CHAPTER 15

Outsourcing in the 21st Century

OUTSOURCING PROJECTS

⧭ Insourcing (in-house-development) – a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems

⧭ Outsourcing – an arrangement by which one organization provides a service or

services for another organization that chooses not to perform them in-house

⧭ Reasons companies outsource

⧭ Onshore outsourcing – engaging another company within the same country for services

⧭ Nearshore outsourcing – contracting an outsourcing arrangement with a company in a nearby country

⧭ Offshore outsourcing – using organizations from developing countries to write code and develop systems

⧭ Big selling point for offshore outsourcing “inexpensive good work”

⧭ Factors driving outsourcing growth include:

🔼Core competencies

Many companies have recently begun to consider outsourcing as a means to fuel

revenue growth rather than just a cost-cutting measure.

🔼Financial savings

It is typically cheaper to hire workers in China and India than similar workers in the United States.

🔼Rapid growth

an organization is able to acquire best-practices process expertise. This facilitates the design, building, training, and deployment of business processes or functions.

🔼Industry changes

High levels of reorganization across industries have increased demand for outsourcing to better focus on core competencies.

🔼The Internet

The pervasive nature of the Internet as an effective sales channel has allowed clients to

become more comfortable with outsourcing.

🔼Globalization

As markets open worldwide, competition heats up. Companies may engage outsourcing service providers to deliver international services

🔼According to PricewaterhouseCoopers “Businesses that outsource are growing

faster, larger, and more profitable than those that do not”

🔼Most organizations outsource their noncore business functions, such as payroll and IT

Outsourcing Benefits

🔺 Outsourcing benefits include:

➷Increased quality and efficiency

➷Reduced operating expenses

➷Outsourcing non-core processes

➷Reduced exposure to risk

➷Economies of scale, expertise, and best

practices

➷Access to advanced technologies

➷Increased flexibility

➷Avoid costly outlay of capital funds

➷Reduced headcount and associated overhead

expense

➷Reduced time to market for products or services

Outsourcing Challenges

➤ Outsourcing challenges include:

➸Contract length

    ➢ Most outsourcing contracts span several years and cause the issues discussed above

             ➳ Difficulties in getting out of a contract

             ➳ Problems in foreseeing future needs

             ➳Problems in reforming an internal IT department after the contract is finished

➸Competitive edge

➢Effective and innovative use of IT can be lost when using an outsourcing service provider

➸Confidentiality

➢Confidential information might be breached by an outsourcing service provider, especially one that provides services to competitors

➸Scope definition

➢Scope creep is a common problem with outsourcing agreements

CHAPTER 14

CREATING COLLABORATIVE PARTNERSHIPS

Teams, Partnerships, and Alliances

➤ Organizations create and use teams,partnerships, and alliances to:

        ➷ Undertake new initiatives
        ➷ Address both minor and major problems
        ➷ Capitalize on significant opportunities

➤ Organizations create teams, partnerships,and alliances both internally with employees       and externally with other organizations

➤ Collaboration system – supports the work of teams by facilitating the sharing and flow                                         of information

➤ Organizations form alliances and partnerships with other organizations based on their         core competency

      ➷ Core competency – an organization’s key strength, a business function that it does better than any of its competitors
      ➷Core competency strategy – organization chooses to focus specifically on its core    competency and forms partnerships with other organizations to handle nonstrategic business processes

➤Information technology can make a business partnership easier to establish and manage

      ➷Information partnership – occurs when two or more organizations cooperate by integrating their IT systems, thereby providing customers with the best of what each can offer

➤The Internet has dramatically increased the ease and availability for IT-enabled organizational alliances and partnerships

Collaboration Systems

⧭ Collaboration solves specific business tasks such as telecommuting, online meetings, deploying applications, and remote project and sales management

⧭ Collaboration system – an IT-based set of tools that supports the work of teams by facilitating the sharing and flow of information

⧭Two categories of collaboration :

