Chapter 19 - Outsourcing in the 21st century. The goals of this chapter are: Describe the advantages and disadvantages of insourcing, outsourcing, and offshore outsourcing; describe why outsourcing is a critical business decision. | CHAPTER 19 Outsourcing in the 21st Century Learning Outcomes Describe the advantages and disadvantages of insourcing, outsourcing, and offshore outsourcing Describe why outsourcing is a critical business decision OUTSOURCING PROJECTS Insourcing (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 OUTSOURCING PROJECTS OUTSOURCING PROJECTS Reasons companies outsource OUTSOURCING PROJECTS Onshore outsourcing – engaging another company within the same country for services Nearshore outsourcing – contracting an outsourcing arrangement with a company in a nearby country Offshore outsourcing – using organizations from developing countries to write code and develop systems OUTSOURCING . | CHAPTER 19 Outsourcing in the 21st Century Learning Outcomes Describe the advantages and disadvantages of insourcing, outsourcing, and offshore outsourcing Describe why outsourcing is a critical business decision OUTSOURCING PROJECTS Insourcing (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 OUTSOURCING PROJECTS OUTSOURCING PROJECTS Reasons companies outsource OUTSOURCING PROJECTS Onshore outsourcing – engaging another company within the same country for services Nearshore outsourcing – contracting an outsourcing arrangement with a company in a nearby country Offshore outsourcing – using organizations from developing countries to write code and develop systems OUTSOURCING PROJECTS Big selling point for offshore outsourcing “inexpensive good work” OUTSOURCING PROJECTS Factors driving outsourcing growth include: Core competencies Financial savings Rapid growth Industry changes The Internet Globalization OUTSOURCING PROJECTS According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger, and more profitable than those that do not” OUTSOURCING PROJECTS Most organizations outsource their noncore business functions, such as payroll and IT Outsourcing Benefits Outsourcing benefits include: Increased quality and efficiency Reduced operating expenses Outsourcing non-core processes Reduced exposure to risk Economies of scale, expertise, and best practices Access to advanced technologies Increased flexibility Avoid costly outlay of capital funds Reduced headcount and associated overhead expense Reduced time to market for products or services Outsourcing Challenges Outsourcing challenges include Contract length Difficulties
