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Presented by: Sharmin Alam Suhas Pande Siddarth Jawale Sushmita Bhattacharya Aditi Sethi Shruti Ajey Ashwin Chati
IT and Outsourcing
IT- information technology is the use of computers and software to manage information
Outsourcing is the act of transferring some of a company¶s recurring internal activities and decision rights to outside providers, as set forth in a contract
IT Outsourcing occurs when an organization contracts a service provider to perform an IT function instead of performing the function itself. The service provider could be a third party or another division or subsidiary of a single corporate entity
Early Outsourcing Highlights
Early US History: manufacturing of covered wagon covers and ship sails were outsourced to Scotland, and raw materials from India. 1830s 1830s-1850s 1970s ± 1980s
1830s England¶ textile industry grew to the point India could not compete. Most textile
work was outsourced to England.
1830s-1850s First wave of outsourcing during the industrial revolution fostered largescale growth of domestic outsourced services such as insurance services, architecture and engineering services
1970s-1980s Outsourcing payroll and accounting was fairly common practice for US
services companies and India emerged as one of the first international providers of these business services, a predecessor of the 1980¶s IT outsourcing entrance. By the late 1980¶s international outsourcing, termed offshore outsourcing, had become a viable alternative for many large firm CIO¶s to consider.
Global IT Sourcing today
India ± 67% (23B) Central/Eastern Europe ± 11% (3.3B) China and Southeast Asia ± 9.5% (3.1B) Latin/South America ± 9% (2.9B) Middle East/Africa - 2%
25% of Services budget include Outsourcing
What Functions of It can be Outsourced
E-commerce Network Infrastructure Software Development Website Development and Hosting Equipment Maintenance Data Handling Security
Making an Outsourcing Decision
Objectives Feasibility Requirement Selection of service provider Transition Steady state Termination or renewal
Advantages of IT Outsourcing
Focus on core Business Activity Cost Saving Experience Best IT Practices Risk Management Staffing Flexibility Skill Development in internal Staff
Disadvantages of IT outsourcing
Security and Privacy Loss of organizational Competencies Lack of trust Lack of motivation in own staff Loss of management control Company Knowledge.
Risks and Challenges
Legal Great Expectations Partners Infrastructure Communication Transparency Culture Process Maturity disparity High Turnover Low Morale ± on and offshore Detailed Specifications
Mitigating the Risk of Outsourcing
Establish an IT outsourcing strategy Maintain in- house IT expertise Ascertain that the service provider understands the need of the organization Evaluate the financial and operational well being of the service provider Consider the use of third parties Draft an adequate agreement between parties
Global Country Outsourcing Index
CIO Insight White Board Global Outsourcing Report: Opportunities, Costs, and Risks of doing business in IT outsourcing by Country.
CIO Insight has ranked the top 10 Countries in the global market through weighted criteria on the left. Rankings for 2004 and forecast for 2015 are given.
Ranking Criteria* Global Outsourcing Index (GOI) Geopolitical risk Legal risk Cultural risk Economic risk IT infrastructure risk Human capital risk Country IT competency risk Market Opportunity Rating Future Outsourcing Rank Global Outsourcing Rank
* Detail description of ranking criteria can be found on sources page.
2 4 1 India 2 China 3 Costa Rica 4 C ech Republic 5 Hungary Canada Latvia Russia Chile 10 Romainia
2 China India Bra il Russia kraine Romainia hillipines Ireland rmenia Chile
Future of Global IT Outsourcing
IT Services are a backbone of business operations globally and will remain a significant are of Global Trade. With technology innovations and new applications of technology in the future, the Global outsourcing market is expected to continue to expand. New opportunities emerge on a regular basis for both providers and buyers, however one must be aware that new outsourcing offerings and markets may take years to mature in the Global Market. According to the Gartner Hype Cycle for IT Outsourcing 006 Report, the constant market tension between method of delivery, location of delivery and method of purchase creates new IT service opportunities for which organizations can meet changing business requirements.
Aside from risks already know today, future risks will include more global oriented risks such as :
Global Trade policies Individual Nation commitments to talent development Global Economy strength The challenge of identifying emerging technologies and services trends with eye towards future outsourcing opportunity International Conflicts
The winners will master these areas
Institutionalize Training Seek Professional Certifications Be Metrics Driven Seek value vs. low cost Promote/Build Leaders Leverage Technology
Move fast Swim Upstream Transparency Field of Dreams
Gartner Research, Hype Cycle for IT Outsourcing, 2006 CIO Insight Report Criteria detail. Published July 10, 2006 Cost: The cost factor, which includes compensation and wages, infrastructure cost, and tax and regulatory cost, makes up 30 percent of the GOI. Risk: The Overall Risk Rating, which makes up 54 percent of the GOI, aggregates a variety of risks every potential outsourcer must take into account: Geopolitical risk (10% of GOI) Human capital risk (10%) IT competency risk (10%) Economic risk (6%) Legal risk (6%) Cultural risk (6%) innovation, adaptability. IT infrastructure risk (6%) Market Opportunity Rating: This number, which makes up 16 percent of the GOI, includes expert third-party analysis of each country, its global competitiveness and IT market share. The rating serves as a check on any imbalances elsewhere in the report. Finally, the map itself includes brief descriptions of the strengths, weaknesses and future prospects of each country in the GOI.