1. McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, All Rights Reserved Chapter 18 Outsourcing in the 21 st Century

2. 18-2 Learning Outcomes 18.1 Describe the advantages and disadvantages of insourcing, outsourcing, and offshore outsourcing 18.2 Describe why outsourcing is a critical business decision 18.3 Assess the reasons for developing strategic outsourcing partnerships

3. 18-3 Outsourcing Development In the high-speed global business environment, an organization needs to maximize its profits, enlarge its market share, and restrain its ever- increasing costs This chapter focuses on businesses’ need to undertake every effort to re-think and re-adopt new processes

4. 18-4 Insourcing Insourcing (in-house-development) – a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems

5. 18-5 Outsourcing Outsourcing – an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house

6. 18-6 Outsourcing Reasons companies outsource

7. 18-7 Outsourcing Benefits from outsourcing include: –Financial savings –Increased technical abilities –Market agility

8. 18-8 Outsourcing Factors driving outsourcing growth include: –Core competencies –Rapid growth –Industry changes –The Internet

9. 18-9 Developing Strategic Outsourcing Partnerships Business process outsourcing (BPO) – contracting of a specific business task, such as payroll, to a third-party service provider BPO is divided into two categories: 1.Back-office outsourcing 2.Front-office outsourcing

10. 18-10 Sourcing’s New Surge - Offshoring Offshore outsourcing – using organizations from developing countries to write code and develop systems According to Forrester Research, nearly half of all businesses use offshore providers, and two-thirds plan to send work overseas in the near future

11. 18-11 CHAPTER EIGHTEEN Opening Case Study Questions 1.How can outsourcing benefit hospitals developing information systems? 2.Why would some hospitals want to keep their IT development in-house? 3.Which systems would be ideal for a hospital to outsource? 4.Describe how Hackensack University Medical Center is using wireless technology to improve its operations. Could it outsource the development of its wireless system?

12. 18-12 CHAPTER EIGHTEEN CASE UPS in the Computer Repair Business Toshiba is handing over its entire laptop repair operation to UPS Supply Chain Solutions, the shippers $2.4 billion logistics outsourcing division

13. 18-13 Chapter Eighteen Case Questions 1.Do you think UPS’s entrance into the laptop repair business was a good business decision? Why or why not? 2.Explain why Toshiba decided to outsource its computer repair business to UPS 3.What are some advantages UPS can offer Toshiba in the outsourcing arrangement? 4.Explain the advantages of forming an outsourcing relationship with a parcel delivery company such as UPS