April 10 (Ch 19): Outsourcing in the 21st Century

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, especially the prospective resources regarding insourcing, outsourcing, and offshore outsourcing.

LEARNING OUTCOMES

19.1 Describe the advantages and disadvantages of insourcing, outsourcing, and offshore outsourcing.

• Advantages of insourcing:
  – Improves requirements determination
  – Increases knowledge worker participation and ownership
  – Increases speed of systems development
• Disadvantages of insourcing:
  – Inadequate knowledge worker expertise leads to inadequately developed systems
  – Lack of organizational focus creates “privatized” IT systems
  – Insufficient analysis of design alternatives leads to subpar IT systems
  – Lack of documentation and external support leads to short-lived systems
• Advantages of outsourcing:
  – Focus on unique core competencies
  – Exploit the intellect of another organization
  – Better predict future costs
  – Acquire leading-edge technology
  – Reduce costs
  – Improve performance accountability
• Disadvantages of outsourcing:
  – Reduces technical know-how for future innovation
  – Reduces degree of control
  – Increases vulnerability of strategic information
  – Increases dependency on other organizations
• Advantages of offshore outsourcing:
  – Cost savings of 30%-50%
  – Attainment of higher service levels
  – Freeing up of in-house management to focus on strategic management as opposed to daily operational issues
• Disadvantages of offshore outsourcing:
  – Unproven on large scales
  – Instability of the offshore countries
  – Language, culture, and time zone issues

19.2 Describe why outsourcing is a critical business decision.
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.

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Content attributed to Business Driven Technology (Customized WMU Edition)
Baltzan & Phillips.