingOutsourcing– Contracting with outside professional Contracting with outside professional

services to meet specific business needs.services to meet specific business needs. IT Outsourcing-it should be noted that IT Outsourcing-it should be noted that

outsourcing has existed for a long time, outsourcing has existed for a long time, and is a commonly accepted business and is a commonly accepted business practice.practice.

Why Companies Why Companies OutsourceOutsource Companies outsource to:Companies outsource to:

– Seek world class skills abroad while Seek world class skills abroad while cutting costs.cutting costs.

– IT is relieved of time consuming, IT is relieved of time consuming, routine tasks.routine tasks.

– Cost predictability, savings and the Cost predictability, savings and the ability of a company to focus on core ability of a company to focus on core competencies.competencies.

Reasons for Reasons for OutsourcingOutsourcing

IT Outsourcing

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ReduceCost

Free upresources

ForeignCapability

RevenuePotential

Shortercycle time

Processefficencies

Companyphilosophy

Lack of ITskills

Who is outsourcing?Who is outsourcing?

There is a variety of companies There is a variety of companies that outsource, but there seems that outsource, but there seems to be trends in IT Outsourcingto be trends in IT Outsourcing– BanksBanks– Medical offices Medical offices – Mortgage Companies Mortgage Companies – Software developmentSoftware development

What Jobs are being What Jobs are being Outsourced?Outsourced? Some typically outsourced jobs have the Some typically outsourced jobs have the

following traits:following traits:- Technical with measurable standards- Technical with measurable standards- Relatively easy for knowledge transfer- Relatively easy for knowledge transfer- Can be done without direct physical contact - Can be done without direct physical contact with customers or colleagues.with customers or colleagues.

Specific IT jobs that are outsourced include:Specific IT jobs that are outsourced include:– Research process, IT operations, Medicare, legal Research process, IT operations, Medicare, legal

support servicessupport services– Art, animation, editorial and DTP workArt, animation, editorial and DTP work– Software developmentSoftware development– Environment servicesEnvironment services

Where are they Where are they outsourcing to?outsourcing to? IT Outsourcing can be farmed out to a IT Outsourcing can be farmed out to a

variety of places, but you will find variety of places, but you will find more often than not, to developing more often than not, to developing countries on the rise.countries on the rise.– Bangalore, India (Call centers)Bangalore, India (Call centers)– The PhilippinesThe Philippines– Saudi ArabiaSaudi Arabia– ChinaChina– Eastern Europe Eastern Europe – CanadaCanada

Outsourcing ProcessesOutsourcing Processes

Once a company has decided to Once a company has decided to outsource certain IT functions, it outsource certain IT functions, it should consider the following:should consider the following:– What services to outsource.What services to outsource.– Which IT outsourcing firm provides Which IT outsourcing firm provides

these services.these services.– Evaluate top candidates.Evaluate top candidates.– Checklist.Checklist.

Outsourcing Outsourcing ConsultantsConsultants IBM and UnisysIBM and Unisys

– Both IBM and Unisys offers a wide range of Both IBM and Unisys offers a wide range of IT outsourcing solutions for businesses.IT outsourcing solutions for businesses.

Network Outsourcing ServicesNetwork Outsourcing Services Managed Storage ServicesManaged Storage Services Managed Security ServicesManaged Security Services E-Business Hosting ServicesE-Business Hosting Services

– IBM is a pioneer in IT and Outsourcing IT.IBM is a pioneer in IT and Outsourcing IT.– Unisys is a major competitor to IBM.Unisys is a major competitor to IBM.

Examples of IT Examples of IT OutsourcingOutsourcing

UnisysUnisys– City of MinneapolisCity of Minneapolis

IBMIBM– ING BankING Bank

Benefits of IT Benefits of IT Outsourcing (Cntd.)Outsourcing (Cntd.) Improved Service to the CustomerImproved Service to the Customer

– Outsourced companies can receive tech Outsourced companies can receive tech support 24/7, with a smaller budget.support 24/7, with a smaller budget.

– Outsourcing companies generally use Outsourcing companies generally use standardized equipment and methods.standardized equipment and methods.

Saves time and money for the customer.Saves time and money for the customer.

– When IT is outsourced, it allows a company When IT is outsourced, it allows a company to concentrate on its core competency.to concentrate on its core competency.

– IT professionals use list of reliable vendors, IT professionals use list of reliable vendors, which will improve quality of goods and which will improve quality of goods and services received.services received.

Difficulties of IT Difficulties of IT OutsourcingOutsourcing Threats to security and confidentialityThreats to security and confidentiality

– Sensitive information such as payroll, Sensitive information such as payroll, medical records and banking/mortgage medical records and banking/mortgage records.records.

– Hidden costs to outsourcing IT.Hidden costs to outsourcing IT. This includes the contract between companies, as This includes the contract between companies, as

well as legal costs incurred.well as legal costs incurred.

– Loss of possible strategic asset or skillLoss of possible strategic asset or skill Could it have been used to create a competitive Could it have been used to create a competitive

advantage over your competitors?advantage over your competitors?

– Loss of control, and dependence on an IT Loss of control, and dependence on an IT supplier.supplier.

