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 Assignment 8 (Due: August 28, 2009, 13:00hrs)

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sharlyn joy pines



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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Fri Aug 28, 2009 12:29 pm


Outsourcing

Outsourcing refers to a company that contract another company to provide services that might otherwise be performed by in-house employees. Many large companies now outsource jobs such as call center services, e-mail services, and payroll. These jobs are handled by separate companies that specialize in each service, and are often located overseas.

Reasons and Advantage…

There are many reasons that companies outsource various jobs, but the most prominent advantage seems to be the fact that it often saves money. Many of the companies that provide outsourcing services are able to do the work for considerably less money, as they don't have to provide benefits to their workers and have fewer overhead expenses to worry about.

Outsourcing also allows companies to focus on other business issues while having the details taken care of by outside experts. This means that a large amount of resources and attention, which might fall on the shoulders of management professionals, can be used for more important, broader issues within the company. The specialized company that handles the outsourced work is often streamlined, and often has world-class capabilities and access to new technology that a company couldn't afford to buy on their own. Plus, if a company is looking to expand, outsourcing is a cost-effective way to start building foundations in other countries.

If you want your organization to stay ahead of competition, concentrate on core competencies and make use of the latest technologies, then outsourcing can help your organization achieve all this and more. In outsourcing, the advantages of outsourcing are more than the disadvantages of outsourcing. The pros of outsourcing have driven more organization to step into offshoring and experience the benefits that it has to offer.

Disadvantage…

There are some disadvantages to outsourcing as well. One of these is that outsourcing often eliminates direct communication between a company and its clients. This prevents a company from building solid relationships with their customers, and often leads to dissatisfaction on one or both sides. There is also the danger of not being able to control some aspects of the company, as outsourcing may lead to delayed communications and project implementation. Any sensitive information is more vulnerable, and a company may become very dependent upon it’s outsource providers, which could lead to problems should the outsource provider back out on their contract suddenly.

While outsourcing may prove highly beneficial for many companies, it also has many drawbacks. It is important that each individual company accurately assess their needs to determine if outsourcing is a viable option.

The disadvantages of offshoring give organizations an opportunity to think about what they are stepping into. However the disadvantages of outsourcing are less than the advantages of offshore outsourcing. When outsourcing, you might not experience any of these disadvantages of offshoring, if you find a reliable outsourcing partner. Before outsourcing take the interests of your customers and employees into consideration and then make an informed decision. If your organization is genuinely interested in outsourcing, let not the disadvantages of outsourcing stop you.

http://www.outsource2india.com/why_outsource/articles/advantages-disadvantages-outsourcing.asp

Does Outsourcing Really Save Money?

Outsourcing is the practice of relocating certain parts or all of business off the shores of the country in which the business is located. Many companies employ this practice as a cost-saving device, and it undoubtedly can save money. This issue however is greatly complicated by all of the factors involved, and it’s valuable to look at how locating most business to foreign shores may save and cost money at the same time.

First, not all outsourcing goes to countries that have lower costs. Some countries relocate plants, stores, and facilities in countries that have higher costs but may have tax advantages. Typically, the practice involves using countries where costs to employ people and to rent or own facilities to house employees is significantly lower, and there may also exist tax advantages for employing large numbers of people within that country.

In highly industrialized countries, costs of wages and of facilities can be high, and companies may pay a fraction of this price elsewhere, while still employing workers who are just as skilled. For companies looking to cut expenses, outsourcing can be a viable means of accomplishing this, while still allowing a company to pay for more expensive employees in the country in which it was established. Many businesses have a combination of local employees and outsourced employees, while others relocate most business to foreign shores.

There have been some negative reactions to companies that outsource all aspects of their business. For instance, many businesses chose to relocate customer help lines to foreign countries and then some found this practice was not working well. People being helped by these lines weren’t getting the kind of service they required to remain customers, and some companies have chosen to stop outsourcing help line and customer service work to better serve customers. The bottom line is that if customer dissatisfaction mitigates cheaper employee costs, then outsourcing doesn’t save money.

Another way to evaluate outsourcing is by the way it affects the local economies in the main countries in which a business operates and depends on sales of products or services. Eliminating jobs from a country impacts its economy and the buying power of consumers. While outsourcing might result in being able to offer products at lower prices, number of customers and consumer spending decreases when jobs are not available. This is a common criticism of the practice.

When companies begin to outsource so much that unemployment rises and the general economy falters, these companies may be unable to make money. In other words, they may create a situation where no consumers exist to buy their products, no matter how inexpensive they are. It’s ultimately argued that decline in consumer buying power can cost companies money, far more than they’d save by outsourcing.

What companies that outsource must weigh is not just the short-term savings but the potential long term costs and possibly benefits for both itself and the society at large.

The Benefits of Outsourcing


Do you want to maximize your revenue and minimize your expenses?
Do you want to get access to specialized skills and services?
Do you want to concentrate more on your core business?
Do you want to save on money, time and infrastructure?

1. Cost Advantage

Outsourcing to countries such as India can give you access to cost-effective services. The same services with the same level of quality are offered in India for a much lower cost! This cost-advantage has increased the number of services that are being offered to India. Services such as call center services, teleradiology, medical billing, etc can help you save up to 60% of your total costs when outsourced! Getting access to high-quality services at a cost-effective price is the biggest benefit that you can get while outsourcing. Outsource and reap the benefits of outsourcing.

2. Save Big!

One of the benefits of outsourcing is that you can save on every aspect of your business and increase your profits. When you outsource, you can save on time, effort, infrastructure and manpower. Since you don't have to invest in infrastructure, you can also save on making unnecessary fixed investments. Outsourcing removes the burden of changing or maintaining infrastructure. You can also save on capital expenditure. Outsourcing can also help you save on training costs, because you do not have to invest in manpower. These savings will help bring about an increase in your revenue. Your organization can also save on investing in expensive software and technologies.

3. Get access to specialized services

By outsourcing you can get expert and skilled services. This benefit of outsourcing has been the key reason why several outsourcers opt for outsourcing. The function that you outsource may not be your core competency but you can find an outsourcing partner who is specialized in that particular business process. Your outsourcing partner will be able to provide more proficient services. This is yet another benefit of outsourcing, because if you perform all your business processes in-house, you will not be able to provide specialized and skilled services. Outsourcing can give you this advantage.

4. Concentrate more on your core business

One of the benefits of outsourcing is that your organization will be free to concentrate on your core business. By outsourcing all your non-core functions, your employees can be put to better use and you will be able to see a huge growth in your core business.

5. . Benefit from time zone advantages

Outsourcing to countries such as India has a time zone advantage. Your night will be India's day. With this advantage, your outsourcing partner can complete critical work and send it to you the next day. Thus, your work is continued by your outsourcing partner even after your employees go home. This enables the work to be completed much faster and gives your business a competitive advantage. This is one of the benefits of offshore outsourcing.

http://www.outsource2india.com/why_outsource/articles/benefit_outsourcing.asp


Insourcing? What is it?

Insourcing is the opposite of outsourcing; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation. The term insourcing is newer, and has several definitions that aren’t exactly the opposite of outsourcing, which can be somewhat complicated to understand.

The type of insourcing that represents almost an opposite form of outsourcing may be the most common definition. This is when companies look at their pool of employees to find those who may be tapped to do certain needed jobs. They may offer these employees extra training or they may merely find the employees that already possess the skills to take on specialty work.

This form of insourcing has become fairly common as a money saving practice. Hiring new employees can take considerable funds, and being able to redirect a current employee to new work can be much easier. Even if there is financial outlay for special training, a business may still save money, and it doesn’t have the negative connotations associated with many forms of outsourcing. Some companies practice this regularly and may boast to employees that they always promote from within, which can be an attractive point when employees are looking for jobs that will allow them opportunities to advance in their careers.

A different form of insourcing doesn’t utilize current employees but instead temporarily hires specialists to work onsite at a company. Occasionally these specialists help train employees on specialized equipment or methods, and part of this may also involve the leasing of various types of equipment. Even though the temporary employee comes from outside of the company, the fact that he or she is “brought in” means he can be considered insourced.

Sometimes the definition of insourcing is a matter of perspective. When a large company sets up part of their business in a foreign country, that company is outsourcing. However, to the country where the business is established, the new work there may be considered as insourced. This is a less common use of the term, but one that may help demonstrate the differing ways in which outsourcing work is viewed.

Insourcing is widely used in an area such as production to reduce costs of taxes, labor (e.g., American labor is often cheaper than European labor), transportation, etc.

Insourcing can be viewed as outsourcing as seen from the opposite side. For example, a company based in Japan might open a plant in the United States for the purpose of employing American workers to manufacture Japanese products. From the Japanese perspective this is outsourcing, but from the American perspective it is insourcing. Nissan, a Japanese automobile manufacturer, has in fact done this.

Sources:

http://www.prospects.ac.uk/p/types_of_job/it_consultant_job_description.jsp
http://en.wikipedia.org/wiki/Infrastructure
http://dictionary.reference.com/browse/infrastructur
http://www.wisegeek.com/does-outsourcing-really-save-money.htm
http://whatis.techtarget.com/definition/0,,sid9_gci1185946,00.html


To Outsource Or Insource?

Outsourcing can provide technological advantages but loss of control is a problem.

As companies have grown more comfortable with the shared service approach, some have asked whether it makes sense to move a step further and hire an outside party to run the operation, says Tim Lloyd, partner with London-based ALS Consulting Ltd. On the positive side, a third party that focuses only on shared services may be more likely to invest in new tools and technology. Going with a third party also may enable a company to more quickly launch a shared service operation.

