Managing IT Outsourcing. MIS 4133 Software Systems

Transcription

1 Managing IT Outsourcing MIS 4133 Software Systems

2 Outline Outsourcing Strategy Sourcing Options Forms of Outsourcing Outsourcing Characteristics Vendor Choices Advantages/Disadvantages Hidden Costs Challenges/Risks Managing Outsourced Staff Offshore Outsourcing

3 Determining an Outsourcing Strategy Outsourcing hired outside services to perform some of a company s IS operations Application service providers (ASPs) provide total systems to organizations, ranging from competitive intelligence systems to broad ERP applications

4 Sourcing Options Insource Outsource Selfsource Multisource

5 Forms of Outsourcing Purchase existing software. Purchase existing software and pay publisher to make certain modifications. Your Organization Outsource the development of an entirely new and unique system for which no software exists. Purchase software and pay publisher for the right to make changes yourself.

6 Outsourcing Characteristics Allows an organization to pay only for what it uses Trend might relate to the position of the CIO Popular, largely due to: Fast pace of technological change Dissatisfaction and costs related to past in-house services Must be both a remedy for service failures/costs and a strategic choice Should not be used for strategic information systems with security or privacy issues

7 Key Factors in Selecting an Outsourcing Vendor Vendor reputation Quality of service Flexible pricing Vendor knowing company business/industry Vendor s ability to make sound technology decisions Vendor s ability to allow for expansion and growth Vendor operates over full geographic area of the company s operations

8 Outsourcing Advantages Focus on unique core competencies Exploit the intellect of other organizations Better predict future costs Acquire leading-edge technology Reduce costs Improve performance accountability

9 Outsourcing Disadvantages Reduces technical know-how for future innovations Reduces degree of control Increases vulnerability of strategic information Increases dependency on other organizations

10 Hidden Costs Benchmarking/analysis to determine if outsourcing is right choice Investigating/selecting a vendor Transitioning knowledge/work to outsourcer Layoffs and associated HR issues Ongoing staffing/mgmt of outsourcing relationship

11 Challenges/Risks Managing a mixture of people Achieving goals/objectives Using resources effectively Establishing and maintaining communications Establishing and maintaining trust Maintaining security Risks: financial, technical, managerial, behavioral, legal

12 Outsourcing Examples Cinergy Corp. Enterprise-wide database administration services outsourced Allowed for technology shift to data warehouse and data mart Summit Information Systems Disaster recovery for data center outsourced During hurricane in Florida, data center stayed up JM Family Enterprises Mainframe hardware, software and operations outsourced Gained efficiencies and were able to deliver reports faster

13 Managing Software Projects Using Outsourced Staff Helps keep software development costs down Uses technical expertise not available in-house Can often complete projects more quickly Off-site outsourcing: Onshore within same country or region Offshore not within same country or region

14 Managing Software Projects Using Outsourced Staff Guidelines for managing an offsite outsourcer: Manage expectations, not staff Take explicit actions to integrate the offsite workers Communicate frequently Focus on formal processes should result in higher quality of the final product

15 Managing Software Projects Using Outsourced Staff Offshore alternative good option when: System requirements well-defined and remain stable Time is of essence and 24x7 availability of resources a good idea Cost of project important

16 Key Trends of Offshore Outsourcing Offshore development centers permanent offshore presence (could be called Offshore Insourcing ) Near-shore sourcing outsourcing to countries close to home and overlapping time zones Multisourcing relying on multiple service providers in a number of companies, based on price and skills

17 Offshore Outsourcing Benefits Cost savings Additional skilled IT personnel Fixed IT cost reductions Time to market improvements Expertise not available in own market

18 Offshore Outsourcing Drawbacks Overestimated cost savings Loss of strategic control Increased security concerns Loss of domestic market jobs

19 Offshore Outsourcing Examples AOL Philippines 24-hr customer service facility staffed by 500 Filipino employees Microsoft India Product development and R&D center; $100 million investment Goldman Sachs India IT, equity research, and administrative operations partially located in India with 250 IT and administrative staff General Atlantic India $400 million investment in software services; 1700 employees

20 Outsourcing Trends Outcome-based pricing (rather than upfront, one time costs) Labor-as-a-service approach (smart robots on the cloud) Standardization in outsourcing (as new technologies become the norm) Renegotiation of outsourcing contracts (focused on the cloud) Use of multiple outside sources Data and analytics central to all outsourcing decisions

21 References Haag, S. and Cummings, M. (2013). Management Information Systems for the Information Age, 9 th edition, McGraw-Hill Companies, Inc., New York. Kliem, R. (2004). Managing the Risks of Offshore IT Development Projects, Information Systems Management, pp Laudon, K.C. and Laudon, J.P. (2006). Management Information Systems: Managing the Digital Firm, Pearson Education, Inc., Upper Saddle River, New Jersey. Martin, E.W., Brown, C.V., DeHayes, D.W., Hoffer, J.A. and Perkins, W.C. (2005). Managing Information Technology, 5 th edition, Pearson Education, Inc., Upper Saddle River, New Jersey. Overby, S. (2005). Simple Successful Outsourcing, CIO Magazine, [accessed: 24 October 2005], October 1. Overby, S. (2007). Outsourcing Definition and Solutions, CIO Magazine, [accessed: 6 October 2015]. Overby, S. (2012). 10 Outsourcing Trends to Watch in 2015, CIO.com, html [accessed: 6 October 2015]. Robinson, M. and Kalakota, R. (2004). Offshore Outsourcing: Business Models, ROI, and Best Practices, Mivar Press, Inc.