Chapter 15

First of all, Alhamdullilah because we are able to cover all chapters.

Thanks a lots to Madam Noor Azzura who is our lecturer in this subject 

(MGT300). And of course to my classmate. Thank you kat korang ye sebab 

selalu Support and tolong sis. peace no war haha. 

Okay, so we proceed to the last chapter.

What is outsourcing ??

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

Nearshore 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

Factors driving outsourcing growth include :

ü   Core competencies 

Many companies have recently begun to consider outsourcing as a means 

to fuel revenue growth rather than just a cost-cutting measure.

ü   Financial savings 

It is typically cheaper to hire workers in China and India than similar 

workers in the United States.

ü   Rapid growth 

an organization is able to acquire best-practices process expertise. 

This facilitates the design, building, training, and deployment of 

business processes or functions.

ü   Industry changes 

High levels of reorganization across industries have increased demand 

for outsourcing to better focus on core competencies.

ü   The Internet 

The pervasive nature of the Internet as an effective sales channel has 

allowed clients to become more comfortable with outsourcing.

ü   Globalization 

As markets open worldwide, competition heats up. Companies may 

engage outsourcing service providers to deliver international services

Most organizations outsource their noncore 

business function, such as payroll and It :

Outsourcing benefits include :

Ø  Reduced operating expenses

Ø  Increased quality and efficiency

Ø  Outsourcing non-core processes

Ø  Economies of scale, expertise, and best practices

Ø  Reduced headcount and associated overhead expense

Ø  Reduced time to market for products or services

Ø  Avoid costly outlay of capital funds

Ø  Access to advanced technologies

Ø  Reduced exposure to risk

Ø  Increased flexibility 

OUTSORCING CHALLENGE :

v Contract Length

v Competitive edge 

v Scope definition

v Confidentially