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
