IT OutsourcingWhat Are We Going To Talk AboutWhat is OutsourcingWhat Is Not OutsourcingWhat IT Jobs Are Outsourced?OutsourcingWhy Companies Are OutsourcingWhy Companies Outsource cont…How Big Is IT OutsourcingTrends In OutsourcingIT Outsourcing GrowingIT Outsourcing Growing cont..Why is it Growing?DuPont Case StudyDuPont cont…DuPont lessons learnedHow Does This Affect Us?Things To RememberSourcesSlide 20IT OutsourcingIT OutsourcingPrepared by Prepared by Travis ReedKaren MurakaniKevin WhitakerJon PowellJennifer AyuyuWhat Are We Going To Talk What Are We Going To Talk AboutAboutWhat is OutsourcingWhat is OutsourcingWhat Types of Jobs Are OutsourcedWhat Types of Jobs Are OutsourcedWhy Companies Are OutsourcingWhy Companies Are OutsourcingHow Big IT Outsourcing IsHow Big IT Outsourcing IsWhat Trends Can Be ObservedWhat Trends Can Be ObservedIs IT Outsourcing GrowingIs IT Outsourcing GrowingHow Does This Effect UsHow Does This Effect UsWhat is OutsourcingWhat is OutsourcingThe practice of subcontracting The practice of subcontracting manufacturing work to outside and manufacturing work to outside and especially foreign or nonunion companies especially foreign or nonunion companies (Merriam-Webster)(Merriam-Webster)Specifically it involves transferring a significant Specifically it involves transferring a significant amount of management control to the supplier.amount of management control to the supplier.Involves a two way information exchange and Involves a two way information exchange and trust.trust.What Is Not OutsourcingWhat Is Not OutsourcingVendor RelationshipsVendor RelationshipsBuying products or services from another Buying products or services from another company – external auditing vs. internal company – external auditing vs. internal auditing by outside companiesauditing by outside companiesOffshoringOffshoringRelocation of a business practice to Relocation of a business practice to another country – transfer of managementanother country – transfer of managementWhat IT Jobs Are Outsourced?What IT Jobs Are Outsourced?Support for product development and IT Support for product development and IT systemssystemsApplication DevelopmentApplication DevelopmentProduct DevelopmentProduct DevelopmentTest OutsourcingTest OutsourcingBuild, Operate, TransferBuild, Operate, TransferOutsourcingOutsourcingAnnually over 100,000 “white-collar” jobs Annually over 100,000 “white-collar” jobs are moved offshore (Ghate).are moved offshore (Ghate).Compared to the invention of the Compared to the invention of the assembly line, revolutionized the industryassembly line, revolutionized the industryWhy Companies Are Why Companies Are OutsourcingOutsourcingImproved Product Quality – expert Improved Product Quality – expert engineering and scientific researchengineering and scientific researchIncreased Revenue as a result of lower costsIncreased Revenue as a result of lower costsFor every dollar spend in outsourcing the For every dollar spend in outsourcing the United States reaps $1.12 to $1.14 in United States reaps $1.12 to $1.14 in benefits (Drenzer).benefits (Drenzer).Capitalize on governmental tax incentives or Capitalize on governmental tax incentives or governmental assistance.governmental assistance.Flexible intellectual property laws Flexible intellectual property laws concerning joint research.concerning joint research.Why Companies Outsource Why Companies Outsource cont…cont…Low Costs of Research Low Costs of Research and Developmentand DevelopmentThe conducive culture The conducive culture to creating new to creating new business enterprisesbusiness enterprisesFew regulatory or Few regulatory or research restrictionsresearch restrictionsEase of export from Ease of export from site to world wide site to world wide countriescountriesEstablishment was a Establishment was a legal requirement for legal requirement for local access to local local access to local marketsmarketsHow Big Is IT OutsourcingHow Big Is IT Outsourcing$70 billion in reported global IT $70 billion in reported global IT outsourcing Revenue in 2002 (CNET outsourcing Revenue in 2002 (CNET News).News).Expected to grow 7.7% annually over the Expected to grow 7.7% annually over the next five years – nearly $100 billion in next five years – nearly $100 billion in 2007 (IDC research company).2007 (IDC research company).73% of North American Companies 73% of North American Companies outsource at least some of their IT outsource at least some of their IT operationsoperationsTrends In OutsourcingTrends In OutsourcingIT Outsourcing Revenues DecliningIT Outsourcing Revenues DecliningMulti-sourcing – contracting multiple Multi-sourcing – contracting multiple specialized contractors vs. one large all specialized contractors vs. one large all encompassing contract.encompassing contract.Omitting capital equipment purchases in Omitting capital equipment purchases in contracts – established companiescontracts – established companiesNew lower cost countries are being utilized, New lower cost countries are being utilized, which in turn makes the market look stagnant.which in turn makes the market look stagnant.In Truth, IT services are being outsourced to In Truth, IT services are being outsourced to bigger, more specialized, established sources, bigger, more specialized, established sources, with their own internal staff and capabilities.with their own internal staff and capabilities.IT Outsourcing GrowingIT Outsourcing GrowingMicrosoft announced plans to invest $1.7 billion in Microsoft announced plans to invest $1.7 billion in India over the next four years.India over the next four years.The only thing that limits us in India, is The only thing that limits us in India, is the speed at which we can the speed at which we can recruit."recruit." – Bill Gates – Bill GatesIntel announced an investment of $1 billion over Intel announced an investment of $1 billion over the next 5 years in India.the next 5 years in India.Cisco Systems joined with a pledge of $1.1 billion Cisco Systems joined with a pledge of $1.1 billion in India.in India.The big three IT services providers in India, Tata The big three IT services providers in India, Tata Consultancy Services (TCS), Infosys and Wipro, and Consultancy Services (TCS), Infosys and Wipro, and each