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When to outsource?

Managing IT and e-Business - 2001. When to outsource?. Pam Conley Greg Jerome Mathew Joseph Stellan Ohrn Enio Pagani Arnon Sela. Agenda. Definition and terms Benefits Costs Risks Recommendations Source of information. Definition.

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When to outsource?

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  1. Managing IT and e-Business - 2001 When to outsource? Pam Conley Greg Jerome Mathew Joseph Stellan Ohrn Enio Pagani Arnon Sela

  2. Agenda • Definition and terms • Benefits • Costs • Risks • Recommendations • Source of information EMBA 2001, 0153

  3. Definition Outsourcing is when a buyer transfers an ownership of process to a supplier EMBA 2001, 0153

  4. Terms • Contracting – operation without ownership • BPO - business process outsourcing • ASP – application service provider • BSP – business service provider EMBA 2001, 0153

  5. Benefits • Economy of scale • Management - competencies focus • Flexible resources • Superior worldwide expertise • Time to market and reduced cycle time EMBA 2001, 0153

  6. Costs • Switching costs • Abdication of control • Lack of customization • Lack of technology innovation • Loss of differentiation EMBA 2001, 0153

  7. Risks • Shirking • Poaching • Opportunistic re-pricing or holdup EMBA 2001, 0153

  8. Recommendations Outsourcing of a function is desired when • It is a non-core competent of the buyer, • There is a supplier that can economically service that function, and • The supplier is trustworthy for delivering in a satisfactory manner. EMBA 2001, 0153

  9. Recommendations (cont.) • Shop around • Start gradually with non-critical function • Short term contract • Clear and manageable scope • “Don’t expect what you don’t inspect” EMBA 2001, 0153

  10. Recommendations (cont.) • Gain-sharing style • Mutual executive supervision • Cross functional teams • Best of breed EMBA 2001, 0153

  11. Source of information • http://www.cio.com/forums/outsourcing • http://www.itworld.com • http://www.outsourcing-center.com • http://www.gartnergroup.com • http://www.computerworld.com • http://www.outsourcing.com EMBA 2001, 0153

  12. Managing IT and e-Business - 2001 When to outsource? The End

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