Outsourcing in the 21st Century

Outsourcing in the 21st Century

CHAPTER 19

OUTSOURCING PROJECTS

Insourcing (in-house-development) -  is a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems.

Outsourcing - is an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house.

Onshore outsourcing - is engaging another company within the same country for services.

Nearshore outsourcing - is contracting an outsourcing arrangement with a company in a nearby country.

Offshore outsourcing -  is using organizations from developing countries to write code and develop systems.

Outsourcing Benefits

•      increased quality and efficiency
•       reduced operating expenses
•       outsourcing non-core process
•       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

Outsourcing Challenges

Contract length - Most of the outsourced IT contracts are for a relatively long time period.

Long period causes : 

•  difficulties in getting out of a contract
• problems in foreseeing future needs
•  problems in reforming an internal IT department after the contract is finished