1. Sourcing
Issues in outsourcing.

2. Analysis of Alternatives
Indicate alternatives approaches
Include “do nothing” option
Consider purchased products and outsourcing
Descriptive name
Narrative model
Essential data and process changes from the current system
Costs and benefits

3. Feasibility: TELOSS Technical: how can we do it?
Economic: is it cost justifiable?
Legal: are there legal issues?
Operational: does this fit the way we want to do business?
Schedule: can we get it done on time?
Security: what are the risks?

4. Costs and Benefits Costs are easier to identify than benefits
Include intangible and tangible costs
Business benefits include reduced costs and increased revenue
Include competitive positioning
Consider business focus: low cost, differentiation, focus

5. Costs and Benefits (cont.)
Differentiate ongoing from one-time costs
Separate development cost from operating cost.
Costs and benefits should be detailed for each alternative.
There should be a separate summary table to compare alternatives.

6. Do make a recommendation and support it.
Choose the best option or options. Consider business as well as technical arguments.
You may leave some options or a choice between equivalent systems
Provide a statement of work
Do make a recommendation and support it.

7. Request for Authorization
Ask permission to continue to next stage
Estimate cost and schedule for next stage, as well as total project costs.
Proceed
Hold
Cancel
Frequently a pre-written memo of authorization.

8. Is this a reengineering project?
Reengineering requires a mandate to change the way you do business, and requires a major commitment from all participants. Most information systems are written to support existing processes.

9. Determinants of Outsourcing Success
Core vs. commodity
Partner vs. vendor
Tight vs. loose contract
Success: Economic, Technical, Strategic, Overall Satisfaction with Contract

10. Primary Reasons for Outsourcing
Technological considerations
Cost Savings
Strategic considerations (infrastructure building - quickly)
Human resource considerations
Mandated by central office/Acquired by another company
Consolidate Data Centers
Efficiency
Cash Infusion

11. What happens in purchased systems
Lease arrangements and components
Customization (total cost often 10 times purchase price)
Data conversion
Installation and cutover

12. Purchased System Advantages
Allows internal resources to be allocated to more critical applications
Developed and debugged code
Standard practice
Shorter time to delivery (but don’t forget setup and training)
Available support

13. Purchased Systems Disadvantages
Loss of flexibility and customization
Loss of ownership
Requirement to adapt practice to someone else’s system
Version control
Reliance on a third party

14. Outsourcing What happens in outsourcing?
What the reasons for outsourcing?
How do you manage an outsourcing agreement?

15. Outsourcing
The purchase of a good or service that was previously provided internally
Farm out data center operations (facilities management)
Farm out tasks and services
Farm out systems development
May transfer IS function to vendor

16. Aha! Need tight contracts
May be successful for core functions… especially if linked to tight contract
Can have successful partnerships

17. Outsourcing Disadvantages
Reliance on vendor/partner
Loss of control
Considerations about security/confidentiality
Evaporation of cost savings
Loss of competitive advantage
Slight of hand with employees

18. Outsourcing strategies

19. Outsourcing strategies