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OSU BA 471 - IT Outsourcing

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IT OutsourcingWhat is Outsourcing?Outsourcing ConceptsHistory of OutsourcingSince 1989Present SituationWhy are Businesses Outsourcing?Quality and the CMM PromiseThe CMM ModelCMM Framework and BenefitsCost Reductions Associated with OutsourcingEducational DifferencesCurrent ControversyDifficulties of OutsourcingThe FutureSizeDirectionHalo Collaboration StudiosWhat are the Implications?IT OutsourcingIT OutsourcingTyler BazeTyler BazeKent BushnellKent BushnellAnne TravousAnne TravousWhat is Outsourcing?What is Outsourcing?Definition - When an organization Definition - When an organization transfers the ownership of a business transfers the ownership of a business process to a supplier.process to a supplier.Outsourcing ConceptsOutsourcing ConceptsOutsourcing vs. ContractingOutsourcing vs. ContractingWithin a countryWithin a countryNearshoringNearshoringOffshoringOffshoringMultisourcingMultisourcingHistory of OutsourcingHistory of OutsourcingAs old as businessAs old as businessIT Outsourcing – Eastman Kodak & IBM IT Outsourcing – Eastman Kodak & IBM (1989)(1989)Since 1989Since 1989Outsourcing industry has grown about Outsourcing industry has grown about 20% a year20% a yearIn 2000, IT outsourcing represented about In 2000, IT outsourcing represented about 30% of IT budgets30% of IT budgetsIn 2001, worldwide spending on IT In 2001, worldwide spending on IT outsourcing services reached almost $64 outsourcing services reached almost $64 billionbillionPresent SituationPresent SituationOffshore outsourcing is increasing at an Offshore outsourcing is increasing at an exponential rateexponential rateOverseas businesses offer higher quality Overseas businesses offer higher quality and lower costsand lower costsEducational differences between US and Educational differences between US and other countriesother countriesDifficulties of outsourcingDifficulties of outsourcingWhy are Businesses Outsourcing?Why are Businesses Outsourcing?Improves performance and profitabilityImproves performance and profitabilityAllows for focus on a firm’s core competenciesAllows for focus on a firm’s core competenciesEnables firms to increase efficiency without Enables firms to increase efficiency without investing in people and technologyinvesting in people and technologyLeads to better service levels than internal Leads to better service levels than internal departments can providedepartments can provideContributes to competitive survival and growth in Contributes to competitive survival and growth in a global marketplacea global marketplaceQuality and the CMM PromiseQuality and the CMM PromiseInternational companies are gaining International companies are gaining access to US jobs, in part due to qualityaccess to US jobs, in part due to qualityCertification, known as the Capability Certification, known as the Capability Maturity Model (CMM) allows firms to Maturity Model (CMM) allows firms to quantify their quality and value in quantify their quality and value in comparison to their competitorscomparison to their competitorsThe CMM ModelThe CMM ModelCMM Framework and BenefitsCMM Framework and BenefitsFRAMEWORKFRAMEWORKFocuses on processes Focuses on processes for Software for Software developmentdevelopmentAims to distinguish Aims to distinguish mature processes from mature processes from immature processesimmature processesProvides quantitative Provides quantitative measures on expected measures on expected output by certified output by certified firmsfirmsBENEFITSBENEFITSConsistency across Consistency across projectsprojectsBetter qualityBetter qualityHigher productivityHigher productivityPredictable Predictable performanceperformanceConsidered the Considered the “passport to the global “passport to the global market”market”Cost Reductions Associated with Cost Reductions Associated with OutsourcingOutsourcingWages are much higher in the US than Wages are much higher in the US than they are in most other countries that take they are in most other countries that take our outsourced jobsour outsourced jobsOther expenses include pensions and Other expenses include pensions and health benefit costs that these firms must health benefit costs that these firms must pay US workers in order to remain pay US workers in order to remain competitivecompetitiveEducational DifferencesEducational DifferencesUS may be facing a shortage of highly skilled US may be facing a shortage of highly skilled workers and a surplus of lesser-skilled workersworkers and a surplus of lesser-skilled workers1995 study compared US students to those in 1995 study compared US students to those in other nations. This study concluded that by 12other nations. This study concluded that by 12thth grade, US students had fallen well below the grade, US students had fallen well below the international averageinternational averageCurrent ControversyCurrent ControversyThe average of the US The average of the US does not accurately does not accurately reflect scoresreflect scoresScores are generally Scores are generally based on standardized based on standardized testing that do not reflect testing that do not reflect cultural implicationscultural implicationsDifficulties of OutsourcingDifficulties of OutsourcingLower than anticipated cost savingsLower than anticipated cost savingsThe need to send specialists to foreign The need to send specialists to foreign countries to resolve project problemscountries to resolve project problemsTime ZonesTime ZonesCultural and Language differencesCultural and Language differencesQuality and SecurityQuality and SecurityPolitical InstabilityPolitical InstabilityThe FutureThe FutureSize and scope of outsourcingSize and scope of outsourcingWhat does this mean?What does this mean?SizeSize33% increase in the entire industry33% increase in the entire industryGrowth in India as a demonstration of the Growth in India as a demonstration of the entire industryentire industryCost savingsCost savingsDirectionDirectionChanges in parts of Changes in parts of businesses being businesses being moved.moved.Transformational Transformational OutsourcingOutsourcingMultisourcingMultisourcingHalo Collaboration StudiosHalo Collaboration Studios Collaboration Studio fosters global face-to-Collaboration Studio fosters global face-to-face communication, decreases need to face communication, decreases need to travel and increases productivity,travel and increases productivity,Real time face to face communicationReal time face


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OSU BA 471 - IT Outsourcing

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