30.11.10

Session 4


Outsourcing, Offshoring, and IT as a Subsidiary

Reasons To Outsource
       Desire to focus on core competency
       Cost reduction
       Improve quality
       Increase speed to market
       Faster innovation
Outsourced IT functions
       Application maintenance
       Telecommunications/LAN
       PC maintenance
Outsourcing Agreements
       Transactional outsourcing agreements ให้บริษัทที่เชี่ยวชาญในด้านนั้นเป็นคนทำแทน
       Co-sourcing alliances ทำร่วมกันระหว่างลูกค้าและผู้รับจ้าง
       Strategic partnership ผู้รับจ้างรับผิดชอบทั้งระบบ
Risks Associated with Outsourcing
       Shirking – ทำงานไม่ดีแต่ต้องจ่ายเต็ม
       Poaching – เอาข้อมูลไปให้ลูกค้าคนอื่นด้วย
       Opportunistic repricing – มีการเปลี่ยนแปลงสัญญา
Hidden Costs of Outsourcing
       Benchmarking & analysis
       Investigating & contracting with a vendor
       Transmitting work & knowledge to outsourcer
       Ongoing staffing & management of outsourcing relationship
       Transitioning back to in-house
Strategies for Risk Management in Outsourcing
       Understand project
       Divide & conquer
       Align incentives
       Write short-period contracts
       Control subcontracting
       Do selective outsourcing
Factors should be considered in offshore outsourcing
       Business & political environments in selected country
       Quality of infrastructure
       Risks e.g. IT competency, human capital, the economy, legal environment, and cultural differences
Risk & Uncertainties in offshore outsourcing
       Cost-reduction expectation
       Data Security/Protection
       Process discipline, which is use of the same process repeatedly without innovation
       Loss of business knowledge
       Vendor failure to deliver
       Scope creep, which is the request for additional services not included in the outsourcing agreement
       Government oversight/ regulation
       Differences in culture
       Turnover of key personnel
       Knowledge transfer

Acquiring and Developing Business
Applications and Infrastructure

The Framework of IT Application Acquisition
IT Application Acquisition Issues
       Wide range of sizes & types.
       Applications keep changing over time.
       Applications may involve several business partners.
       No single way to acquire IT applications.
       Diversity of IT applications requires variety of acquisition methodologies & approaches.
Acquisition Process of IT Application
       Step 1 – planning, identifying, & justifying IT-based systems – must be aligned with overall business plan.  May require process redesign.  Cost benefit analysis is critical.
       Step 2 – creating an IT architecture – plan for organizing underlying infrastructure & applications of IT project.
       Step 3 – selecting an acquisition option – 1. build in-house, 2. vendor build custom-made system, 3. buy existing application & install with/without modifications, 4. lease, 5. enter partnership or alliance, or 6. use combination.
       Step 4 – testing, installing, integrating & deploying IT applications.
       Step 5 – operations, maintenance & updating.  May take same effort as install.  Rapid changes to technology require frequent updates.

Acquiring IT Applications:  Available Options
·         Buy vs. Lease Options
·         Software-as-a-service (SaaS)
·         In-House Development (Insourcing)
o   Build from scratch
o   Build from components
o   Integrating applications

Methods Used in In-House Development
       Systems Development Life Cycle (SDLC)
       Prototyping
       Web 2.0 or Application 2.0 methodology
       End-user development

Business Process Redesign
Methods for Restructuring
       BPR – may include one or more processes.  Can be anything from redesign of individual process to redesign of group of processes to design of entire enterprise.
       BPM – combines workflow systems & redesign methods.  Covers:  people-to-people, systems-to-systems, & systems-to-people interactions.  Process-centered perspective.  Blends workflow, process management & applications integration.



 By Pornpitra Sithiprasasana 5302115224

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