Business Driven Technology Unit 5 Transforming Organizations Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Unit Five O Chapter Seventeen – Building Software to Support an Agile Organization O Chapter Eighteen – Managing Organizational Project O Chapter Nineteen - Outsourcing in the 21 st Century O Chapter Twenty – Developing a 21st-Century Organization 19-2

Chapter 19 Outsourcing in the 21st Century 19-3

LEARNING OUTCOMES 1. Describe the advantages and disadvantages of insourcing, outsourcing, and offshore outsourcing 19-4

OUTSOURCING PROJECTS O Insourcing (in-house-development) – a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems O Outsourcing – an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house 19-5

OUTSOURCING PROJECTS 19-6

OUTSOURCING PROJECTS O Reasons companies outsource 19-7

OUTSOURCING PROJECTS O Onshore outsourcing – engaging another company within the same country for services O Nearshore outsourcing – contracting an outsourcing arrangement with a company in a nearby country O Offshore outsourcing – using organizations from developing countries to write code and develop systems 19-8

OUTSOURCING PROJECTS O Big selling point for offshore outsourcing “inexpensive good work” 19-9

OUTSOURCING PROJECTS O Factors driving outsourcing growth include: O Core competencies O Financial savings O Rapid growth O Industry changes O The Internet O Globalization 19-10

OUTSOURCING PROJECTS O According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger, and more profitable than those that do not” 19-11

OUTSOURCING PROJECTS O Most organizations outsource their noncore business functions, such as payroll and IT 19-12

Outsourcing Benefits O Outsourcing benefits include: O Increased quality and efficiency O Reduced operating expenses O Outsourcing non-core processes O Reduced exposure to risk O Economies of scale, expertise, and best practices O Access to advanced technologies O Increased flexibility O Avoid costly outlay of capital funds O Reduced headcount and associated overhead expense O Reduced time to market for products or services 19-13

Outsourcing Challenges O Outsourcing challenges include O Contract length 1. Difficulties in getting out of a contract 2. Problems in foreseeing future needs 3. Problems in reforming an internal IT department after the contract is finished O Competitive edge O Confidentiality O Scope definition 19-14

LEARNING OUTCOME REVIEW O Now that you have finished the chapter please review the learning outcomes in your text 19-15