On the other hand, some loss of control is likely. Executives wouldn't want to outsource functions that are unique to their company, notes Richard Sypniewski, practice director for accounting and finance operations with Parson Consulting, Chicago. For instance, a company that produces highly engineered products may negotiate individual contracts with each client. Before management transfers responsibility for accounts receivable to an outside firm, it will want to determine how much information the firm will need, and the extent to which the firm will be able to act on its own when working with clients.

Know When to Send Projects out the Door


With many companies shipping work to India, Russia, and other parts of the globe, offshore outsourcing has been the hot topic in tech circles recently. Yet many IT managers are finding that when it comes to getting outside help, assistance is usually much closer to home.

With IT budgets tight and staff members overburdened, hiring consultants or other outside experts can be a boon for productivity and a way to keep operations running smoothly. Certainly, too, there are plenty of independent gurus eagerly waiting for business and ready to rent out their expertise. Frequently outsourced work includes data backup and recovery services, training, recruitment, application development integration, and project management.

The decision about whether to outsource work is only the first step in a longer list of choices. IT managers must decide how they're going to use internal resources and how the outsourcing relationship will be managed.
Considering all of these direct and indirect costs, outsourcing may be a good solution. It allows you to instantly acquire the required skill set and quickly deploy an improved landing page.

Perspective

Thinking outside the box is difficult if you work in it. Your experience in your industry, company, and department conspire to straitjacket you with invisible assumptions. It's hard to throw away all of your biases and beliefs and come up with truly original approaches to testing. .
http://searchenginewatch.com/3630742

What's best for your Organization?

Outsourcing…

Outsourcing began in the early eighties when organizations started delegating their non-core functions to an external organization that was specialized in providing a particular service, function or product. In outsourcing, the external organization would take on the management of the outsourced function.
Most organizations choose outsourcing because outsourcing offers a lot of advantages. When organizations outsource to countries like India, they benefit from lower costs and high-quality services. Moreover organizations can concentrate more on core functions once they outsource their non-core functions. Outsourcing can also help organizations make better use of their resources, time and infrastructure.

In outsourcing, the outsourcer and the outsourcing partner have a greater relationship when compared to the relationship between a buyer and a seller. In outsourcing, the outsourcer trusts the outsourcing partner with vital information. Outsourcing is no longer confined to the outsourcing of IT services. Outsourcers in the US and UK now outsource financial services, engineering services, creative services, data entry services and much more.
Most organizations are opting to outsource because outsourcing enables organizations to access intellectual capital, focus on core competencies, shorten the delivery cycle time and reduce costs significantly. Organizations feel outsourcing is an effective business strategy to help improve their business.

Insourcing…

The internal entity will usually have a specialized team who will be proficient in the providing the required services. Organizations sometimes opt for insourcing because it enables them to maintain a better control of what they outsource. Insourcing has also come to be defined as transferring work from one organization to another organization which is located within the same country. Insourcing can also mean an organization building a new business centre or facility which would specialize in a particular service or product.

Organizations involved in production usually opt for insourcing in order to cut down the cost of labor and taxes amongst others. The trend towards insourcing has increased since the year 2006. Organizations who have been dissatisfied with outsourcing have moved towards insourcing. Some organizations feel that they can have better customer support and better control over the work outsourced by insourcing their work rather than outsourcing it. According to recent studies, there is more wok insourced than outsourced in the U.S and U.K. These countries are currently the largest outsourcers in the world. The U.S and U.K outsource and insource work equally.

Recommendation…

If your organization has a number of non-core processes which are taking plenty of time, effort and resources to perform in-house, it would be wise to outsource these non-core functions. Outsourcing in this case, would help you save on time, effort, manpower and would also aid you in making quicker deliveries to your customers.
If you require expertise services in areas which do not fall under your core competency, then outsourcing will be a good option as you can get access to expertise services. For reducing costs and making faster deliverables, outsourcing is again a good option.

If your work involves production, then it would be more ideal for your organization to opt for insourcing, as you can save on transportation costs and exercise a better control over your project.
It is not necessary to choose outsourcing over insourcing or vice versa. Your organization can outsource and insource at the same time. By outsourcing and insourcing simultaneously, you can have the best of what both offers and your business can get a competitive advantage!

http://www.outsource2india.com/why_india/articles/outsourcing-versus-insourcing.asp


Last edited by sharlyn joy pines on Fri Oct 02, 2009 11:29 am; edited 2 times in total
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PostSubject: Assignment 8   Fri Aug 28, 2009 12:29 pm

Continuation....

Language skills


In the area of call centers end-user-experience is deemed to be of lower quality when a service is outsourced. This is exacerbated when outsourcing is combined with off-shoring to regions where the first language and culture are different. The questionable quality is particularly evident when call centers that service the public are outsourced and off shored.

The public generally find linguistic features such as accents; word use and phraseology different which may make call center agents difficult to understand. The visual clues that are present in face-to-face encounters are missing from the call center interactions and this also may lead to misunderstandings and difficulties. In addition to language and accent differences, a lack of local social and geographic knowledge is often present, leading to misunderstandings or miscommunications.

Social responsibility

Outsourcing sends jobs to the lower-income areas where work is being outsourced to, which provides jobs in these areas and has a net equalizing effect on the overall distribution of wealth. Some argue that the outsourcing of jobs (particularly off-shore) exploits the lower paid workers. A contrary view is that more people are employed and benefit from paid work. Despite this argument, domestic workers displaced by such equalization are proportionately unable to outsource their own costs of housing, food and transportation.

On the issue of high-skilled labor, such as computer programming, some argue that it is unfair to both the local and off-shore programmers to outsource the work simply because the foreign pay rate is lower. On the other hand, one can argue that paying the higher-rate for local programmers is wasteful, or charity, or simply overpayment. If the end goal of buyers is to pay less for what they buy, and for sellers it is to get a higher price for what they sell, there is nothing automatically unethical about choosing the cheaper of two products, services, or employees. Social responsibility is also reflected in the costs of benefits provided to workers. Companies outsourcing jobs effectively transfer the cost of retirement and medical benefits to the countries where the services are outsourced. This represents a significant reduction in total cost of labor for the outsourcing company. A side effect of this trend is the reduction in salaries and benefits at home in the occupations most directly impacted by outsourcing.

Quality of service

Quality of service is measured through a service level agreement (SLA) in the outsourcing contract. In poorly defined contracts there is no measure of quality or SLA defined. Even when an SLA exists it may not be to the same level as previously enjoyed. This may be due to the process of implementing proper objective measurement and reporting which is being done for the first time. It may also be lower quality through design to match the lower price. There are a number of stakeholders who are affected and there is no single view of quality. The CEO may view the lower quality acceptable to meet the business needs at the right price. The retained management team may view quality as slipping compared to what they previously achieved. The end consumer of the service may also receive a change in service that is within agreed SLAs but is still perceived as inadequate. The supplier may view quality in purely meeting the defined SLAs regardless of perception or ability to do better.

Quality in terms of end-user-experience is best measured through customer satisfaction questionnaires which are professionally designed to capture an unbiased view of quality. Surveys can be one of research. This allows quality to be tracked over time and also for corrective action to be identified and taken.


Outsourcing the Information System Functions of the School

A student information system (SIS) is a software application for educational establishments to manage student data. Student information systems provide capabilities for entering student test and other assessment scores through an electronic grade book, building student schedules, tracking student attendance, and managing many other student-related data needs in a school, college or university Also known as Student Information Management System (SIMS, SIM), student records system (SRS), Student Management System (SMS) or school management system (SMS).

In recent years, several forces have been driving an evolution of student information systems and, as a result, leading many institutions to replace theirs. Those forces are: Demand for 24x7 web-based access to information by students, instructors, and (in primary and secondary education, or K-12) parents. Increasing demands in the amount and frequency of data reporting for accountability and other purposes (so-called "vertical reporting" up to state, provincial, and national agencies) Importance of integrating student information systems with other tools, especially relating to instruction (IMS systems like SchoolNet and SchoolCity in the US), courses (CMS systems like Blackboard, Angel, Sakai, Moodle), and learning (LMS systems and on-line course ware like APEX). These systems vary in size, scope and capability, from packages that are implemented in relatively small organizations to cover student records alone, to enterprise-wide solutions that aim to cover most aspects of running large multi-campus organizations with significant local responsibility. Many systems can be scaled to different levels of functionality by purchasing add-on "modules" and can typically be configured by their home institutions to meet local needs. Most student information systems and school administration software that have been around for a while have an outdated code base and have intermixed presentation, business logic, and data access layers to such an extent that modifying them to keep up with these demands has proven expensive or impossible. As a result, some systems with widespread use, like SASI for K-12 in the United States, will no longer be supported. Institutions using such legacy systems will be forced to switch at some point, and will likely choose from a new generation of student information systems built on a modern code base; with online accessibility; with modern databases; with relatively clean separation between presentation, business logic, and data access layers; with solid data architectures, and with a well-defined set of business processes so that their integration with other applications can be better understood and executed.

Modern use also implies that smaller K-12 schools can benefit from the reducing cost of technology; this has made it possible for even these organizations to implement such school software that not only encompass the management of student information but also provide the means for parents or guardians to connect with the teaching staff through parent portals. Before outsourcing an organization is responsible for the actions of all their staff and liable for their actions. When these same people are transferred to an outsourcer they may not change desk but their legal status has changed. They no-longer are directly employed or responsible to the organization. This causes legal, security and compliance issues that need to be addressed through the contract between the client and the suppliers. This is one of the most complex areas of outsourcing and requires a specialist third party adviser.

