1. Outsourcing in the 21st Century CHAPTER 19 Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

2. LEARNING OUTCOME Describe the advantages and disadvantages of insourcing, outsourcing, and offshore outsourcing. 19-2

3. OUTSOURCING PROJECTS Insourcing (in-house-development)—A common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems Outsourcing—An arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house 19-3

4. OUTSOURCING PROJECTS 19-4

5. OUTSOURCING PROJECTS Reasons companies outsource: 19-5

6. OUTSOURCING PROJECTS Onshore Outsourcing—Engaging another company within the same country for services Near-shore Outsourcing—Contracting an outsourcing arrangement with a company in a nearby country Offshore Outsourcing—Using organizations from developing countries to write code and develop systems 19-6

7. OUTSOURCING PROJECTS Factors driving outsourcing growth include: –Core competencies –Financial savings –Rapid growth –Industry changes –The Internet –Globalization 19-7

8. OUTSOURCING PROJECTS 19-8

9. OUTSOURCING BENEFITS Outsourcing benefits include: –Increased quality and efficiency –Reduced operating expenses –Outsourcing non-core processes –Reduced exposure to risk –Economies of scale, expertise, and best practices –Access to advanced technologies –Increased flexibility –Avoid costly outlay of capital funds –Reduced headcount and associated overhead expense –Reduced time to market for products or services 19-9

10. OUTSOURCING CHALLENGES Outsourcing challenges include: –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. –Competitive edge –Confidentiality –Scope definition 19-10