⟴Unstructured collaboration (information collaboration) - includes document exchange,shared whiteboards, discussion forums, and e-mail
⟴Structured collaboration (process collaboration) - involves shared participation in business processes such as workflow in which knowledge is hardcoded as rules

⧭Collaborative business functions

⧭Collaboration systems include:

   ⟰ Knowledge management systems
   ⟰ Content management systems
   ⟰ Workflow management systems
   ⟰ Groupware systems

Knowledge Management Systems

🔺Knowledge management (KM) – involves capturing, classifying, evaluating, retrieving, and sharing information assets in a way that provides context for effective decisions and actions
🔺Knowledge management system – supports the capturing and use of an organization’s

“know-how”

Explicit and Tacit Knowledge

🔻 Intellectual and knowledge-based assets fall into two categories

   ⤇Explicit knowledge – consists of anything that can be documented, archived, and
codified, often with the help of IT
   ⤇Tacit knowledge - knowledge contained in people’s heads

🔻 The following are two best practices for transferring or recreating tacit knowledge

   ⤇Shadowing – less experienced staff observe more experienced staff to learn how their
more experienced counterparts approach their work
   ⤇Joint problem solving – a novice and expert work together on a project

🔻 Reasons why organizations launch knowledge management programs

KM Technologies

🔺 Knowledge management systems include:

    🔽Knowledge repositories (databases)
    🔽Expertise tools
    🔽E-learning applications
    🔽Discussion and chat technologies

    🔽Search and data mining tools

KM and Social Networking

⧪ Finding out how information flows
through an organization

   ⥈ Social networking analysis (SNA) – a process of mapping a group’s contacts (whether personal or professional) to identify who knows whom and who works with whom

   ⥈ SNA provides a clear picture of how employees and divisions work together and

can help identify key experts

Social Networking

Content Management

➤ Content management system (CMS) – provides tools to manage the creation, storage, editing, and publication of information in a collaborative environment

➤ CMS marketplace includes:

⬲Document management system (DMS)
⬲Digital asset management system (DAM)

⬲Web content management system (WCM)

Document management system (DMS)

⧭ Supports the electronic capturing, storage, distribution, archival, and accessing of documents

Digital asset management system (DAM)

⧭ Similar to DMS, generally works with binary rather than text files, such as multimedia

files types.

Web content management system (WCM)

⧭ Adds an additional layer to document and digital asset management that enables

publishing content both to intranets and to public Web sites

Content Management

⧭ Content management system vendor overview

WORKING WIKIS

⧭ Wikis - Web-based tools that make it easy for users to add, remove, and change online content

⧭ Business wikis - collaborative Web pages that allow users to edit documents, share ideas, or monitor the status of a project

Workflow Management Systems

⧪ Work activities can be performed in series or in parallel that involves people and automated computer systems

⧪ Workflow – defines all the steps or business rules, from beginning to end, required for a

business process

⧪ Workflow management system – facilitates the automation and management of business processes and controls the movement of work through the business process

⧪ Messaging-based workflow system – sends work assignments through an

e-mail system

⧪ Database-based workflow system – stores documents in a central location and automatically asks the team members to access the document when it is their turn to edit the document

Groupware Systems

⧭ Groupware Technologies

⧭ Groupware – software that supports team interaction and dynamics including calendaring, scheduling, and videoconferencing

VIDEOCONFERENCING

⧭ Videoconference - a set of interactive telecommunication technologies that allow two or more locations to interact via two-way video and audio transmissions simultaneously.

WEB CONFERENCING

⧭ Web conferencing - blends audio, video, and document-sharing technologies to create virtual meeting rooms where people “gather” at a password-protected Web site.

INSTANT MESSAGING

⧭ E-mail is the dominant form of collaboration application, but real-time collaboration tools like instant messaging are creating a new communication dynamic

⧭ Instant messaging - type of communications service that enables someone to create a kind of private chat room with another individual to communicate in real-time over the Internet

⧭ Instant messaging application