OUTSOURCING IN THE 21ST CENTURY ORGANIZATION

In sourcing

> In sourcing (in-house-development)

= A common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems

Outsourcing

•  An arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house

# Different forms of outsourcing options a project must consider:

> Onshore outsourcing

= Engaging another company within the same country for services.

> Near shore outsourcing

= Contracting an outsourcing arrangement with a company in a nearby country. Often this country will share a border within  the native country

> Offshore Outsourcing

= Using organizations from developing countries to write code and develop systems. In offshore outsourcing the country is geographically far away

# Reasons company outsource

# Benefits from outsourcing:

~ Financial savings

*  Example: Ford, Chrysler & GM shared CAD/ CAM, e-mail msg & shipping comm- reduce cost of producing cars

~ Increased technical abilities

  - Consequences

• More expense to upgrade system
• More time to install
• Increase complexity to master

~ Market agility

    - Ability to expend core buss more rapidly depending on outsources capabilities to provide:

• Efficient transition to new system
• Better info. Mgt for decision making
• Expansion to new geographical market

# Factors driving outsourcing growth:

~ Core competencies

• Maintain update technology while freeing it to focus on core buss

~ Rapid growth

• Market condition always change. Outsourcing enable organization to acquire best practices process expertise.

~ Industry changes

• M&A force company to change their organization thus outsourcing can make it better for organization to focus on the core competencies

~ The Internet

• Make outsourcing easier with the communication accessibility.

Developing Strategic Outsourcing Partnerships

> Business process outsourcing (BPO)

= contracting of a specific business task, such as payroll, to a third-party service provider

# Categories of BPO

• Back-office outsourcing includes internal buss function.

      * Example: Billing and purchasing

• Front-office outsourcing includes customer-related services

    * Example: marketing and technical support

Sourcing's New Surge - Off shoring

> Offshore outsourcing

= Using organizations from developing countries to write code and develop systems

• According to Forrester Research, nearly half of all businesses use offshore providers, and two-thirds plan to send work overseas in the near future.