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When to Outsource: A Strategic Guide for IT and e-Business Management

In the ever-evolving landscape of IT and e-business, outsourcing has become a vital strategy for organizations. This guide explores the definition of outsourcing, its benefits including economies of scale and access to superior expertise, and the associated costs and risks such as loss of control and lack of innovation. Key recommendations include assessing core competencies, seeking trustworthy suppliers, and initiating with non-critical functions. By understanding the intricacies of outsourcing, businesses can make informed decisions to enhance their operational efficiency.

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When to Outsource: A Strategic Guide for IT and e-Business Management

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  1. Managing IT and e-Business - 2001 When to outsource? Pam Conley Greg Jerome Mathew Joseph Stellan Ohrn Enio Pagani Arnon Sela

  2. Agenda • Definition and terms • Benefits • Costs • Risks • Recommendations • Source of information EMBA 2001, 0153

  3. Definition Outsourcing is when a buyer transfers an ownership of process to a supplier EMBA 2001, 0153

  4. Terms • Contracting – operation without ownership • BPO - business process outsourcing • ASP – application service provider • BSP – business service provider EMBA 2001, 0153

  5. Benefits • Economy of scale • Management - competencies focus • Flexible resources • Superior worldwide expertise • Time to market and reduced cycle time EMBA 2001, 0153

  6. Costs • Switching costs • Abdication of control • Lack of customization • Lack of technology innovation • Loss of differentiation EMBA 2001, 0153

  7. Risks • Shirking • Poaching • Opportunistic re-pricing or holdup EMBA 2001, 0153

  8. Recommendations Outsourcing of a function is desired when • It is a non-core competent of the buyer, • There is a supplier that can economically service that function, and • The supplier is trustworthy for delivering in a satisfactory manner. EMBA 2001, 0153

  9. Recommendations (cont.) • Shop around • Start gradually with non-critical function • Short term contract • Clear and manageable scope • “Don’t expect what you don’t inspect” EMBA 2001, 0153

  10. Recommendations (cont.) • Gain-sharing style • Mutual executive supervision • Cross functional teams • Best of breed EMBA 2001, 0153

  11. Source of information • http://www.cio.com/forums/outsourcing • http://www.itworld.com • http://www.outsourcing-center.com • http://www.gartnergroup.com • http://www.computerworld.com • http://www.outsourcing.com EMBA 2001, 0153

  12. Managing IT and e-Business - 2001 When to outsource? The End

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