Outsourcing I.T. and I.S. Prepared For: Dr. Fang Fang Professor MIS 304 9 December 2008 Prepared By: Athena Lim Michael Vu Rex Santa Cruz Chinh Dang John Gilligan Students: MIS 304 Due By: 9 December 2008Information Technology is the implementation and maintenance of computer hardware and software to organize and process information electronically. Information System is a collection of people, data, and operations in order to process information in a business. By today’s standards, non-IT/IS workers tend to consider both the same. However, though IT involves technical hardware, software and support within the IS field, they are far from similar. One way we have decided to present this fact is the outsourcing of both industries. The outsourcing of Information Technology has provided job opportunities for overseas workers as well as dramatically decrease expenses for firms while the trick to outsource IS has not been completely mastered. The information we present in this text discusses the differences of IT/IS outsourcing for here and abroad. We will conclude with how our findings prove a difference between IS and IT based on outsourcing. Advantages of Outsourcing for American Firms Outsourcing seems to be a bad word to the United States employees with numerous jobs going to India, China and the Philippines. Not all jobs are being outsourced, also called “off shoring”; national and local government Information Technology jobs are still within the country. Our education system is benefitting from outsourced jobs. The education system is not the only one that is benefitting; firms are bettering themselves by cutting cost down. We will see this by using Porter’s Five Forces and Value Chain Model. With all the changes that industries are making they can pass benefits to the customer/consumers. As a country we are raised up to believe in individualism. We can see that in our nation’s educations system. It is praised if you are top of the class and if they are they will be rewarded. For example, in high school you try to be the top of your class so you can get into the bestcolleges out there. If you have the highest GPA in the school you are rewarded by being valedictorian. That leaves many other kids behind, about 1.2 millions students drop out every year (ref#2). Some might think what does this have to deal with the off shoring. We are off shoring because other countries are being taught in a better education system and that is why they are getting the jobs over there and they are getting paid less for it. It is report that the United States education system is ranked 18th out of 24 nations (Wu). To better ourselves as a country we have to come up with the new state of the art technology. That means that our students and employees as a nation be the best in math and in science. This would be hard to achieve since 17 percent of 12th grade students scored at the proficient level in 2000 (ref#2). This is a major problem in the U.S. There is no short-term fix. We as a nation have to think about the long-term solution that will help our students. We are now concentrating more on our education system with the “No Child Left Behind Act of 2001.” With a better education in math and science we as a country can keep up with the demand of workers in new high technology industry. Also this would prepare student better when they reach college. It was propose by the Bush administration that a portion of the spending will be in primary and secondary schools with more of an emphasis in science and math. This would better prepare students enter colleges trying to get a degree in computer science. In the article by Frauenheim, it states that it is “recommended that funds for teacher’s salaries in public schools should be raised by $30 billion and that educator’s based pay be based partly on performance.” With at better salary for our educators there will be a higher quality of education that should be taught to the students. This is not a short-term fix for the offshore sourcing but this will help in the long run for the country. This doesn’t deal with outsourcing directly but it is a positive effect of it. We can be the leadersof developing advance technology with a better education system. Once a student does graduate with a degree they can now better a firm even with the threat of off shoring. Off shoring is not a bad thing to everyone. Companies outsource so they can cut their cost down. With outsourcing companies can have an advantage in every factor of Porter’s Five Forces Model. A company that outsourced would have the advantage to entry to the IT industry. By outsourcing labor and productions a company can save 30-70% in expenses (Council). With that kind of saving this allows a firm to grow. With growth a company can obtain more capital for the firms operations. Outsourcing allows a company to distribute their product or services more easily. Five Forces With the ease of distribution a company can easily raise the bar and would have a competitive advantage over rivals. From the saving from expense it would make the company grow faster than a company that doesn’t outsource. Since the services or product that a company has would offer a lower price and offer a higher quality. With the cost cuts in labor a firm can concentrate on product differentiation. In the IT industry this can be a better software or hardware at a lower cost. With this advantage this will increase the intensity of rivalry. Since a company is fighting for the same customers. A company that has a good market growth will usually succeed over a company that doesn’t off shore since cost is lower and revenue is higher. If an IT company can’t differentiate their service or product the threat of substitutes will increase. Barriers to entry will be more difficult for other companies if they do not outsource. When products/service is low in prices will also make it difficult for others to enter the industry.With the cost savings that an outsourcing company acquires will help develop new technology. With that technology that the company has developed they earn the right for patents and trademarks. With that in place again it will make it difficult for other companies to compete. A customer has many choices out there to buy any type of IT products. For firm to survive from the threat of substitutes is to come out a product that is cheaper and
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