Chapter 10 – MGT 651
ï½ Outsourcing Historic View
ï½ Kellwood Outsourcing Review
ï½ Sourcing Decision Cycle Framework
ï½ Factors in the Outsourcing Decision
ï½ How to Outsource Successfully?
ï½ Where to Outsource?
ï½ Keep as Is ? Re-Assess the Decision
ï½ Crowdsourcing
2
Top 3 Outsourcing Trends 2018
ï½ Why Outsourcing in past?
ï½ What’s driving trends?
ï½ Top 3 Trends
3
ï½ Original Outsourcing Decision (EDS) – goal was to integrate
different systems into one
ï½ Acquired by Sun Capital Partners, COO made
consolidation/cost savings the top priority
ï½ How IT Services were sourced came under reviewï½ Analysis Done with help of outside firm
ï½ Results & Action Plan/Communication Strategy
ï½ Kellwood Article ïƒ 3 times the savings
â—¦ Kellwood Saves Millions
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5
ï½ How – scope of the outsourcing & steps that should be takenï½ Where – work with an outsourcing provider in your own
country, offshore, or in the cloud
ï½ Starting the Cycle: Make or Buy (insource vs. outsource)
ï½ Insourcing – most traditional way to source IT work
ï‚– Keep core competencies in-house
ï‚– Security concerns
ï‚– Reasons not to insource
ï½ Outsourcing – purchase of good or service previously
provided internally but is now provided by outside vendors6
7ï½ Initial Goal was cost savings
ï½ Multi-vendor approach – “the Kodak effectâ€
â—¦ Data Center ïƒ IBM
â—¦ Desktop ïƒ BusinessLand
â—¦ Network ïƒ DEC (Digital Equipment Company)
ï½ Many others followed Kodak’s lead
ï½ Kodak Moment to Reconsider IT Value
8ï½ Primary Reasons (Historically)
â—¦ Cheaper Costs due to Economies of Scale
â—¦ Ability to handle peaks in processing
◦ Client company’s need to consolidate Data Centers
ï½ Other Factors Leading to Outsourcing
â—¦ Frees up resources
â—¦ Transition to newer technology
â—¦ Shortage of resources (from earlier video)
9ï½ Yes to These ïƒ Suggest Insourcing
â—¦ Does it involve a core competency?
â—¦ Confidential or sensitive IS services?
â—¦ Adequate training for in-house IS Professionals?
â—¦ Time available to complete software development in-house?ï½ Yes to These ïƒ Suggest Outsourcing
â—¦ Reliable outsourcing providers who will likely stay in business for length of the contract?
â—¦ Outsourcing provider that has culture and practices that are
compatible with the client
ï½ Surrender Control
ï½ OP may not recommend newer technologies
ï½ Lose ability to develop IS functions for competitive advantageï½ Risk of over reliance – locked into an arrangement they no
longer want  DHL example – 90% of IT Development/Maintenance projects
to Infosys (lot of money tied into this decision)  IM Example with Infosys – lights on/maintenance only
ï½ Cultural Differences ï‚– Sense of urgency, commitment to completion/deadlines
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ï½ Selection
â—¦ Identify key requirements/selection criteria
â—¦ See SW Vendor Example (canvas)
ï½ Contracting
â—¦ Length is important, need for SLAs
ï½ Scope
â—¦ Full or Selective?
â—¦ Jetblue example
ï½ Multi-sourcing
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ï½ On-shoring
â—¦ Also called in-shoring
ï½ Off-shoring
â—¦ Outsourcing offshore
ï½ Cloud Computing
â—¦ Dynamic provisioning of 3rd party provided IT services over the
internet
◦ Different Flavors – Private, Community and Public
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ï½ Is it Working?
â—¦ Solution Decision Cycle (Figure 10.1)
ï½ Factors to Consider
â—¦ Service Delivery, Costs, Competition, & Value/Partnershipï½ Backsourcing
ï½ Continuous Improvement
13
14
ï½ Outsourcing Bad for Business
ï½ Seemed like a good idea at the time
ï½ Savings originally conceived aren’t what they once wereï½ Skilled workers still there but intense competition for
their services
15
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