REFERENCES:

http://en.wikipedia.org/wiki/Outsourcing
http://en.wikipedia.org/wiki/Student_information_system




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PostSubject: MIS Assignment 8   Fri Aug 28, 2009 2:46 pm

As a student, you were invited by the Dean of the Institute of Computing to attend a seminar-workshop on information systems planning with some of the faculty members. In one of the sessions, a discussion of outsourcing came up. You have been asked to present your evaluation about outsourcing the information systems functions of the school.

What is Outsourcing?????

So, what is outsourcing? Outsourcing is contracting with another company or person to do a particular function. Almost every organization outsources in some way. Typically, the function being outsourced is considered non-core to the business. An insurance company, for example, might outsource its janitorial and landscaping operations to firms that specialize in those types of work since they are not related to insurance or strategic to the business. The outside firms that are providing the outsourcing services are third-party providers, or as they are more commonly called, service providers.
Although outsourcing has been around as long as work specialization has existed, in recent history, companies began employing the outsourcing model to carry out narrow functions, such as payroll, billing and data entry. Those processes could be done more efficiently, and therefore more cost-effectively, by other companies with specialized tools and facilities and specially trained personnel.
Currently, outsourcing takes many forms. Organizations still hire service providers to handle distinct business processes, such as benefits management. But some organizations outsource whole operations. The most common forms are information technology outsourcing (ITO) and business process outsourcing (BPO).

Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company.The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources]. Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labour.Out sourcing in the information technology field has two meanings . One is to commission the development of an application to another organization, usually a company that specializes in the development of this type of application. The other is to hire the services of another company to manage all or parts of the services that otherwise would be rendered by an IT unit of the organization. The latter concept might not include development of new applications.

Advantages of Outsourcing

Focus On Core Activities
In rapid growth periods, the back-office operations of a company will expand also. This expansion may start to consume resources (human and financial) at the expense of the core activities that have made your company successful. Outsourcing those activities will allow refocusing on those business activities that are important without sacrificing quality or service in the back-office.
Cost And Efficiency Savings
Back-office functions that are complicated in nature, but the size of your company is preventing you from performing it at a consistent and reasonable cost, is another advantage of outsourcing.
Reduced Overhead
Overhead costs of performing a particular back-office function are extremely high. Consider outsourcing those functions which can be moved easily.
Operational Control
Operations whose costs are running out of control must be considered for outsourcing. Departments that may have evolved over time into uncontrolled and poorly managed areas are prime motivators for outsourcing. In addition, an outsourcing company can bring better management skills to your company than what would otherwise be available.
Staffing Flexibility
Outsourcing will allow operations that have seasonal or cyclical demands to bring in additional resources when you need them and release them when you’re done.
Continuity & Risk Management
Periods of high employee turnover will add uncertainty and inconsistency to the operations. Outsourcing will provided a level of continuity to the company while reducing the risk that a substandard level of operation would bring to the company.
Develop Internal Staff
A large project needs to be undertaken that requires skills that your staff does not possess. On-site outsourcing of the project will bring people with the skills you need into your company. Your people can work alongside of them to acquire the new skill set.

Disadvantages of Outsourcing

Loss Of Managerial Control
Whether you sign a contract to have another company perform the function of an entire department or single task, you are turning the management and control of that function over to another company. True, you will have a contract, but the managerial control will belong to another company. Your outsourcing company will not be driven by the same standards and mission that drives your company. They will be driven to make a profit from the services that they are providing to you and other businesses like yours.
Hidden Costs
You will sign a contract with the outsourcing company that will cover the details of the service that they will be providing. Any thing not covered in the contract will be the basis for you to pay additional charges. Additionally, you will experience legal fees to retain a lawyer to review the contacts you will sign. Remember, this is the outsourcing company's business. They have done this before and they are the ones that write the contract. Therefore, you will be at a disadvantage when negotiations start.
Threat to Security and Confidentiality
The life-blood of any business is the information that keeps it running. If you have payroll, medical records or any other confidential information that will be transmitted to the outsourcing company, there is a risk that the confidentiality may be compromised. If the outsourced function involves sharing proprietary company data or knowledge (e.g. product drawings, formulas, etc.), this must be taken into account. Evaluate the outsourcing company carefully to make sure your data is protected and the contract has a penalty clause if an incident occurs.
Quality Problems
The outsourcing company will be motivated by profit. Since the contract will fix the price, the only way for them to increase profit will be to decrease expenses. As long as they meet the conditions of the contract, you will pay. In addition, you will lose the ability to rapidly respond to changes in the business environment. The contract will be very specific and you will pay extra for changes.
Tied to the Financial Well-Being of Another Company
Since you will be turning over part of the operations of your business to another company, you will now be tied to the financial well-being of that company. It wouldn't be the first time that an outsourcing company could go bankrupt and leave you holding-the-bag.
Bad Publicity and Ill-Will
The word "outsourcing" brings to mind different things to different people. If you live in a community that has an outsourcing company and they employ your friends and neighbors, outsourcing is good. If your friends and neighbors lost their jobs because they were shipped across the state, across the country or across the world, outsourcing will bring bad publicity. If you outsource part of your operations, morale may suffer in the remaining work force.

Reasons Companies Outsource
Improve company focus
Outsourcing sets up a framework for an outside expert to assume responsibility for operational details, allowing management to focus on the more important business issues associated with meeting customer needs.
Obtain access to world-class capabilities
Because of the nature of their specialization and their own core activities, outsourcing providers bring extensive world-class capabilities, including leading-edge technology, to help companies satisfy the needs of their customers and become more productive.
Accelerate reengineering benefits
An organization can realize the anticipated benefits of reengineering quickly if it contracts with an outside organization - which is already reengineered to world-class standards - to take over the process.
Share risks
Outsourcing enables management to turn over to its suppliers certain classes of risks - such as demand variability and capital investments. Unlike the buyer, the outsourcing provider can spread these risks over multiple clients.
Free resources for other purposes
Outsourcing permits and organization to redirect its resources from non-core activities to ones that have the greatest impact on the business.
Make capital available
Contracting out certain functions as operational expenses can reduce the competition for capital since the outsourcing company provides the capital investment as part of its overhead.
Obtain a cash infusion
Outsourcing sometimes involves the sale of assets to the provider, which the customer realizes typically as some combination of cash and loan.
Reduce and control operating costs
Access to the outside provider's lower cost structure, which may be the result of greater economies of scale, is one of the most compelling tactical reasons for outsourcing.
Obtain resources not available internally
Outsourcing is often a viable option for companies experiencing rapid growth, expansion into a new geography, or spin-offs from the parent company - where normally required resources are not readily available.
Function difficult to manage or out of control
Control problems are cited as a reason for outsourcing. However, there may be underlying causes - such as unclear management expectations or difficulty in measuring performance - for which outsourcing alone is not the solution. Management in this case should work with outsourcing providers to define requirements.


For me, I will go for OUTSOURCING because allows companies to focus on other business issues while having the details taken care of by outside experts. This means that a large amount of resources and attention, which might fall on the shoulders of management professionals, can be used for more important, broader issues within the company. The specialized company that handles the outsourced work is often streamlined, and often has world-class capabilities and access to new technology that a company couldn't afford to buy on their own. Plus, if a company is looking to expand, outsourcing is a cost-effective way to start building foundations in other countries.
While outsourcing may prove highly beneficial for many companies, it also has many drawbacks. It is important that each individual company accurately assess their needs to determine if outsourcing is a viable option.



Sources:
http://en.wikipedia.org/wiki/Outsourcing
http://www.wisegeek.com/what-is-outsourcing.htm
http://www.sourcingmag.com/content/what_is_outsourcing.asp
http://operationstech.about.com/
http://www.horizontech.net/toptenreasons.htm

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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Fri Aug 28, 2009 3:27 pm

Continuation on page 1Arrow Arrow

The Advantages Of Outsourcing Benefits Administration

In this economy, companies should be looking for new yet proven ways to save money.

PRLog (Press Release) – Jun 09, 2009 – It is common knowledge that for most employers, payroll processing is the biggest expense they incur on a regular basis. However, benefits administration and processing comes in at a close second in terms of employer cost. Indeed, as health care benefits become more and more complex to deal with, companies are spending increasing amounts of time processing them for their employees. When payroll processing and other human resources tasks are added to the mix, it's easy to see why benefits administration can be such a burden on midsized companies.

To deal with this growing problem, many companies are choosing to outsource their benefits administration. Doing so allows their existing human resources staff to perform other critical functions, and has a host of other advantages for companies looking to increase their efficiency and lower their costs. There is little doubt that benefits administration outsourcing will continue to rise in popularity; as noted by Norman LeClair, CEO of Corban OneSource (An HR Outsourcing Company for midsized businesses http://www.corbanone.com), "Outsourcing benefits administration has become very popular for companies with 100 to 1000 employees because it is proven to save money while increasing the customer service to employees." Below, we take a closer look at some of the compelling advantages to outsourcing benefits administration.

Reduce Costs


By outsourcing their benefits administration, companies can stand to cut costs and save a great deal of money. As things like health benefits become more and more convoluted to manage, keeping a human resources staff trained and up-to-date on performing these operations can be a costly proposition. Human resources personnel who have in depth experience in benefits administration typically come with very high salary requirements, increasing the operating costs for small to midsized companies enormously.

Rather than keep trained personnel on staff to tackle daily benefits administration tasks, many companies are discovering that outsourcing these functions saves them a lot of money in the long run. The firms that handle such tasks specialize in benefits administration processing, and typically cost a company far less than keeping in-house personnel up-to-date and fully trained. Since benefits administration has become so complex, most companies normally need at least one employee fully dedicated to handling it; for a lot less money, it can hire an outside agency to do the same work.

