1. IT Outsourcing
Chapter 7

2. Topics Covered Definitions of IT outsourcing.
Examples of IT outsourcing.
Significance and benefit of IT Outsourcing
Issues in IT Outsourcing

3. Definitions
IT outsourcing (as a part of an outsourcing definition) is the use of external service providers to effectively deliver IT-enabled business process, application service and infrastructure solutions for business outcomes.

4. Examples of IT Outsourcing activities
Outsource Accounting & Bookkeeping
Bookkeeping is like your morning exercise – no one wants to take the time out to do it but neglecting it can cause serious problems over the period of time. It has become practical for businesses to outsource their bookkeeping activities.

5. Outsource Tax Preparation & Filing
Activity of preparing tax returns is time consuming and requires special skill sets. You’ll easily find tax consultants who can take away the tax filing burden from you. 

6. Outsource Payroll processing
But once your business starts expanding beyond 10 employees, processing monthly payroll can eat up lot of your time. 

7. Outsource Your Creative work
Everyone thinks they can do their own design work, and they can, but very few can do it well. Its better to leave it to the professionals. You can get quality results by outsourcing your artwork creation. 

8. Social media marketing
More and more businesses are using sites like Facebook, Twitter and Linkedin for lead generation. In fact, popular messaging app, WhatsApp is also being used by businesses extensively. Marketing on these social networks is not easy and this activity requires considerable amount of time.

9. Event Management
Planning to host a workshop for employees? or a team outing? or may be a get-together party for vendors? Its better to outsource entire event management activity to an agency.

10. Significance of IT Outsourcing

11. Advantages of IT Outsourcing
Swiftness and Expertise: Most of the times tasks are outsourced to vendors who specialize in their field. The outsourced vendors also have specific equipment and technical expertise, most of the times better than the ones at the outsourcing organization. Effectively the tasks can be completed faster and with better quality output
Concentrating on core process rather than the supporting ones: Outsourcing the supporting processes gives the organization more time to strengthen their core business process

12. Risk-sharing: one of the most crucial factors determining the outcome of a campaign is risk-analysis. Outsourcing certain components of your business process helps the organization to shift certain responsibilities to the outsourced vendor. Since the outsourced vendor is a specialist, they plan your risk-mitigating factors better
Reduced Operational and Recruitment costs: Outsourcing eludes the need to hire individuals in-house; hence recruitment and operational costs can be minimized to a great extent. This is one of the prime advantages of offshore outsourcing

13. The Disadvantages of Outsourcing
Risk of exposing confidential data: When an organization outsources HR, Payroll and Recruitment services, it involves a risk if exposing confidential company information to a third-party
Synchronizing the deliverables: In case you do not choose a right partner for outsourcing, some of the common problem areas include stretched delivery time frames, sub-standard quality output and inappropriate categorization of responsibilities.

14. Hidden costs: Although outsourcing most of the times is cost-effective at times the hidden costs involved in signing a contract while signing a contract across international boundaries may pose a serious threat
Lack of customer focus: An outsourced vendor may be catering to the expertise-needs of multiple organizations at a time. In such situations vendors may lack complete focus on your organization’s tasks

15. Why Companies Outsource:
Focus in-house resources on core functions
Personnel cost savings
Improved quality of information systems services
Increased flexibility
Increased access to new technology
Provide alternatives to in-house costs
Stabilize information systems costs
Technology cost savings
Re-engineer process
Reduce technological obsolescence risk.

16. Which Sectors are Being Outsourced?
Information Technology
Programming
Logistics
Human Resources
Purchasing

17. Trends in Outsourcing
Companies are now outsourcing more functions than just IT.
Even the government is starting to outsource “white collar” jobs.
Most major companies are turning to outsourcing to stay competitive in the global economy.
Companies rely on their “core competencies” while trying provide better customer service and lowering costs.
Companies now outsourcing for long-term, strategic reasons yield better results than doing so for short-term, tactical reasons.

18. Process For Outsourcing
1. Clearly define the scope and schedule of your project.
Make a clear statement of what you wish to accomplish.
2. Evaluate a service provider like you'd hire a full-time employee.
Be subjective and ask questions and for references.
3. Look for specific experience fit.
Ideally, your provider will have experience with your type of project, which is crucial for projects like software development.
4. Don't choose a vendor based solely on price.
Look for a good balance of value and quality.
5. Review portfolios and samples.
Make sure their previous work meets your expectations for quality and style.

19. Process Cont. 6. Start small.
First time with a service provider? Make it a small project, not a crucial one.
7. Tie payment to clearly defined project milestones.
Follow the progress and compensate along the way based on completion.
8. Negotiate ownership of work up front.
Be clear about who owns the result of the work.
9. Don't forget about support after the project is complete.
Specify a warranty or support clause to ensure continuing support.
10. Get it in writing.
Clearly communicate schedules and payments in writing.

20. Main Issues in IT Outsourcing
Post-Contract Processes and Decision Rights Not Understood
Simply put, clients and service providers are not operationally prepared to work together after contract signing. The results are that services simply aren’t performed, implementation activities get stalled, client stakeholders and service provider staff are both frustrated.
2. Little or No Support From Client Leaders Receiving Services
This can result in active or passive resistance to the entire outsourcing model; create the desire for “special treatment” or opt-out from the outsourcing services, and results in business case deterioration.

21. 4. Client Retained Team Not in Place or Too Small
3. Poor Mutual Understanding of the Contract
The client has staff who are just learning the details of the agreement, may be emotionally charged regarding the decision to outsource and also have a personal view of what the service provider should (and should not) perform.
4. Client Retained Team Not in Place or Too Small
This causes issues in implementation because there is no one “directing traffic” or the team is too small to handle both the volume and complexity. 

22. 5. Client Retained Team Lacks Required Skills if a client puts a retained team in place to manage the outsourcing implementation and ongoing operations, the team may not have the right skills required for their new roles. 6. Loss of Key Talent and/or Poor Knowledge Transfer The uncertainty can cause this staff to look elsewhere for employment and leave either before or during the outsourcing implementation, causing a need to either backfill the resource or reduce the amount of work performed by the organization. In addition, some of the client staff is temporarily engaged for knowledge transfer to the service provider during the implementation.