Confidentiality and IT Confidentiality and IT OutsourcingOutsourcing Outsourcing of sensitive information such as Outsourcing of sensitive information such as

bank records between countries.bank records between countries. How do you assure your clients that their How do you assure your clients that their

information is safe and legal?information is safe and legal? Seek out and build a relationship with this Seek out and build a relationship with this

outsourcing supplier before passing them outsourcing supplier before passing them sensitive informationsensitive information– Only agree to work with a supplier that is ISO/IEC Only agree to work with a supplier that is ISO/IEC

7064:2003 certified. 7064:2003 certified. – Have periodic audits, and develop COBIT. Have periodic audits, and develop COBIT. – This is a big deal, especially as you see more and This is a big deal, especially as you see more and

more companies sending all their information more companies sending all their information systems overseas and offshoresystems overseas and offshore

What does Outsourcing What does Outsourcing Mean for the Western Mean for the Western World?World? Capability Maturity ModelCapability Maturity Model

– As IT Outsourcing continues, you will find that our As IT Outsourcing continues, you will find that our abilities will diminish. We will slide further down on the abilities will diminish. We will slide further down on the Capability Maturity Model, due to the outsourcing of our Capability Maturity Model, due to the outsourcing of our IT know how and abilities. IT know how and abilities.

Many economists have recently conjectured that the Many economists have recently conjectured that the higher-than-expected IT unemployment numbers were higher-than-expected IT unemployment numbers were not the result of offshore outsourcing.not the result of offshore outsourcing.

Outsourcing has actually had a positive impact on the Outsourcing has actually had a positive impact on the American economy. American economy.

Many western companies have realized that Many western companies have realized that outsourcing can improve the quality of much of their outsourcing can improve the quality of much of their work by taking advantage of excellent workforces work by taking advantage of excellent workforces abroad.abroad.

What does Outsourcing What does Outsourcing Mean for the Western Mean for the Western World?World?

Outsourcing ParadoxOutsourcing Paradox

Outsourcing of IT jobs occurs at a Outsourcing of IT jobs occurs at a rate of between 2 and 3% rate of between 2 and 3% – While the number of jobs being While the number of jobs being

outsourced has increased, it is outsourced has increased, it is important to note that an almost important to note that an almost equal number of IT jobs have been equal number of IT jobs have been created.created.

– Difficult to measure the loss of IT Difficult to measure the loss of IT jobs to outsourcingjobs to outsourcing

Is Outsourcing a Good Is Outsourcing a Good Thing?Thing? PROS:PROS: Some Americans don't believe that offshore outsourcing is Some Americans don't believe that offshore outsourcing is

bad for this country. They seem to be convinced that we can bad for this country. They seem to be convinced that we can be strengthened as a nation if we are forced to compete in be strengthened as a nation if we are forced to compete in the global economy. the global economy.

Stimulates trade and creates a stronger economy in the U.S. Stimulates trade and creates a stronger economy in the U.S. and more jobs in the long runand more jobs in the long run

A way to get the job done for less money by: A way to get the job done for less money by: -reducing and controlling company operating costs-reducing and controlling company operating costs -freeing up internal company resources for more -freeing up internal company resources for more

important purposesimportant purposes -improving the company focus and resultant -improving the company focus and resultant

productivityproductivity They consider that what is even more important than the They consider that what is even more important than the

welfare of their employees...is making money.welfare of their employees...is making money. U.S. businesses need to stay competitiveU.S. businesses need to stay competitive

Is Outsourcing a Good Is Outsourcing a Good Thing? (Cntd.)Thing? (Cntd.) CONS:CONS: The Loss of jobs in the U.S.The Loss of jobs in the U.S. The problems associated with The problems associated with

offshore outsourcing are profound offshore outsourcing are profound and complexand complex

Outsourcing jobs to places like India Outsourcing jobs to places like India and China really aren't as substantial and China really aren't as substantial as some would like us to believe.as some would like us to believe.

Questions?Questions?

Can you name 2 benefits of Can you name 2 benefits of outsourcing?outsourcing?

What are 2 difficulties of when What are 2 difficulties of when

outsourcing? outsourcing? Why would a company outsource part Why would a company outsource part

of its IT function?of its IT function? Can you name one IT outsourcing Can you name one IT outsourcing

consultant and one service that they consultant and one service that they offer?offer?

ReferencesReferences

http://www.unameits.com/why_it/http://www.unameits.com/why_it/how_outsource_information_technology.jshow_outsource_information_technology.jspp

http://www.a1technology.com/it-http://www.a1technology.com/it-outsourcing.htmoutsourcing.htm

http://www.msnbc.msn.com/id/12393501http://www.msnbc.msn.com/id/12393501

http://www.whomovedmyjob.org/http://www.whomovedmyjob.org/play.texas.holdem.in.morgan.county,.indiplay.texas.holdem.in.morgan.county,.indiana.htmana.htm

http://www.unisys.com/services/http://www.unisys.com/services/outsourcing/clients/index.htmoutsourcing/clients/index.htm

ReferencesReferences

http://www-1.ibm.com/services/us/index.wss/http://www-1.ibm.com/services/us/index.wss/itservice/so/a1000414itservice/so/a1000414

““Baseless Optimism?” Computerworld; 3/20/2006, Vol. Baseless Optimism?” Computerworld; 3/20/2006, Vol. 40 Issue 12, p39-39, 1/5p40 Issue 12, p39-39, 1/5p

http://en.wikipedia.org/wiki/http://en.wikipedia.org/wiki/Outsourcing#IT_operations Outsourcing#IT_operations

http://www.unisys.com/about__unisys/http://www.unisys.com/about__unisys/gartner.htm gartner.htm

http://www.unameits.com/why_it/http://www.unameits.com/why_it/how_outsource_information_technology.jsp how_outsource_information_technology.jsp

Principles of Information Systems. Stair, Ralph and Principles of Information Systems. Stair, Ralph and Reynolds, George p61.Reynolds, George p61.