Free Up Resources

Obviously, human resources departments do much more for an average copany than benefits administration. They handle payroll processing, hiring and a slew of other critical tasks. However, benefits administration can take up an inordinate amount of employees' time and resources; other tasks may fall by the wayside. By outsourcing benefits administration, though, companies can free up existing HR personnel and allow them to get the important, day-to-day work done in a timely manner. This increases overall efficiency and improves employee morale considerably.

Improve Customer Service To Employees

When a company's human resources department is bogged down by the myriad complexities involved in benefits administration, it is less capable of providing excellent customer service to the organization's employees. Human resources should always be available and able to handle all sorts of employee concerns; they should be viewed and looked upon as a place for employees to receive the information that they need. By outsourcing benefits administration, companies can free up a lot of their HR personnel's time, allowing them to increase their level of customer service to employees in general.

Streamline The Benefits Process

The typical staff at a benefits administration outsourcing firm is comprised of highly trained and very experienced specialists who know precisely how to handle all aspects of the benefits administration process. Therefore, these companies can help organizations find many ways to streamline their benefits process, making it more amenable and accessible to each and every employee - from the bottom up. When the benefits process is truly streamlined, it allows a company's employees to take full advantage of those benefits - and keeps them up to date on what they are entitled to and how to receive those benefits.

Outsourcing Benefits Administration: A Great Choice

As demonstrated above, there are many compelling reasons for outsourcing benefits administration. With the highly competitive nature of today's business world, companies must continually strive to cut costs and improve efficiency. The increasingly complex nature of today's benefits administrations works against those goals, bogging companies down in red tape and subjecting them to countless errors and expenses. Removing those functions from the shoulders of existing HR personnel frees them up to focus on what truly matter: providing excellent customer service to the company's employees.

Companies that are struggling in today's worrisome economic climate are likely to find that outsourcing their benefits administration gives them the boost needed to keep them afloat. After all, being flexible and willing to adapt to changing times is critical to remaining a viable operation. Outsourcing benefits administration is just one other way of doing that with skill and ease.

The success of an outsourcing company depends on mainly three factors. Firstly a proper executive-level support from the client’s organization for the outsourcing mission. Secondly, there should be frequent communication between the client organizations (that is hiring services) and the service providing firm or company. And last but certainly not the least a lot depends on the client's ability to manage and handle its service providers.


References:
http://www.cyfuture.com/definition-of-outsourcing.htm
http://repositorium.sdum.uminho.pt/bitstream/1822/950/1/Outsource.pdf
http://whatis.techtarget.com/definition/0,,sid9_gci1185946,00.html
http://www.businessforum.com/woj01.html
http://operationstech.about.com/od/officestaffingandmanagem/a/OutSrcAdvantg.htm
http://www.articlesbase.com/outsourcing-articles/meaning-of-outsourcing-580687.html
http://www.prlog.org/10254091-the-advantages-of-outsourcing-benefits-administration.html

my Blog:
http://jevaldez.blogspot.com/
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Ariel Serenado



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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Fri Aug 28, 2009 3:58 pm

For this assignment we are tasked to stand as to whether we prefer outsourcing or in-sourcing.

In some point of my discussions during the group reporting in HRM, I have made mentioned about outsourcing of a certain company that we adopted. In the case of the company we visited some services are actually outsourced, like their activities on counseling they actually outsourced teams, organizations that could handle the said activity in behalf of the employees who has the authority to do that kind of service. However, this certain companies also held companies in which the service involved is referred “in-house”. For me both in-house and in-source actually have identical meaning but then in-source is somewhat technical that anyone would doubt at some point, but both really have the same implications.

Before making into a firm preference I would like to emphasize first the distinct definition of the two – outsourcing and in-sourcing.

Outsourcing – What is Outsourcing?


For companies looking for a competitive advantage, outsourcing is a hot topic. The reason is the promise that outsourcing will help a company focus on more on it’s core competencies.

Outsourcing is contracting with other company or person to do a particular function. Almost every organization outsource in some way. Typically, the function being outsourced is considered non-core to the business. All insurance company, for example, might outsource its janitorial and landscaping operations to firms that specialize in those types of work since they are not related to insurance or strategic to the business, outside firms that are providing the outsourcing services are third-party providers, or as they are more commonly called, service providers.

Although outsourcing has been around as long as work specialization has existed, in recent history, companies began employing the outsourcing model to carry out narrow functions, such as payroll, bill and data entry. Those processes could be done more efficiently and therefore cost-effectively, by other companies with specialized tools and facilities and specially trained personnel.

Currently, outsourcing takes many forms. Organizations still hire service providers to handle distinct business processes, such as benefits management. But some organizations outsource whole operations. In most common forms are information technology outsourcing (ITO) a business process outsourcing (BPO). Business process outsourcing encompasses call center outsourcing, human resources outsourcing (HRO), finance and accounting outsourcing, and claims processing outsourcing. These outsourcing deals involve multi-year contracts that can run into hundreds of millions of client firm are transferred and become employees for the service providers. Dominant outsourcing service providers in the information technology outsourcing and business process outsourcing fields include IBM, EDS, CSC, HP, ACS, Accenture and Capgemini.

Some nimble companies that are short on time and money, such as start-up software publishers, apply multisourcing – using both internal and service provider staff – in order to speed up the time to launch. They hire a multitude of outsourcing service providers to handle almost all aspects of a new project, from product design, to software coding, to testing, to localization, and even to marketing and sales. In the context of outsourcing it encompasses four stages, these are the following:

1.) Strategic thinking, to develop the organization’s philosophy about the role of outsourcing in the activities. This stage is really vital to an organizations for this kind of thinking commonly results to a centralize manner of giving due importance to the specific roles of outsourcing for the betterment of the organization.

2.) Evaluation and selection, to decide on the appropriate outsourcing projects and potential locations for the work to be done and service providers to do it. This stage will asses the right and suited outsourcing activities for the organization to adapt.

3.) Contract development, to work out the legal, pricing and service level agreement (SLA) terms; and

4.) Outsourcing management or governance, to refine the ongoing working relationship between the client and outsourcing service providers. This stage must be taken into account especially that due and effective supervision will really affect the current business process being involved by the client and the outsourcing service providers.

In all cases, outsourcing success depends on three factors: executive-level support in the client organization for the outsourcing mission; and ample communication to affected employees; and the clients’ ability to manage its service providers. The outsourcing professionals in charge of the work on both the client and provider sides need a combination of skills in such areas as negotiation, communication, project management, the ability to understand the terms and conditions of the contracts and service level agreements (SLAs), and, above all, the willingness to be flexible as business needs change. The challenges of outsourcing become especially acute when the work is being done in a different country (offshored), since having an offshore transaction would mean having constraints on language, cultural and time zone differences.

Organizations who are interested in outsourcing are often curious to know more about disadvantages and advantages of offshoring. By gaining insights about the good and bad of outsourcing, organizations can decide if outsourcing is right for them. Most organization jump headlong into outsourcing, without actually finding out if outsourcing is good for their business. Before outsourcing, ensure that you are aware about the pros and cons of outsourcing. The advantages and disadvantages of outsourcing can help your organization decide if outsourcing is right for their business. The following are the advantages and disadvantages of “outsourcing”:

Advantages of Outsourcing

The benefits of outsourcing are:

Less capital expenditure – For example, by outsourcing information technology requirements, a company does not have to buy expensive hardware and software.

Less management headache – For example, by outsourcing business process such as accounting, company nom longer has to hire and manage accounting personnel.

Focus on core competencies – Outsourcing non – core related processes will allow a business to focus more on its core competencies and strengths, giving it a competitive advantage.

Specific advantages of outsourcing are as follow:


  • With outsourcing your organization can experience increased efficiency and productivity in non-core business processes


  • Outsourcing can help you streamline your business operations


  • Offshore outsourcing can help you save on time, effort, manpower, operating costs and training costs amongst others


  • Outsourcing can make your organization flexible to change


  • You can experience an increased control of your business with outsourcing


  • Your organization can save on investing in the latest technology, software and infrastructure as your outsourcing partner would be investing in these


  • Outsourcing can give you assurance that your business process are being carried out efficiently, proficiently and within a fast turnaround time.


  • By outsourcing, your company can save on management problems as your offshore partner will be managing the team who does your work


  • By outsourcing, you can crater to the new and challenging demands of your customers.


  • Outsourcing can help your organization to free up its cash flow


  • Outsourcing can give your business a competitive advantage as you will be able to increase productivity in all the areas of your business


  • Outsourcing can help your organization to cut is operational costs to more than half

If you want your organization to stay ahead of competition, concentrate on core competencies and make use of the latest technologies, then outsourcing can help your organization achieve all this and more. In outsourcing, the advantages of outsourcing are more than the disadvantages of outsourcing. The pros of outsourcing have driven more organization to step into offshoring and experience the benefits that it has to offer.

Furthermore, one of the biggest advantages can be lower personnel costs. By outsourcing job duties to non-employees, a business does not have to pay consistent wages or offer additional employee benefits. The company may pay lower taxes because independent contractors, the people who complete the outsourced projects, pay their own withholding, social security, and other taxes. This can add up to substantial savings. Some businesses choose to take their outsourcing one step further by choosing a vendor, located in another part of the world. Doing so typically saves them more money because they end up paying a much lower wage than would be necessary in their home country. The disadvantage is that these vendors may not understand English and communication is more difficult. Many times, outsourcing speeds up production time. Since the third-party vendor will only be concentrating on one specific task, instead of numerous office duties, actual production time can be greatly increased.

Some businesses choose to take their outsourcing one step further by choosing a vendor, located in another part of the world. Doing so typically saves them more money because they end up paying a much lower wage than would be necessary in their home country. The disadvantage is that these vendors may not understand English and communication is more difficult.

