IT Outsourcing

1. IT Outsourcing Definition/Overview Disadvantages Advantages Trends Low Cost Competitive Advantage Lose of control Poor quality Future Current Communication issues Trade secrets Economies of Scale Labor Globalization Try & expenditures by 30% Bugs in software IT to be outsourced most Global competition Lower overhead Which leads to Vendors to many projects Core competencies Data Storage Competitors’ competition Gov’t outsourcing Maintenance False advertisement Lower Inventory cost/ Reduced Management time/ Improved Production flow etc. Black Water Pay per month Suppliers become competitors

2. IT Outsourcing By: Nick Sanders Leila Hemenway

3. Overview • Outsourcing – definition and overview • Advantages to you and your business • Disadvantages - what to watch out for • Trends: Current/Future • Outsourcing Process • Is it right for my company?

4. What is Outsourcing? • Outsourcing - “the strategic use of outside resources to perform activities traditionally handled by internal staff and resources”. Sometimes known also as “facilities management”, outsourcing is a strategy by which an organization contracts out major functions to specialized and efficient service providers, who become valued business partners. Definition from: Supply Chain Management: An information digest for the SCM professional. “A Brief History of Outsourcing”. http://scm.ncsu.edu/public/facts/facs060531.html

5. History of Outsourcing • Outsourcing dates back to Roman times • Evident in U.S. after the Industrial Revolution • Companies wished to exploit their competitive advantage • 1950’s – 1960’s companies began diversifying • Economies of scale

6. History of Outsourcing Cont’d • Became a business strategy in 1989 • Due to companies being non self-sufficient • Outsourced functions which they could not handle in-house • Support services began in 1990 • Due to cost saving measures • In 1989 (Eastman) Kodak began outsourcing IT

7. Advantages • Low Cost • Labor • Lower overhead • Reduce and control operating costs • Share in risk with a partner company • Competitive advantage • Economies of scale • Focus on core competencies

8. Disadvantages • Hidden Cost • Bugs in software • Communication issues • Labor • Lose of control • Quality problems • Slow resolution time

9. Trends: Current • Global competition • Pressure on margins • Political debate • Invest in multiple locations • reduce risk and control quality • Mobile applications • Improving effectiveness

10. Trends: Future • Differentiation • Core competencies • Cost per month • Global sourcing of personnel • Long term relationships • Suppliers as competitors?

11. Outsourcing Process • Program Initiation • Identifying what you want and composing a draft contract • Service Implementation • Defining the project, transferring staff, define Service Level Agreement, Define service reporting, Implementation of service, implement procedures

12. Outsourcing Process Cont’d • Final Agreement • Draft amended and final contract produced • Program closure • Formal close down of old program

13. Do I Outsource? • No simple criteria • Consider projects individual merits • Relationship management • Short term vs. long term • Costs of training and fixing ‘bugs’

14. Conclusion • Advantages – Cost effective • Disadvantages – Hidden costs • Current and future trends – More companies are outsourcing • Process – Program initiation to closure • Decision making – what’s best for your company

15. QUESTIONS???