• 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
• Nearshore outsourcing – contracting an outsourcing arrangement with a company in a nearby country
• Offshore outsourcing – using organization from developing countries to write code and
develop systems
• Factors driving outsourcing growth include:
• Core competencies
• Financial savings
• Rapid growth
• Industry changes
• The Internet
• Globalization
• According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger, and more profitable than those that do not”
• Most organizations outsource their non core business functions, such as payroll and IT
• 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
– Increased flexibility
– 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
• Difficulties in getting out of a contract
• Problems in foreseeing future needs
• Problems in reforming an internal IT department after the contract is finished
– Competitive edge
– Confidentiality
– Scope definition