Many times, outsourcing speeds up production time. Since the third-party vendor will only be concentrating on one specific task, instead of numerous office duties, actual production time can be greatly increased. In turn, it can cause community uproar and even a decrease in business and profits. This happens when local consumers make the decision to shop elsewhere, as a way to voice their disdain. Outsourcing customer service jobs, to foreign countries, is on the rise. Many large corporations including credit card companies, shopping networks and computer manufacturers are making this change. The problem with this is a lack of communication. It can be very frustrating for a consumer who is calling in with a customer service issue. When this individual cannot understand the customer service representative they are speaking with, it just causes more frustration and does little to solve the problem.



Disadvantages of Outsourcing

Before deciding on outsourcing your company's business process, keep in mind the disadvantages of outsourcing:
Less managerial control - It may be harder to manage the outsourcing service provider as compared to managing your own employees.
Outsourcing company goes out of business - If your outsourcing service provide goes bankrupt or out of business, your company will have to quickly transition to a new service provider or take the process back in-house.
May be more expensive - Sometimes it is cheaper to keep a process in-house as compared to outsourcing.
Security and confidentiality issues - If your company is outsourcing business processes such as payroll, confidential information such as salary will be known to the outsourcing service provider.
Moreover, here are the list of the advantages of outsourcing:

  • At times, it is more cost-effective to conduct a particular business process, rather than outsourcing it


  • While outsourcing services such as payroll processing services and tax preparation services, your outsourcing provider will be able to see your company’s confidential information and hence there is a threat to security and confidentiality in outsourcing
  • When you begin to outsource your business processes, you might find it difficult to manage the offshore provider when compared to managing processes within your organization
  • In case, your offshore service provider becomes bankrupt or goes out of business, your organization will have to immediately move your business processes in-house or find another outsourcing provider
  • The employees in your organization might not like the idea of you outsourcing your processes and they might express lack of interest or lack of quality at work
  • Your outsourcing provider might not be only providing services for your organization. Since your provider might be catering to the needs of several companies, there might be not be complete devotion to you and your company
  • By outsourcing, you might forget to cater to the needs of your valuable customers as your focus will be on the business process that is outsourced
  • In outsourcing, you may lose your control over the process that is outsourced
  • Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred while signing a contract between companies. You might also have to spend a lot of time and effort in getting the contract signed
  • With outsourcing, your organization might suffer from a lack of customer focus
  • There can be several disadvantages in outsourcing, such as, renewing contracts, misunderstanding of the contract, lack of communication.
Outsourcing occurs when a business secures (purchases) products and/or services from a third party, as opposed to producing them in-house. There are several advantages and disadvantages to outsourcing.




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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Fri Aug 28, 2009 4:37 pm

As a student, you were invited by the Dean of the Institute of Computing to attend a seminar-workshop on information systems planning with some of the faculty members. In one of the sessions, a discussion of outsourcing came up. You have been asked to present your evaluation about outsourcing the information systems functions of the school.

Required:

You are to take a position- outsource or in-source and justify your position. (3000words)








INSOURCING VS. OUTSOURCING


1. What is Outsourcing? Its advantages and disadvantages?
2. What is Insourcing? Its advantages and disadvantages?
3. What is the difference between Ousorcing and Insourcing?
4. Where do I stand?



The answer’s maybe here:

OUTSOURCING

In a layman’s view, it simply means getting source from the outside. Source of what? Source of services someone needed but he cannot afford to provide him because it’s not his expertise.

“You can outsource almost anything.” (Basil Tesler)
Take this simple example for instances. You have a television. Of course, when you bought it, it’s in its good condition but as time passes by, the colored picture turned into black and white. So it’s concluded that something inside is already damaged and therefore you need to fix it. However, you’re no good in fixing damaged electronics because you only have little knowledge of it. Remember that, little knowledge of anything may cause some harm. So you decide to call for someone who is an expert on this. Here comes the concept of outsourcing.

That’s only an example though. Our real object for the discussion is the organizations.
We know that organizations have different functions inside. Some are their core functions in which they specialize at. And there also non-core ones in which they are not the expert.

Outsourcing began in the early eighties when organizations started delegating their non-core functions to an external organization that was specialized in a particular service, function or product. In outsourcing, the external organization would take on the management of the outsourced function. These outsourced services of course, are a big help in the company’s development. Organizations feel that outsourcing is an effective business strategy to improve their business.



ADVANTAGES

Most organizations choose outsourcing because it offers a lot of advantages. Outsourcing allows companies to focus on their core competencies. Also, it allows them to concentrate on other business issues while having the details taken care of by the outsourcing partner. This means that outsourcing makes the organizations to use better and more effectively their resources, time and infrastructures. You won’t be able to completely forget all about the project or its part that you have chosen to outsource as you sign a contract with an outsource service provider, but you won’t have to get scattered either.

Another advantage of outsourcing is the benefit from lower costs. Outsourcing is the most effective way to stretch your budget. When managers plan development, outsourcing they usually make it their aim to cut down company’s expenditures with 30%. This figure has a great impact in the cash flows of the company. And its important to note that organization can significantly save money (operating costs, training costs among other). It can save on capital expenditures. Also, the organization can save on investing in the latest technology software and infrastructure as your outsourcing partner will be investing on this. Many companies that provide outsourcing are able to do work for considerably less money for they don’t have to offer benefits to their workers and have fewer overhead expenses to worry about.

Another is that of the high-quality services the outsourcing company offers. It is said that the company that provides the outsourced job is often streamlined, and often has world-class capabilities and access to new technology the company couldn’t afford to have their own. It can give the company an access to professionals, expert and high-quality services. Thus, helping you streamline your business operations. If you contract and deal with the experienced and high qualified company why offer the outsourced work, you will be able to gain valuable expertise in support in your capacity. Almost any vendor will surely try to set a dependency trap for you, but it doesn’t mean that you have to acquire the dependency pattern instead of learning everything you can derive from the vendor’s expertise.

Cutting costs and upgrading the quality of service will expand the competitive capacity of your business. If you need to have a state-of-the-art services and innovations implemented with small losses, outsourcing is a good way. It will save you of training your employees or hiring new ones and paying for the equipments needed.

Furthermore, outsourcing allows less management headache in part of the organization. It is because your outsource partner will be the managing team who does your outsourced work. Again, making you to have an increased control over you business especially in the core competencies. It can also make the company cater the new and challenging demands of the customers.

Outsourcing can also give assurance that your business processes are being carried out efficiently, proficiently, and within a fast turnaround time. Because you are focused on your core competencies, the outsource partner on the other hand will provide efficiency and productivity in your business operations. Also, outsourcing let your organization to share the risks of change and the flexibility of change.

Moreover, in outsourcing, the organization and the outsourcing partner can build great relationship, better than that of between the producers and the customers.
It is because of the trust built when the outsourcer made known to the outsourcing companies their vital information. Just like in US and UK who outsource almost all of the services that deal with confidentially such as financial, engineering, creative, data entry and others.



DISADVANTAGES

When you have the lists of advantages in outsourcing that almost overwhelm your decision to have outsourcing, you also have to consider its disadvantages.

Even if outsourcing offer you to have a cost-0effective service, in some instances, it is cheaper to keep a process in- house. Sometimes, it is more cost-effective to conduct a particular business process, rather than outsourcing it. Also, outsourcing might =have hidden costs such as the legal ones especially when you are signing contract with your outsourcing partner. Additionally, you might have to spend a lot of time and effort in getting the contract signed. So it’s better to weigh the costs between insourcing and outsourcing in your organization.

If your company is outsourcing business processes such as payroll, confidential information such as salary will be known to the outsource service provider. While outsourcing provider will be able to see your company’s confidential information, hence a threat to security and confidentiality.

Moreover, it will be harder to manage the outsourcing services provider as compared to managing your own employees. You will definitely lose control over the project or at least over the part that you have chosen to outsource. This is the problem that frightens almost any manager who has little or no experience in outsourcing. This is the challenge and risk you have to take. However, the outsource service provider n=must not abuse the confidence you have given to them. In order to minimize the risk, you have to be extremely=y careful on studying the background of your potential vendor. Once, you have decided in favor of this company and begin negotiating the contract, you should try to make the whole process of the project implementation as transparent as possible.

Another is when your outsource company partner goes to bankrupt. Your company will have to quickly transit to a new service provider or take the process in-house. Any sensitive information is more vulnerable and the company may become very dependent upon its outsource providers which could lead to problems should the outsource provider back out in the contract.

Additionally, there also problems arise such as contract renewals, misunderstanding of the contract, and lack of communication, poor quality and delayed service, forgetting to cater the needs of the customers and the risk of employees to express their lack of interest and lack of quality of work for they may not like the idea of outsourced service amongst others.

That’s all about outsourcing and yet I can’t still choose between the two because I haven’t discussed yet the opposite process which is insourcing and its pros and cons.




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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Fri Aug 28, 2009 4:39 pm




INSOURCING


So what’s insourcing by the way? Insourcing is the direct opposite of outsourcing.
Beforehand, let us have simple instance first. You are hungry who obviously needs to eat. If you wan to control the flavors and taste of the food you are going to eat, Instead of buying a ready-to-eat meal, you just have to cook by yourself or let someone in your home to cook for you. It only implies that if you can afford to have food in cooked in you home, why buy outside? In this case, it will be more advantageous to have your own food cooked in your home than buying it .That’s a simple concept of insourcing.

