Is Outsourcing Fool’s

Gold?
Group F:

Sara Cisneros
Wanda Di Maggio
Gregory Gonzalez
Cinthia Rojas
QUESTION 1

Hiring an organization’s existing IS staff is

common practice when starting a new
outsourcing arrangement. What are the
advantages of this practice to the outsource
vendor? What are the advantages to the
organization?
 Advantages for the
Outsource Vendor
It allows this same outside vendor the
opportunity to play an impromptu “midlevel
management role where they can assess, and
evaluate the productivity and necessity of
each employee.
It targets those IS staff members who are not
productive or skilled enough for termination.
Another advantage to outsource vendors is
that it get their first-level employees by
hiring those from the organization.
Advantages to the Organization

One advantage to the organization that

engages in outsourcing is that it can save
money.
Obtain expertise
Avoid management problems
Free management time
Risk reduction
QUESTION 2

Suppose you work for an outsource vendor.

How do your respond to the charge that your
managers care only about how they appear to
their employer (the outsource vendor), not
how they actually perform for the
organization.
 The outsourcing vendor managers are likely evaluated
on how well they manage (or reduce) the costs of their
part of the organization while following the outsource
vendor’s profit generating procedures. Most
outsourcing agreements include service level
agreements (SLA’s) which require a minimum level of
performance from the outsourcing vendor for the
customer.
 Often these agreements also include financial penalties
if the vendor does not perform well enough. So if
they do not perform well, their employer may incur
financial penalties from not meeting SLA’s.

 This negatively affects the manager’s appearance.

Even if the manager’s top priority is managing their
appearance to their employer, how they perform affects
a big part of that appearance. In other words, they need
to be concerned with both.
QUESTION 3

Consider the statement, “We can’t figure out

how to manage an important function in our
company , so you do it!” Do you agree with
the sentiment of this statement? If this is true,
is it necessarily bad? Why or why not?
I personally do not agree with
this sentiment. However every
business situation is different and
in some cases, hiring another
company to do something a
company does not know how to
is a good thing.

 I think what it boils down to is a cost comparison,

that is, the company that can’t “figure out how to
manage an important function in our company…”
needs to decide whether it is more economically
sensible to hire outside of its ranks or try and used
its internal skill sets (employees) to get the job
done.  Each case is different.
QUESTION 4

Explain how it is possible for an outsource

vendor to achieve economies of scale that are
not possible for the hiring organization. Does
this phenomenon justify outsourcing? Why or
why not?
 It is possible for an outsource vendor to achieve
economies of scale that are not possible for the hiring
organization because the outsource vendor services
multiple companies like the hiring organization and thus
is able to reach economies of scale much more quickly
and easily due to the sheer volume of business they are
conducting in their specific field.

 Yes this phenomena justifies

outsourcing because it encourages
focus on the business core of the
company so that its resources are
not wasted doing a job (like running
a cafeteria) that it does not have
skilled employees (like cooks for ex.)
to manage.
Most definitely this phenomena justifies
outsourcing because it constantly
increases the economies of scale of the
outsourcing vendor, and traditionally,
such increases bring along with them
streamlined processes of doing the
business which increase productivity and
a host of other good business behaviors.
QUESTION 5

In what ways is outsourcing IS infrastructure

like outsourcing the company cafeteria? In
what ways is it different? What general
conclusions can you make about infrastructure
outsourcing?
It is similar because the task being
outsourced is not the main FOCUS or
BUSINESS of the company- just
something peripheral like providing food
for workers at a company cafeteria.
Outsourcing is a great way to streamline a
companies business.
It also is great for enhancing the
peripheral factors that attract employees
to a company such as the fact that the
company has a great cafeteria (which they
outsourced to a premier catering
company).