Please read this information on IT sourcing strategies: Chapter 12.4 – "IT Sourcing and Cloud Strategy" (PowerPoint)Report on outsourcing and insourcing by Deloitte Consulting (Links to an external si
Information Technology Outsourcing
Wilmington University
Vennela Dasi
IST7100:IT Policy and Strategy
Summary of First Article:
The organization has been outsourcing IT for 70 years. However, outsourcing increased tremendously when Kodak outsourced in 1989. In an earlier stage, companies were outsourced to reduce the operational cost but nowadays outsourcing is used to improve business performance strategically. Many IT functions are outsourced like telephony services, applications programmer, system operations, and integrations. In the past, only a small part of Information technology functions were outsourced but now the entire IT department is outsourcing. The organization needs to perform few activities, outsourcing acquires more knowledge and ability to learn about the product. Outsourcing is implemented not only in IT departments but also in Automobile manufacturing companies to reduce costs in the short run.
Outsourcing is defined as “outside resource using”, outsourcing has been defined in many different ways by different Authors. This definition represents contracting with outside parties to provide and manage services. These considered purchasing outside company services, “that organizations provide for themselves”. For example, Automobile manufactures outsource subcontract for some portion of operations to manage their manufacturing and assembly operations, subcontracting of their services are considered to be outsourcing. Most companies mainly engage in outsourcing for strategic and economic reasons. Economically,
Outsourcing is easy on the eye because the tasks are being performed with lower total cost. When coming at Strategically, when an organization has the capacity to restrict from servicing a market. When a company does not have the required time, skills, quality, this can be done by outsourcing within a time frame and of great quality. Apart from strategic and economic reasons, many firms are outsourcing because of the “herd mentality”. Organizations may believe that “they may miss the boat” and lose the expectations about the project that will impact future projects. There are two types of Transaction Cost Economics in outsourcing: production and coordination. Production costs are mainly to produce the goods and services from different firms and coordination costs are costs that control and monitor workers. The next major reason for outsourcing is increasing workload.
Selecting the perfect outsourcing is difficult because technology has both advantages and disadvantages and it completely depends on the company to select the right one among all. And also bringing experts to get efficient output increases the production cost. Therefore, many companies have found sourcing is the best solution. There are different types of sourcing for any organization to fulfill its goals. they are
Multi-sourcing
IT outsourcing
Professional outsourcing
BPO(Business process outsourcing)
Project Outsourcing
Manufacturing and operational sourcing and many more.
Selecting the right source depending upon the project leads to the best performance in the project and being able to reach the business goals. There is a backend outsourcing process like data management, data entry, accounting, etc. These would be simple as well as these can be done by non-technical persons too.
Summary of the second article
The E-commerce industry has grown rapidly nowadays and this is projected towards an uptrend in the future. As everyone is shifting from traditional channels to online channels. E-commerce is playing a key role in everyone's daily life. The researchers claimed that IT infrastructure is essential in any organization from small to large scale. This cost of production increases more than the actual cost. There are several aspects that using outsourcing reduces the cost of IT infrastructure. IST sourcing is different from outsourcing in that it is not seeking to turn over another firm but to create IT infrastructure using technology services that are built by external vendors. External resources are experts where they live in a different country who work on a specific task that is assessed by the company. There are different types of outsourcing services like software development, AWS, Networking, Support, Testing. These are popular services. A company outsources its project to get better quality with less cost of production. There are some Key benefits of sourcing
Can be done in time
Cost reduction
Expertise
Saving technology and infrastructure
Reduce Risk factory
Increase efficiency
Focus on the core tasks
Before outsourcing every company should checklist whether they are clear about the task to be outsourced, clear instructions, expected performances, skills required and resources required. If they are not clear about these kinds of things this can lead to time-out projects, less expected outputs. There are different types of outsourcing strategies
Onshore outsourcing
Onshore outsourcing is nothing but domestic sourcing. This means obtaining services from another company but within the country. The purpose of onshoring outsourcing is to make non-essential activities but not core business. It has more benefits than other outsourcing like being able to communicate with others is easy because of the same language, including marketing, sales and customer support will be simple. Even though communication is easy, the delivery of the project will be delayed due to time zones mainly in the US.
Offshoring Outsourcing:
Offshoring outsourcing is completely the opposite of onshoring. The company obtains the services from outside the country. For example, US companies obtain services from Indian companies. They select based on their skills, requirements. Offshore outsourcing reduces more costs from nearshoring and offshoring. Mainly IT functions are Offshoring outsources.
Nearshore Outsourcing:
Nearshoring outsource is getting work done by professionals from neighborhood countries. For example, US outsourcing from Canada and Mexico firms. In nearshore outsourcing project managers won’t have to waste time educating about the project because of geographical distances. The nearby country will have similar projects.
Reference:
Michael H. Zack (22nd March 2006) Information Technology Outsourcing: Reducing Costs or knowledge?
https://warwick.ac.uk/fac/soc/wbs/conf/olkc/archive/olkc1/papers/109_singh.pdf
Juliana Yuh-Shun Tsai (May 2012) Information Systems and Technology Sourcing Strategies
and Performance of E-Retailers
https://www.proquest.com/openview/efcddc6231098ddce2786392e20a7e1b/1?pq-origsite=gscholar&cbl=18750