~> 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.
=>> Onshore outsourcing – engaging another company within the same country for services.
=>> Near shore 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.
=>> Big selling point for offshore outsourcing “inexpensive good work”.
=>> Factors driving outsourcing growth include:
§> Core competencies.
§> Financial savings.
§> Rapid growth.
§> Industry changes.
§> The Internet.
Ø> According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger and more profitable than those that do not”.
Ø> Most organizations outsource their noncore business functions, such as payroll and IT.
Ø>> 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.
§~Avoid costly outlay of capital funds.
§~Reduced headcount and associated overhead expense.
§~Reduced time to market for products or services.
=>> Outsourcing challenges include:
§> Contract length:
1. Difficulties in getting out of a contract.
2. Problems in foreseeing future needs.
3. Problems in reforming an internal IT department after the contract is finished.
§> Competitive edge.
§> Scope definition.