IT Outsourcing Tyler Baze Kent Bushnell Anne Travous

What is Outsourcing? Definition - When an organization transfers the ownership of a business process to a supplier.

Outsourcing Concepts Outsourcing vs. Contracting Within a country NearshoringOffshoringMultisourcing

History of Outsourcing As old as business IT Outsourcing – Eastman Kodak & IBM (1989)

Since 1989 Outsourcing industry has grown about 20% a year In 2000, IT outsourcing represented about 30% of IT budgets In 2001, worldwide spending on IT outsourcing services reached almost $64 billion

Present Situation Offshore outsourcing is increasing at an exponential rate Overseas businesses offer higher quality and lower costs Educational differences between US and other countries Difficulties of outsourcing

Why are Businesses Outsourcing? Improves performance and profitability Allows for focus on a firm’s core competencies Enables firms to increase efficiency without investing in people and technology Leads to better service levels than internal departments can provide Contributes to competitive survival and growth in a global marketplace

Quality and the CMM Promise International companies are gaining access to US jobs, in part due to quality Certification, known as the Capability Maturity Model (CMM) allows firms to quantify their quality and value in comparison to their competitors

The CMM Model

CMM Framework and Benefits FRAMEWORK Focuses on processes for Software development Aims to distinguish mature processes from immature processes Provides quantitative measures on expected output by certified firms BENEFITS Consistency across projects Better quality Higher productivity Predictable performance Considered the “passport to the global market”

Cost Reductions Associated with Outsourcing Wages are much higher in the US than they are in most other countries that take our outsourced jobs Other expenses include pensions and health benefit costs that these firms must pay US workers in order to remain competitive

Educational Differences US may be facing a shortage of highly skilled workers and a surplus of lesser-skilled workers 1995 study compared US students to those in other nations. This study concluded that by 12 th grade, US students had fallen well below the international average

Current Controversy The average of the US does not accurately reflect scores Scores are generally based on standardized testing that do not reflect cultural implications

Difficulties of Outsourcing Lower than anticipated cost savings The need to send specialists to foreign countries to resolve project problems Time Zones Cultural and Language differences Quality and Security Political Instability

The Future Size and scope of outsourcing What does this mean?

Size 33% increase in the entire industry Growth in India as a demonstration of the entire industry Cost savings

Direction Changes in parts of businesses being moved. Transformational Outsourcing Multisourcing

Halo Collaboration Studios Collaboration Studio fosters global face-to- face communication, decreases need to travel and increases productivity, Real time face to face communication Equipment and software

What are the Implications? Although outsourcing in increasing, the mix of activities are changing. Businesses are also becoming more leery of their activities. They are not just throwing money into outsourcing.