Information Technology Outsourcing By: Andrew Butler Michael Cheng Carlos Garcia
Outline • What is outsourcing? • Why do companies outsource? • Who is outsourcing? • What jobs are being outsourced and where? • Outsourcing processes. • Outsourcing consultants. • Benefits/difficulties of outsourcing. • Outsourcing and the Western World. • Outsourcing paradox • Is it a good thing?
What is IT? Outsourcing? • Information Technology • The development, installation and implementation of computer systems and applications. • Outsourcing • Contracting with outside professional services to meet specific business needs. • IT Outsourcing-it should be noted that outsourcing has existed for a long time, and is a commonly accepted business practice.
Why Companies Outsource • Companies outsource to: • Seek world class skills abroad while cutting costs. • IT is relieved of time consuming, routine tasks. • Cost predictability, savings and the ability of a company to focus on core competencies.
Who is outsourcing? • There is a variety of companies that outsource, but there seems to be trends in IT Outsourcing • Banks • Medical offices • Mortgage Companies • Software development
What Jobs are being Outsourced? • Some typically outsourced jobs have the following traits: - Technical with measurable standards- Relatively easy for knowledge transfer- Can be done without direct physical contact with customers or colleagues. • Specific IT jobs that are outsourced include: • Research process, IT operations, Medicare, legal support services • Art, animation, editorial and DTP work • Software development • Environment services
Where are they outsourcing to? • IT Outsourcing can be farmed out to a variety of places, but you will find more often than not, to developing countries on the rise. • Bangalore, India (Call centers) • The Philippines • Saudi Arabia • China • Eastern Europe • Canada
Outsourcing Processes • Once a company has decided to outsource certain IT functions, it should consider the following: • What services to outsource. • Which IT outsourcing firm provides these services. • Evaluate top candidates. • Checklist.
Outsourcing Consultants • IBM and Unisys • Both IBM and Unisys offers a wide range of IT outsourcing solutions for businesses. • Network Outsourcing Services • Managed Storage Services • Managed Security Services • E-Business Hosting Services • IBM is a pioneer in IT and Outsourcing IT. • Unisys is a major competitor to IBM.
Examples of IT Outsourcing • Unisys • City of Minneapolis • IBM • ING Bank
Benefits of IT Outsourcing (Cntd.) • Improved Service to the Customer • Outsourced companies can receive tech support 24/7, with a smaller budget. • Outsourcing companies generally use standardized equipment and methods. • Saves time and money for the customer. • When IT is outsourced, it allows a company to concentrate on its core competency. • IT professionals use list of reliable vendors, which will improve quality of goods and services received.
Difficulties of IT Outsourcing • Threats to security and confidentiality • Sensitive information such as payroll, medical records and banking/mortgage records. • Hidden costs to outsourcing IT. • This includes the contract between companies, as well as legal costs incurred. • Loss of possible strategic asset or skill • Could it have been used to create a competitive advantage over your competitors? • Loss of control, and dependence on an IT supplier.
Confidentiality and IT Outsourcing • Outsourcing of sensitive information such as bank records between countries. • How do you assure your clients that their information is safe and legal? • Seek out and build a relationship with this outsourcing supplier before passing them sensitive information • Only agree to work with a supplier that is ISO/IEC 7064:2003 certified. • Have periodic audits, and develop COBIT. • This is a big deal, especially as you see more and more companies sending all their information systems overseas and offshore
What does Outsourcing Mean for the Western World? • Capability Maturity Model • As IT Outsourcing continues, you will find that our abilities will diminish. We will slide further down on the Capability Maturity Model, due to the outsourcing of our IT know how and abilities. • Many economists have recently conjectured that the higher-than-expected IT unemployment numbers were not the result of offshore outsourcing. • Outsourcing has actually had a positive impact on the American economy. • Many western companies have realized that outsourcing can improve the quality of much of their work by taking advantage of excellent workforces abroad.
Outsourcing Paradox • Outsourcing of IT jobs occurs at a rate of between 2 and 3% • While the number of jobs being outsourced has increased, it is important to note that an almost equal number of IT jobs have been created. • Difficult to measure the loss of IT jobs to outsourcing
Is Outsourcing a Good Thing? • PROS: • Some Americans don't believe that offshore outsourcing is bad for this country. They seem to be convinced that we can be strengthened as a nation if we are forced to compete in the global economy. • Stimulates trade and creates a stronger economy in the U.S. and more jobs in the long run • A way to get the job done for less money by: • -reducing and controlling company operating costs • -freeing up internal company resources for more important purposes • -improving the company focus and resultant productivity • They consider that what is even more important than the welfare of their employees...is making money. • U.S. businesses need to stay competitive
Is Outsourcing a Good Thing? (Cntd.) • CONS: • The Loss of jobs in the U.S. • The problems associated with offshore outsourcing are profound and complex • Outsourcing jobs to places like India and China really aren't as substantial as some would like us to believe.
Questions? • Can you name 2 benefits of outsourcing? • What are 2 difficulties of when outsourcing? • Why would a company outsource part of its IT function? • Can you name one IT outsourcing consultant and one service that they offer?
References • http://www.unameits.com/why_it/how_outsource_information_technology.jsp • http://www.a1technology.com/it-outsourcing.htm • http://www.msnbc.msn.com/id/12393501 • http://www.whomovedmyjob.org/play.texas.holdem.in.morgan.county,.indiana.htm • http://www.unisys.com/services/outsourcing/clients/index.htm
References • http://www-1.ibm.com/services/us/index.wss/itservice/so/a1000414 • “Baseless Optimism?” Computerworld; 3/20/2006, Vol. 40 Issue 12, p39-39, 1/5p • http://en.wikipedia.org/wiki/Outsourcing#IT_operations • http://www.unisys.com/about__unisys/gartner.htm • http://www.unameits.com/why_it/how_outsource_information_technology.jsp • Principles of Information Systems. Stair, Ralph and Reynolds, George p61.