Insourcing (contracting in) is often defined as the delegations of operations or jobs from the production within a business to another entity which is internal but not a part of the organization or in other way “stand-alone” that is specializes in that operation. It is a business decision that made to maintain the control of the organizations over the critical productions or competencies. An alternate use of the term implies transferring jobs within the same country where the term is used, either by hiring a local subcontract or building a facility. The internal entity will usually have a specialized team who will be proficient in providing the required services. The Organization for International Investment, Washington D.C. Trade Association used the term to describe the creation of jobs through foreign direct investment.



ADVANTAGES

Organization sometimes opts for insouring because it enables them to maintain a better control of what they outsource. Insourcing has also come to be defined as transferring of work from one organization to another within the same country. It can also mean an organization building a new business center or facility which would

Insourcing at United Parcel Services (UPS) was described in the bestselli9ng book The World is Flat by Thomas Friedman.

Insourcing is lossely referred in call centers that are doing the work of outsouring companies. Compnies that outsource include Dell, Hewlett Packard, Symantec and Linksys. The call centers and technicians that are contracted to handle the outsourced work are usually overseas. Companies may refer to these countries as “India” technical support if they are hard to understand over telecommunications. These insuring companies were a great way to save money for the outsourcing of work. But quality varies, and poor performance has sometimes harmed the reputations of the companies who provide 24/7 customer technical support. It is widely used in an area such as production to reduce costs of taxes, labor, transportation, etc.


According to the PR Web, the trend toward insourcing has increase since 2006 as business had less than satisfactory experiences with outsourcing organizations who have been dissatisfied with the outsourcing have moved towards insourcing. Some organizations feel that they can have better customer support and better control over the work outsourced by the insourcing their work rather than outsourcing it.

According to a study by Mary Amiti and Shang-Jin Wei, in the US and the UK and other industrialized countries, more jobs are insources than outsourced. They also found out that the US and the UK actuallyhave the largest net trade surpluses in business services.
According to the 2010 budget documents, White House plans to convert contractor positions into federal positions. Of course, insourcing was not new to the Bush Administration even did some insourcing and save millions of dollars in some cases.


DISADVANTAGES


While most will argue that in the long run, single sourcing pays for itself over and over again, startup costs in both time and dollars can be high and the learning curve can be extensive. Usually software tools need to be researched and purchased, technical and writing staff will require training and the time it takes to develop a structured approach once the purchases and training have been completed is lengthy. Justin Darley says,"Unfortunately, to achieve the potential gains, and avoid the duplication of effort we may have been used to, we need to create mechanisms that will account for the different media, purposes and audiences that we aim to cater for. This can be a time-consuming and potentially costly process."
If your organization only has a couple of small projects, or projects where the information isn't likely to change very often it may not be worth switching to a single source solution. On the other hand, if you are working with documentation that changes frequently, is extensive, highly complex, or applies to multiple products and venues etc. it will be much cheaper in the long run to go with a single source solution.


MY CHOICE

So we I have already discussed the difference between insour cing and outsouring. And now, it’s time for me to choose on where I should stand. Well, if I were to choose between the two, I would definitely go with Outsourcing and I have the many reasons to consider supporting my stand.

First, we are aware that every organization has not without non-core competencies. If your organization has a number of non-core competencies which are taking a lot of time, effort and resources, to perform in-house, then it would be better to have it outsourced.

Another thing is that outsourcing allows your organization to contract with the other organization which is expert on the outsourced processes. Thus, you don’t have to spend so much time and cost in training your employees or hiring a new one.

On the other hand, if your work involves production, then it would be nicer to opt for insourcing as you can save on transportation costs and exercise a better control over your project.

If you don’t want to struggle the disadvantages of outsourcing such as the difficulty of controlling the project, communication problems, misunderstanding of the partners, building of trust amongst other, of course, you will going to choose insourcing, right? But consider the fact that the advantages of outsourcing overwhelm its disadvantages. Also, you might not experience any of these cons if you find a reliable outsouring partner and if you’re not afraid to face the circumstances of having the process outsourced. Before outsouring, take the interests of you company and employees into consideration and then make an informed decision. If you organization is genuinely interested in outsourcing, let not the disadvantages stop you.

A number of problems may arise due to the incompetence of a customer who is novice in outsourcing. That’s right, you don’t have to think that an outsource service provider is the root of all evil. Incompetent customers tend to make modifications in standards and procedures that have been long established. A vendor who knows that the customer is always right tries to implement the project way the customer wants it, which finally leads to a total mess-up. In order to avoid this kind of situation, try to find out as much as you can about IT development outsourcing from your contacts. In short, if you want to have outsourcing, it’s a need to have a deeper knowledge about your potential outsourcing partner.

If you want your organization to stay ahead of competition, concentrate on core competencies and make use of the latest technology the outsourcing can help your organization achieve these goals.
Another is that, the disadvantages of outsouring can be resolved without necessarily shifting to the opposite. Just for instance, the building of trust. Of course, in every organization has its own confidential information that shoul be kept with secrecy. When you outsource, you have to open it to your provider. So it’s very important to study and examines your potential vendor. By this, you can a have good relationship with the outsourcing partner.

If you are discreet selecting the outsource service provider, negotiating the contract and monitoring the project implementation, the return on investment might be the greatest you have ever had. Sometimes, in business, you have to take risks because this can make your business profitable if it succeeded. In this case, outsourcing development in your company will be rewarding. But the again, if you’re not cautious and thorough enough, you might end up paying through the nose for much worse service than you expected to get.

To end it up, I would conclude that it’s not really necessary to choose between the two. Your company can outsource and insource at the same time. By outsourcing and insourcing simultaneously, you can have the best of what both processes offer in your organizations competitive advantage. There’s always a no one-fits-all approach. It simply implies that Outsourcing has the advantages in the other way as insourcing has on its own. Just take the instance of Michigan, despite the perception that this is an “insource state”, still they have outsourced some of their services. They also maintain great relationships with their vendors whom they value greatly. Like in Michigan.gov portal is hosted by IBM in Boulder, Colorado. They also outsource specific applications such as credit card processing where it makes business sense.

If you don’t process in-house expertise, and/ or budget necessary to implement a vital development project, outsourcing then would be the best solution you can find.

Will insourcing or outsourcing alone or both when practiced in the organization benefit it? It depends.



REFERENCES:

http://en.wikipedia.org/wiki/Insourcing
http://whatis.techtarget.com/definition/0,,sid9_gci1185946,00.html
http://www.govtechblogs.com/lohrmann_on_infrastructure/2009/05/how-insourcing-jobs-can-save-d.php
http://www.ictstandards.com/Advantages_And_Disadvantages_Of_Outsourcing.htm
http://www.outsource2india.com/why_outsource/articles/advantages-disadvantages-outsourcing.asp
http://www.webspacestation.com/it-outsourcing-news/articles/outsourcing.html




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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Fri Aug 28, 2009 8:11 pm

My Opinions:

If I were given a chance to give my suggestion for the improvement of our school in Information System (IS), I would probably suggest that the school must find an Information Technology (IT) expert to share us new kinds of Information Technology (IT) that our school should adopt. For example, new facility use in studying. Our school should also consult different Information Technology (IT) Companies of what is the best technology who teach the student. In my personal views about outsourcing, our school is a state university means we can ask the government to give us support in improving our quality education in Information Technology (IT) by asking them to provide manpower which is expert in Information Technology (IT) and also give us latest facilities such as new computers. In outsourcing the school should discover a students who has a special talent and skills in Information Technology (IT) such as a student who is expert in making a programs, developing new gadgets and etc. by giving them a special attention. The school should give the student an assistance to improve more his or her talent and skills.

We know nowadays, technology is improving faster, when we talk in communication, years ago there is only a telephone but now we used mobile phones and sometimes we can have an internet service there that's why the school should give an attention to give the students a knowledge in Information Technology (IT) so that we can go with a new technology. We like it or not we should know to use computers this days because if we apply for a job the employer should ask if we are computer illiterate.



OUTSOURCING...


There are many reasons that companies outsource various jobs, but the most prominent advantage seems to be the fact that it often saves money. Many of the companies that provide outsourcing services are able to do the work for considerably less money, as they don't have to provide benefits to their workers and have fewer overhead expenses to worry about.

Outsourcing also allows companies to focus on other business issues while having the details taken care of by outside experts. This means that a large amount of resources and attention, which might fall on the shoulders of management professionals, can be used for more important, broader issues within the company. The specialized company that handles the outsourced work is often streamlined, and often has world-class capabilities and access to new technology that a company couldn't afford to buy on their own. Plus, if a company is looking to expand, outsourcing is a cost-effective way to start building foundations in other countries.

There are some disadvantages to outsourcing as well. One of these is that outsourcing often eliminates direct communication between a company and its clients. This prevents a company from building solid relationships with their customers, and often leads to dissatisfaction on one or both sides. There is also the danger of not being able to control some aspects of the company, as outsourcing may lead to delayed communications and project implementation. Any sensitive information is more vulnerable, and a company may become very dependent upon its outsource providers, which could lead to problems should the outsource provider back out on their contract suddenly.

While outsourcing may prove highly beneficial for many companies, it also has many drawbacks. It is important that each individual company accurately assess their needs to determine if outsourcing is a viable option.


Source: http://www.wisegeek.com/what-is-outsourcing.htm

INSOURCING...


Insourcing is a business practice in which work that would otherwise have been contracted out is performed in house.

Insourcing often involves bringing in specialists to fill temporary needs or training existing personnel to perform tasks that would otherwise have been outsourced. An example is the use of in-house engineers to write technical manuals for equipment they have designed, rather than sending the work to an outside technical writing firm. In this example, the engineers might have to take technical writing courses at a local college, university, or trade school before being able to complete the task successfully. Other challenges of insourcing include the possible purchase of additional hardware and/or software that is scalable and energy-efficient enough to deliver an adequate return on investment (ROI).

