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What is Outsourcing

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IS IN ORGANISATIONS Outsourcing What is Outsourcing Outsourcing occurs when a function or department of a company, which was traditionally guided by company staff, is instead completed by a third party. The nature of outsourcing has changed from facilities management and time sharing to functional outsourcing. A lot of companies are outsourcing telecommunications, system operations, management of PCs and the computing infrastructure, even strategic planning in some cases. This third party are sub-contracted to all parts of the information systems services to a company. There has been an increase in the amount of subcontracting, where firms do not carry out the whole of the production process themselves but subcontract some of their activities to other organisations. Subcontracting goes some way to explaining the vast growth rate in business services that occurred in the 1980s. It has changed since the early days of the industry in the early 1970s, when outsourcing relationships were essentially time-sharing arrangements and facilities management. ...read more.


For example, there may be no paid overtime, or staff maybe asked to work elsewhere in the country on other outsourcing contracts. Types of outsourcing There are different degrees of outsourcing, varying from total outsourcing to partial management of services. It is best to consider the types of outsourcing services that are offered. Below are the main categories of services that can be managed: > Hardware outsourcing - This may involve renting time on high capacity mainframe computers. Effectively, the organisation is sharing the expense of purchasing and maintaining the network with other companies which are also signed up for an outsourcing contract. > Operating systems development - When companies require specialist programs, it is necessary to develop software or modify existing systems. This is also an outsourcing activity. > Information systems development - A company help desk can be outsourced to a third party. It could cover answering queries about operating systems, office applications or specific company applications. ...read more.


* Enables focus on the core business - A company can concentrate its expertise on what it's already familiar with i.e. its market and customers, rather than being distracted by information systems development. Below are the top 10 reasons for outsourcing: 1. Accelerate re-engineering benefits 2. Access to world class capabilities 3. Cash infusion 4. Free sources for other purposes 5. Function difficult to manage or out of control 6. Improve organisational focus 7. Make capital funds available 8. Reduce operating costs 9. Reduce risk 10. Resources not available internally Disadvantages * Not identifying present and future requirements fully, and leaving gaps in the contract. * Failing to recognise the full costs and service levels of existing in-house operations, with the result of the contracts turning out to cost more. * Software license transfer causes making customers responsible for fees. * Change of character causes prompting excess fees for any changes in services or functions. * Fixed prices that soon exceed market prices because of the cost for information technology is decreasing. ...read more.

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