IT Outsourcing Management

Dr. Kishen Iyengar

What is Outsourcing?

• Outsourcing is the transfer of ownership and responsibility of a functionality from a firm to an other legal entity.

• Outsourcing has been around for decades, especially in non-core activities.

• IT outsourcing to firms based in other countries is referred to as offshoring; If the provider is in the same country it is called onshore outsourcing

IT OutsourcingWhere American and European Companies source from (source – Weissman Center)

India 90%

Philippines 17%

Central/South America 13%

China 9%

Singapore 9%

Ireland 5%

Eastern Europe 4%

Benefits of Outsourcing• Cost Benefits – lower manpower costs, reduced

capital costs, on-demand teams• Business and Organizational Benefits – faster

time to market, risk migration, ability to focus on core competencies, improved processes

IT outsourcing may involve any activity in the IT organization including routine processes like desktop support, hardware and network maintenance, or complex functions such as implementation of ERP

Outsourcing Process

Questions in the IT Outsourcing Process

1. What function do I need to outsource?2. What are the risks involved?3. Who do I outsource to?4. What are the terms of the outsourcing

contract?5. How to decide if the outsourcing contract is a

success, Did it meet expecations?6. Should I renew the contract?

What functions to Outsource?• Require minimal client or end-user interaction• Have mature features and stable well defined

requirements• The process is standardized, repetitive, well segmented

and documented• Do not involve secure or sensitive data• Large enough to produce substantial benefits• Low added value or labor intensive• The application/process is stable with a reasonable

expected life time• Low operational complexity• Low to medium business criticality

Risks?

• Country • Criticality• Employee motivation• Others?

After risks are considered, you may invite other parties to submit their proposals by issuing an RFP

Who to Outsource to?

• When you are deciding between multiple vendors, you may want to look at certain aspects of each vendor to help you decide.

• Reputation• Management• Markets and Clients• Staff• Technology and Process

Reputation

• The reputation of our company is very good

• We have a detailed, written business plan

• Our business plan is extensively used as a management tool

• We have a high priority to export our services

• Everyone in our company knows our priority to export our services

• We help each other within our company (also between departments)

• We believe in professionalism and commitment

Management•The top management has a high level of technology understanding

•The management is willing to change

•We have a professional management team

•The management is highly motivated

•The management provides leadership

•The management is focused

•Our management has an open style

Markets and Clients•We have a strong client base in the US

•We know the EU market very well

•We have a professional marketing team

•We have a well defined and clearly communicated selling proposition

•We have capacity to carry out projects for foreign clients

•We have professional printed marketing material

•We have a professionally designed web site

•Our clients are highly satisfied with our services

•We have a strong reference list

•We know that we are very price competitive

Staff•Our company has a strong technical staff

•Our staff is highly motivated

•Most of our people are certified (Microsoft, Cisco, Linux, etc)

•Our company offers an extensive employment benefit package

•Our staff participates in training regularly

•Our staff selection process is formal and well documented

•We evaluate our staff regularly

•Our staff evaluation process is formal and well documented

•We maintain a less than 10% annual staff turnover

Technology and Process•We have several R&D programs running in our company•We add new technologies to our technology portfolio regularly•We have a fully defined and documented software engineering process•We have a fully defined and documented project management process•We have a fully defined and documented QA process

•We handle requirements changes very flexibly

•We master requirement engineering practices

•We plan all of our projects in great detail

•We have a web based project monitoring system

•We have a formal quality certification (CMM, ISO, etc)•We constantly improve quality assurance and key processes•Our on-site security is up-to-date