Insourcing can be viewed as outsourcing as seen from the opposite side. For example, a company based in Japan might open a plant in the United States for the purpose of employing American workers to manufacture Japanese products. From the Japanese perspective this is outsourcing, but from the American perspective it is insourcing. Nissan, a Japanese automobile manufacturer, has in fact done this.

Source: http://whatis.techtarget.com/definition/0,,sid9_gci1185946,00.html

There is a big debate going on at the moment and people are constantly arguing whether or not it is better to outsource or to insource. We can mention a lot of good reasons and bad reasons for both but at the end of the day what is important stand in your own personal needs.

The biggest benefit that insourcing has stands in the fact that you get a very close contact with the person you are hiring. This can create a very good working environment but at the same time it does bring in some negative aspects that we have to think about. Unfortunately sometimes we can not find what we are looking for through insourcing. This basically means that what we want done can not be found locally. Such a fact shows us the biggest advantage why outsourcing is preferred in a comparison with insourcing: a wider set of choices. The truth is that when outsourcing we are faced with more people or companies to consider hiring. We are basically moving everything towards a much larger scale. Why outsourcing towards a single area or even country when we can think at a global scale.

If you talk to most Internet Marketers about outsourcing they will tell you that it is a must have. Most of them don't even think about insourcing when we have the possibility of outsourcing. The Internet has made it possible for a lot of people to meet. We now have a chance we never did in the past. In the past we had to invest into newspaper ads and similar actions in order to get in contact with professionals we needed. This does bring everything down in terms of time and possible success. When thinking about why outsourcing is better than insourcing we should always think about numbers. For instance, there is a huge chance that we can spare money by hiring someone from abroad that will do everything cheaper than on a local scale search. Also, the number of potential people worth hiring is much bigger. We can thus make sure at all times that we hire the best professionals we can afford.

There shouldn't be any doubt in anyone's mind that outsourcing is a lot better than insourcing. The reasons mentioned above are just the most obvious but the list can go on. In short, the most important facts we need to consider when thinking whether or not outsourcing is better than insourcing can be written with ease.

Why Outsourcing?

- It is Cheaper
- It is Better
- You can Work with More Competent People
- You can make sure you get what you are looking for
- The Quality is Better in Most Cases
- Marketing time needed to look for people is drastically reduced
- Less Risks

"Outsource Method Saved Me Over 500% On My Staffing Costs"
Outsourcing can be a very costly and mistake ridden path if you don't have the connections or know the pitfalls. When we Interviewed the CEO of RentACoder.com we were amazed at how many buyers get this wrong.
Learn how to save yourself mistakes that could cost you 10's of thousands of dollars and how you can more effectively manage your business process outsourcing.

Article Source: http://EzineArticles.com/?expert=Mary_Thomas


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charmaine_dayanan



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PostSubject: In source or outsource...? part 1   Fri Aug 28, 2009 9:21 pm

This is similar to what we call as the ‘hottest’ topic every time we have sessions in our Management Information System module reporting. “…in the case of our university’s information systems, should we outsource?” This brought varying reactions from several individuals who expressed their thoughts about the matter. Before we mark our final word, we shall first weigh the factors involved.

So, what is really ‘outsourcing’? What is its difference from ‘in-house’ or ‘in-sourcing’? What are the factors involved regarding this matter? Let us first discuss these few explanations based on what I have researched.

In-housing or in-sourcing, is actually the administration of ancillary activity within a company. It is managing by using the resources within a company. Outsourcing on the other hand, is subcontracting. It is the purchase by a company of labor or parts from a source outside the company rather than using the company’s staff or plant.

Why is there a need to outsource, instead of keeping in in-sourcing? Let us take the example of making a website. Once a certain organization decides to make a company website, it will need the necessary manpower to keep in charge of it. In other words, it will need to decide who will undertake the project and maintain the web site over time. There are various skills required to carry out this project and these skills may be found in some existing staff working for the company. But there are also cases when the management has to decide whether to hire somebody who may have possessed those certain skills to be work part-time or full-time, or to contract services from an outside source. In this case, when the company decides to hire staff and/or services outside their company, outsourcing happens.

In-housing versus Outsourcing

If you opt to start a critical project, you have to weigh your current in-house capacity first. Will your staff be able to address the needs? Will your resources allow you to do the task(s) completely? If you think your skills and budget allow you to deal with the task without aid from outside source then you have to take advantage of your potential - use your own resources within the company. On the other hand, if you think that you will be working out with more than you could ever handle, then I guess you should consider the advantages and disadvantages of outsourcing.

When you choose in-house to hire in-house staff you can have these several benefits:

- Managerial control and ease of communication
Of course when you choose to have your own company staff working for your tasks, you can easily manage to look after them and how they do the job. It would be best for you if you will keep in touch with the updates of your projects being carried out by personnel working within your reach. In case of some sudden changes and modifications, you can easily tap them since they are your company’s workforce.

- Timeliness
If you have a task to be done, you can immediately call your staff’s attention for the urgent matter. The great thing here is you have greater control over your personnel on when your task has to be done or updated. For example, in a company’s website scenario, if you need a few changes for your site, your staff can immediately do it for you even in a few minutes compared to the vendor or outsourced personnel who may happen to have another client aside from you (tendency is you will be putting yourself in a queue especially if there are other customers being served by your outsourced provider).

- Quality of Results
Since you have greater control over your projects and resources, you have more chances of achieving desirable results. It is because you are there to guide them when the personnel are working on the projects along the way.

- New funding opportunities
If you have really skilled personnel, you could invest in developing your in-house capacity to do certain jobs. This will generate extra income for the company or to your staff, and perhaps you could even sell new products and services.

- Financial predictability
When we speak of costs, it is easier to estimate how much will you spend in your projects if workforce time is included in your resource budget.

- Security and confidentiality issues
Definitely, you have fewer worries about your company’s assets and information especially on matters of privacy.

Those are on the in-housing staff side. Now let us talk about more on outsourcing. I should say this is quite a broader topic to talk about. As business organizations grow larger across the years, there are pressures on business and companies to be more and more competitive in their fields. Thus, there is a need to increase their productivity. Some felt that in order to gain more efficiency, outsourcing the resources of the company is an easy way out. Well, does it really address the needs?

Some of the key reasons why an organization should consider outsourcing are: competitive response, loss of key staff, cost overruns and project time, new product designs don’t work, and problem with quality and yield.

(See also Wikipedia’s Reasons for Outsourcing… http://en.wikipedia.org/wiki/Outsourcing)

Now let us discuss some benefits regarding outsourcing:

One major advantage of outsourcing is less capital expenditure. Outsourcing is an effective way to extend your budget. In terms of personnel budget alone, you can save costs for wages and additional employee benefits (which may include trainings, tax payments, etc). When you outsource information technology requirements, you don’t have to pay for the expensive hardware and software needed.

Less management headache, in the sense that the management has less control on the personnel working for a particular project or task. Thus, time spent by the management on personnel will be lesser. For example, in IT maintenance, the company doesn’t have to take time hiring and/or training staff since you probably will have valuable technical expertise by your outsource vendor.

Focus on core competencies. When you outsource IT activities to outside companies, this will provide you greater time concentrating on your core activities and strengths of the company. This will also give way to increased production time. Since your outsource company will be focusing on a specific project rather than the numerous company business activities, actual production time will speed up giving your business a competitive advantage.

Outsourcing also gives company the flexibility to change third-party vendors. In other words, they are easy to fire. When you are not satisfied with the results of your projects and you are not happy with the services provided by your vendor, it is easier to change to a new outsource provider than it is to fire poorly-performing company staff. This is because outsource vendors and your company agree that services will be provided to a legally binding contract with financial penalties.
*
So now that you have read about the advantages of outsourcing, you probably think that this is a best way to your company’s business. But we still have to think things over because the disadvantages are not yet specified. Before deciding to outsource your company’s business process, let discuss some drawbacks of outsourcing:

One major disadvantage is less managerial control. As I have stated in the above statements, this can be a benefit. But what makes it a weakness is that you actually are losing control over your outsourced project (or at least a part of it) since the vendor will take charge of the job. It may be harder to manage your outsourcing provider than it is to manage your staff especially that service providers usually stress their control over the projects they’re working out.

This is also associated with lack of communication. Most companies find it hard to have constant communication links with their outsource providers. Problems linked with this involve misunderstanding between company customers and outsourced customer service representative, difference in language and cultural problems (in cases of outsourcing to another country), and several inherent difficulties like having conversations in varying available schedule between you and the vendor (like having different time zones of work).

Undesirable results. For example, a company hires a vendor to mass produce a product and when the finished products don’t meet with the company’s standards, chances are the manufacturing process will then be repeated probably by a different vendor. Quality risks in outsourcing are driven by several factors and cases such as the following: most vendors try to accumulate as many projects as they can (granted that they have other clients aside from you, there could be more projects that the outsource vendor will accept even if the burden is more than they could bear. This may wreck your project schedule, if not the whole project.); some vendors advertise services and even accept projects with little or no expertise in the corresponding areas (of course they wanted to gain more so they would take out your project. Lack of supplier capabilities / resources / capacity becomes a problem.); outsourcing company might go out of business (in the event that your vendor goes bankrupt or out of business, you will have to change to a new provider to continue business or you may take the process back in-house.).

Outsourcing can be very costly. It may be more expensive for the company in the sense that the company is paying twice for the same job. Not only it is a waste of time and materials but there is also possibility that the company will lose sales during the same period due to unavailability of the product. Sometimes it is cheaper to keep a business process in-house as compared to outsourcing.

