Slide 1IT OutsourcingOverviewWhat is Outsourcing?History of OutsourcingHistory of Outsourcing Cont’dAdvantagesDisadvantagesTrends: CurrentTrends: FutureOutsourcing ProcessOutsourcing Process Cont’dDo I Outsource?ConclusionSlide 15IT OutsourcingAdvantagesLaborLow CostDefinition/OverviewTry & expenditures by 30%Competitive AdvantageTrendsCore competenciesGov’t outsourcing Global competitionLower overheadFutureGlobalizationCurrentIT to be outsourced mostMaintenanceLower Inventory cost/ Reduced Management time/ Improved Production flow etc.DisadvantagesEconomies of ScaleWhich leads toCompetitors’ competitionSuppliers become competitorsPay per monthData StorageBlack WaterBugs in softwareLose of control Poor qualityTrade secretsCommunication issuesVendors to many projectsFalse advertisementIT OutsourcingIT OutsourcingBy:By:Nick SandersNick SandersLeila HemenwayLeila HemenwayOverviewOverviewOutsourcing – definition and overviewOutsourcing – definition and overviewAdvantages to you and your businessAdvantages to you and your businessDisadvantages - what to watch out forDisadvantages - what to watch out forTrends: Current/FutureTrends: Current/FutureOutsourcing ProcessOutsourcing ProcessIs it right for my company?Is it right for my company?What is Outsourcing?What is Outsourcing?Outsourcing - “the strategic use of Outsourcing - “the strategic use of outside resources to perform activities outside resources to perform activities traditionally handled by internal staff and traditionally handled by internal staff and resources”. Sometimes known also as resources”. Sometimes known also as “facilities management”, outsourcing is a “facilities management”, outsourcing is a strategy by which an organization strategy by which an organization contracts out major functions to contracts out major functions to specialized and efficient service specialized and efficient service providers, who become valued business providers, who become valued business partners.partners. Definition from: Supply Chain Management: An information digest for the SCM professional. “A Brief History of Outsourcing”. Definition from: Supply Chain Management: An information digest for the SCM professional. “A Brief History of Outsourcing”. http://scm.ncsu.edu/public/facts/facs060531.htmlhttp://scm.ncsu.edu/public/facts/facs060531.htmlHistory of OutsourcingHistory of OutsourcingOutsourcing dates back to Roman timesOutsourcing dates back to Roman timesEvident in U.S. after the Industrial Evident in U.S. after the Industrial RevolutionRevolutionCompanies wished to exploit their competitive Companies wished to exploit their competitive advantageadvantage1950’s – 1960’s companies began 1950’s – 1960’s companies began diversifyingdiversifyingEconomies of scaleEconomies of scaleHistory of Outsourcing Cont’dHistory of Outsourcing Cont’dBecame a business strategy in 1989Became a business strategy in 1989Due to companies being non self-sufficientDue to companies being non self-sufficientOutsourced functions which they could not Outsourced functions which they could not handle in-househandle in-houseSupport services began in 1990Support services began in 1990Due to cost saving measuresDue to cost saving measuresIn 1989 (Eastman) Kodak began In 1989 (Eastman) Kodak began outsourcing IToutsourcing ITAdvantagesAdvantagesLow CostLow CostLaborLaborLower overheadLower overheadReduce and control operating costsReduce and control operating costsShare in risk with a partner companyShare in risk with a partner companyCompetitive advantageCompetitive advantageEconomies of scaleEconomies of scaleFocus on core competenciesFocus on core competenciesDisadvantagesDisadvantagesHidden CostHidden CostBugs in softwareBugs in softwareCommunication issuesCommunication issuesLaborLaborLose of controlLose of controlQuality problemsQuality problemsSlow resolution timeSlow resolution timeTrends: CurrentTrends: CurrentGlobal competitionGlobal competitionPressure on marginsPressure on marginsPolitical debatePolitical debateInvest in multiple locationsInvest in multiple locationsreduce risk and control quality reduce risk and control quality Mobile applications Mobile applications Improving effectivenessImproving effectivenessTrends: FutureTrends: FutureDifferentiationDifferentiationCore competenciesCore competenciesCost per monthCost per monthGlobal sourcing of personnelGlobal sourcing of personnelLong term relationshipsLong term relationshipsSuppliers as competitors?Suppliers as competitors?Outsourcing ProcessOutsourcing ProcessProgram InitiationProgram InitiationIdentifying what you want and composing a Identifying what you want and composing a draft contractdraft contractService ImplementationService ImplementationDefining the project, transferring staff, define Defining the project, transferring staff, define Service Level Agreement, Define service Service Level Agreement, Define service reporting, Implementation of service, reporting, Implementation of service, implement proceduresimplement proceduresOutsourcing Process Cont’dOutsourcing Process Cont’dFinal AgreementFinal AgreementDraft amended and final contract producedDraft amended and final contract producedProgram closureProgram closureFormal close down of old programFormal close down of old programDo I Outsource?Do I Outsource?No simple criteriaNo simple criteriaConsider projects individual meritsConsider projects individual meritsRelationship managementRelationship managementShort term vs. long termShort term vs. long termCosts of training and fixing ‘bugs’Costs of training and fixing ‘bugs’ConclusionConclusionAdvantages – Cost effective Advantages – Cost effective Disadvantages – Hidden costsDisadvantages – Hidden costsCurrent and future trends – More Current and future trends – More companies are outsourcingcompanies are outsourcingProcess – Program initiation to closureProcess – Program initiation to closureDecision making – what’s best for your Decision making – what’s best for your
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