IT Outsourcing Management Dr. Kishen Iyengar

What is Outsourcing? Outsourcing is the transfer of ownership and responsibility of a functionality from a firm to an other legal entity. Outsourcing has been around for decades, especially in non-core activities. IT outsourcing to firms based in other countries is referred to as offshoring; If the provider is in the same country it is called onshore outsourcing

IT Outsourcing Where American and European Companies source from (source – Weissman Center) India 90% Philippines 17% Central/South America 13% China 9% Singapore Ireland 5% Eastern Europe 4%

Benefits of Outsourcing Cost Benefits – lower manpower costs, reduced capital costs, on-demand teams Business and Organizational Benefits – faster time to market, risk migration, ability to focus on core competencies, improved processes IT outsourcing may involve any activity in the IT organization including routine processes like desktop support, hardware and network maintenance, or complex functions such as implementation of ERP

Outsourcing Process

Questions in the IT Outsourcing Process What function do I need to outsource? What are the risks involved? Who do I outsource to? What are the terms of the outsourcing contract? How to decide if the outsourcing contract is a success, Did it meet expecations? Should I renew the contract?

What functions to Outsource? Require minimal client or end-user interaction    Have mature features and stable well defined requirements    The process is standardized, repetitive, well segmented and documented    Do not involve secure or sensitive data    Large enough to produce substantial benefits    Low added value or labor intensive    The application/process is stable with a reasonable expected life time    Low operational complexity    Low to medium business criticality

Risks? Country Criticality Employee motivation Others? After risks are considered, you may invite other parties to submit their proposals by issuing an RFP

Who to Outsource to? When you are deciding between multiple vendors, you may want to look at certain aspects of each vendor to help you decide. Reputation Management Markets and Clients Staff Technology and Process

Reputation The reputation of our company is very good We have a detailed, written business plan Our business plan is extensively used as a management tool We have a high priority to export our services Everyone in our company knows our priority to export our services We help each other within our company (also between departments) We believe in professionalism and commitment

Management The top management has a high level of technology understanding The management is willing to change We have a professional management team The management is highly motivated The management provides leadership The management is focused Our management has an open style

Markets and Clients We have a strong client base in the US We know the EU market very well We have a professional marketing team We have a well defined and clearly communicated selling proposition We have capacity to carry out projects for foreign clients We have professional printed marketing material We have a professionally designed web site Our clients are highly satisfied with our services We have a strong reference list We know that we are very price competitive

Staff Our company has a strong technical staff Our staff is highly motivated Most of our people are certified (Microsoft, Cisco, Linux, etc) Our company offers an extensive employment benefit package Our staff participates in training regularly Our staff selection process is formal and well documented We evaluate our staff regularly Our staff evaluation process is formal and well documented We maintain a less than 10% annual staff turnover

Technology and Process We have several R&D programs running in our company We add new technologies to our technology portfolio regularly We have a fully defined and documented software engineering process We have a fully defined and documented project management process We have a fully defined and documented QA process We handle requirements changes very flexibly We master requirement engineering practices We plan all of our projects in great detail We have a web based project monitoring system We have a formal quality certification (CMM, ISO, etc) We constantly improve quality assurance and key processes Our on-site security is up-to-date