OutsourcingOutsourcing

Is it Coming Back In September, financial services giant, JPMorgan Chase canceled the remaining portion of an outsourcing agreement with IBM in December 2002 – citing that it had greater capacity to manage its own technology

Two differing views Sears decided to outsource even though they needed to upgrade their aging technology Huntington Bank decided not to outsource Both used a structured process for decision making

How to make a Smart Decision Resist the instinct to rule out or rule in a sourcing decision based on initial reaction or biases Involve corporate and business unit executives early on in the discussions and analyses to ensure you have buy- in at the time of the ultimate decision

Decision continued Give yourself at least six months to analyze your options Engage outside experts to help you assess both the current and future state of IT and the business Factor in the impact on employees, even if you can’t quantify it. Involve them in the process as early as possible

Decision continued Once you make a sourcing decision, remember that it is not set in stone. Revisit as the business and IT environment changes

Data According to Gartner, by end of 2004 one out of every 10 jobs at U.S. based IT vendors and IT service providers will move to emerging markets More than 80 percent of executive boardrooms in the U.S. will have discussed offshore outsourcing

Data continued More than 40 percent of U.S. enterprises will have tried a pilot program or actual outsourcing either offshore or near shore (Canada, Mexico, South America, etc.) Forrester Research predicts that $136 billion in wages, or 3.3 million jobs, will move offshore in the next 15 years

Data continued India still 1 st choice for outsourcing By 2007 total offshore spending on IT will reach $50 billion Countries participating: Brazil, Canada, China, Czech Republic, Hungary, Ireland, Israel, Mexico, Northern Ireland, Philippines, Poland, Russia, S. Africa

Data continued Emerging countries: Australia, Belarus, Bulgaria, Estonia, Latvia, Lithuania, Malaysia, New Zealand, Romania, Slovakia, Ukraine

Why Outsource Can reduce implementation time by up to 43% Effective costs Effective resource management Maintains steady level of productivity

What to Outsource Examples –Call centers –Data management –Health care –Software development –Financial services

Problems Loss of American jobs No current legislation for companies outsourcing Problems with taxes Emotional toll on employees

Other outsourcing Airline industry –Boeing sends heavy maintenance for 777 to a Chinese company –Many other U.S. airline carriers outsource heavy maintenance work to third parties for lower costs

Benefits Reduced labor costs – such as 24 hour monitoring, log scanning, and intrusion detection Security personnel – can actually respond more quickly to global threats Services can be contracted on as- needed basis – saving money