Chapter 19 : Outsourcing in the 21st Century Organization

OUTSOURCING DEVELOPMENT

•          In the high-speed global business environment, an organization needs to maximize its profits, enlarge its market share, and restrain its ever-increasing costs

•          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

•          Reasons companies outsource

•          Benefits from outsourcing include:

1.       Financial savings

2.       Increased technical abilities

3.       Market agility

•          Factors driving outsourcing growth include:

1.       Core competencies

2.       Rapid growth

3.       Industry changes

4.       The Internet

DEVELOPING STRATEGIC OUTSOURCING PARTNERSHIP

•          Business process outsourcing (BPO) – contracting of a specific business task, such as payroll, to a third-party service provider

•          BPO is divided into two categories:

1.       Back-office outsourcing

2.       Front-office outsourcing

SOURCING’S NEW SURGE – OFFSHORING

•          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