1. Chapter 15
Outsourcing

2. Learning Outcomes
Describe the advantages and disadvantages of insourcing, outsourcing, and offshore outsourcing
Outsourcing can give the right combination of people, processes, and technology to operate efficiently and effectively in the global marketplace without burdening time and budget
Developing strategic outsourcing partnerships is increasingly becoming the strategic choice of companies looking to achieve cost reductions while improving their service quality, increasing shareholder value, and focusing on their core business capabilities

3. Overview
This chapter focuses on businesses’ need to undertake every effort to re-think and re-adopt new processes, especially the prospective resources regarding:
Insourcing
Outsourcing
Offshore outsourcing

4. Insourcing
Insourcing – a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems

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. Benefits from Outsourcing
Financial savings
Increased technical abilities
Market agility

7. Factors driving outsourcing growth
Core competencies
Rapid growth
Industry changes
The Internet

8. 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:
Back-office outsourcing
Front-office outsourcing

9. Offshore Outsourcing
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

10. Opening Case Study Questions
Explain the driving forces behind Amazon.com’s need to keep all IT development and systems in-house
Identify which business process Amazon.com could or perhaps should outsource
Discuss the pitfalls Amazon.com would encounter if it decided to outsource its IT department

11. IBM with Pearson
IBM signed an outsourcing arrangement with Pearson, a leading provider of financial and business news, to provide the company with managed operations services for its mainframe and server environment
As a result of the relationship with IBM, more than 70 Pearson employees will join IBM to support Pearson’s data center operations

12. IBM with Pearson
Summarize a few reasons why Pearson did not use an insourcing approach for its IT needs
What are some of the advantages that IBM can offer Pearson as a result of outsourcing many of its critical business functions?
Explain the advantages of forming an outsourcing relationship with an international company, such as IBM has with Pearson