Another main problem by organizations that outsource is security and confidentiality issues. There are cases when you are outsourcing business processes to a vendor such as payroll, and if so, some confidential information like salary will be known to the outsourcing provider. Before outsourcing, the company is liable for the actions of their staff. When they outsource personnel, these workers are not anymore directly employed or connected to the organization. Chances are, this may cause legal, security, and compliance issues that are to be addressed by binding contract so to avoid frauds.

Loss of jobs can be one drawback of outsourcing. Granted that the company may outsource personnel from other organizations and/or other countries to save money in wages, they will have to reduce their company’s workforce at the expense of laying off their employees.

Those are several outsourcing disadvantages to look at. Will outsourcing or keeping in-house really profit your business? Well, it depends. There are still other issues yet to consider. Both parties should pay attention to contracts. In the case of outsourcing IT, there are more development of tools and databases, so you have to be aware of which outsource services will you have to pay or not. For example, your vendor happened to develop a special tool that can be considered as their intellectual property, you can’t take it with you when their contract of service ends and you choose another vendor. Sustainability is also an essential issue. In the company website scenario, your company has to be steady in gaining income so to pay salaries for a full-time maintenance staff.

Status of the University

Let us now discuss the overview of the university’s situation. Currently, the university has recently changed to in-house after hiring some outsource company for the campus’ information system. For the past years that I have been a part of the university, we, students, could really feel the consequences of the processes that our school involves especially regarding the enrollment system. Now the university has decided to try using the services by its own IT personnel who have also expertise in the field of systems development. Our current management information system (this includes the entire enrollment process – registrar, cashier, local offices involved) is being programmed mainly by two of our faculties. Surely, we had another type of enrollment process undergone just last summer (when the new system had just recently been simulated) and this semester. Well, it feels like we are actually having a series of different type of enrollment process every year! I know the university is actually finding and testing many sorts of system and that they are looking for the perfect match that would be implemented for the campus permanently, or at least for a longer period of time.

..more about this on the following thread... study study


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PostSubject: In source or outsource...? part 2   Fri Aug 28, 2009 9:23 pm

Regarding the issue, we in our Management Information System class are debating whether the university made the right decision to change from outsourcing the IS process to in-house. And as many as the key points I have mentioned, we were also having uncertainties as to which we should stand with. In-house or outsource? Which is better for the university?

Whatever the case is, it is still better to weigh things according to the situation and those involved with it. I have heard that the primary reason the school administration decided to cut the outsourcing service is cost. So the administration tapped the IT faculties inside the campus to save long-term costs. This posed an advantage both to the university and the staff as well. As stressed out by our class instructor (I agree with him), we have local personnel who are highly-skilled in the said field, so why not use them? That is also an additional income for them, and the university budget will not go outside the institution, but to its own workforce. Furthermore, it is of pride to realize that we actually have and are using a system developed by our own university family members. This surely makes us proud of our instructors who are not only proficient in sharing their field of expertise to class discussions but are actually applying their knowledge to a system we are currently using.

But as experts would say just choosing between outsourcing staff or in-housing does not necessarily mean straight success to the organization’s business. Until now we are analyzing which feels better – the previous system or the existing implementation?

My Stand

Having thought about the scenario of our university I am coming up to a position for which I think is better for the information system functions of the university. My evaluation is guided by these factors I have gathered from my research:

Cost
- In-house (or outsource) labor costs
- In-house (or outsource) equipment costs
- In-house (or outsource) ‘other’ costs
- In-house (or outsource) annual expenditure
Features and functionality
Efficiency of operations
Quality of service provided
Security of service provided
Reputation of vendor (in outsourcing) / staff (in-house)
Current technology

I don’t really know how big or small of the university budget will be sliced out to the labor cost of developing and/or maintaining the IS of the school. But I am sure that the major part incurred is the wages paid to the system developer. In the case of outsource service provider, the university doesn’t have to pay for benefit expenses, payroll taxes, and sick/leave/vacation allowances. But granted that the ones working for the system are present university staff, I think it is quite lesser than long-term expenses paid to outside company.

In terms of equipment, well, I should say that the university is not really that streamlined when we talk of hardware components. We have some computer units to use, some good ole servers and mainframe, but I don’t think it is more than enough. Anyway, the workmen’s computers are just those which they use in other transactions, the university did not invest in equipments needed to system development. (More about this on current technology issues) I’m just wondering if they thought of looking for some software and miscellaneous materials needed for it.

The ‘other’ expenses are perhaps in the form of monthly office rentals, employees’ training expense on software installed, fees paid to technical experts and maintenance operators, that is, on the side of outsource service provider. In the case of our university programmers, monthly office rental is not a problem, as well as training expense (our faculty and staff have experience and potential) and fees to maintenance operators (since we also have school operators assigned in computer maintenance).

The above factors can be summed up to total expenditures that we can calculate by long-term budget. Well, in this case, I cannot give you the exact amount to compare the costs of hiring the university personnel and outsourcing the service. Only the administration knows that. Hehe.

Features and functionality
The system’s performance level should be well taken care of in the sense that the personnel should keep an eye on the maintenance procedure of the ongoing processes. In the case of university’s in-source staff, they have timely access to the IS because they are existent workers of the campus. I guess this is better than outsourcing staff because our faculty have high priority on having immediate access to our school’s system. On this matter, they could easily check the functionalities of the current system and can easily modify its features if there be any urgency to do so.

Efficiency of operations
The reliability and efficiency of the system procedures are high on the organization’s list in that it requires effective communications. Having pointed out some outsource drawbacks regarding communication on both parties, and benefits of outsourcing more on the skills side, I can say that we could still maintain a good system even by in sourcing. Regarding the capability of staff we are not that behind, and communication gaps won’t be a problem since they are within reach.

Quality and security of service provided
We don’t need superb information system, we just need an efficient one adequate for the university’s needs. Well, that is, as for the moment. As soon as we address the needs of the university’s information system functions, there’s no reason in deterring the advancement of our IS be it in the interface or functionality side. In the long run, our IS staff will be able to maintain and improve further the quality of our IS. I should say that security will not be a major issue here since there is no need for confidential information to leak out of the university premise. Since service quality is essential and security is vital, the university has more control in in-house staff rather than outsourcing these services. Our developers are our own family. I’m pretty sure they can be trusted enough in their field.

Reputation of vendor/staff
This is something to be checked out especially when we give a critical task to the one who will do the project. When we outsource, we have to check the background of the outsource service provider, their skills and capabilities, relevant case studies and success stories, and the like. In the case of our in-house staff, their reputation is well-known in the university (and vice versa!). Like I’ve said, the personnel tapped by the administration are trained and have spent years in experience in their profession. We also have some co-faculties who could recommend them.

Current technology
Here, we are talking about the IS functions of the school in general and not only in the enrollment system development. I should say that the university should make investments in equipments necessary for the university’s business procedures. I have read that the relatively low rating of current technology factors results from two broad concepts: larger institutions have established technology standards and require new applications fit their standards, rather than considering new platforms for each new application; and, smaller institutions tend to make greater use of outsourcers, and therefore delegate the definition of the enabling technologies to those outsourcers. I must admit that the university is on its way to improving the technology we are using. I guess I should share these points in evaluating in-house or outsource decisions:
- Will a modern archive system architecture be easily integrated into an existing IT system?
- Will it sufficiently scale as the business grows?
- Does the IS solution sufficiently support the business policies of the institution?
- Does the technology assure long and reliable data life?

If I am to ask, I should say that we can keep in in-housing our IS staff as evident in the key points I have mentioned above. But I think we should consider outsourcing the equipments our university is using since initial costs as well as long-term maintenance operating cost is a primary factor of the university’s decision, and we can’t say that we could provide our necessary tools and equipments as soon as we urgently need it.

Regarding the question on whether in-housing or outsourcing services will really improve our university, it depends. But I’m quite sure that we have at least capable personnel potentials (the question now is the budget support of the university for the project) so we have less need to outsource staff services, yet we are fairly deficient in terms of material resources so outsourcing can be considered. The number of years that the equipment(s) will serve the company and its depreciation value will have to be added to the operational cost annually, and these should be included in evaluation.

References and resources which supported me in making this essay: study study study
Advantages and Disadvantages of Outsourcing
Sustainable Development Communications Network: In-house staff vs. outsourcing
Medical Transcription Outsourcing Cost Benefits Louisiana:
Outsourcing IT Development: Advantages and Disadvantages By Basil Tesler
Outsourcing: The Advantages And Disadvantages Of Outsourcing
In-house or Outsourced Image Archive Services: Plotting Position and Course Whitepaper by Dana Gould & Aaron McPherson October 2008
Wikipedia.com - Outsourcing
MS Encarta Dictionaries
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You can drop comments at my blog http://charmainespeaksup.blogspot.com/2009/08/in-house-vs-outsource-which-is-better.html lol! lol! lol!


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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Sat Aug 29, 2009 12:26 am

As a student, you were invited by the Dean of the Institute of Computing to attend a seminar-workshop on information systems planning with some of the faculty members. In one of the sessions, a discussion of outsourcing came up. You have been asked to present your evaluation about outsourcing the information systems functions of the school.

Required:

You are to take a position- outsource or in-source and justify your position. (3000words)
What is Outsourcing?

Outsourcing began in the early eighties when organizations started delegating their non-core functions to an external organization that was specialized in providing a particular service, function or product. In outsourcing, the external organization would take on the management of the outsourced function.

Most organizations choose outsourcing because outsourcing offers a lot of advantages. When organizations outsource to countries like India, they benefit from lower costs and high-quality services. Moreover organizations can concentrate more on core functions once they outsource their non-core functions. Outsourcing can also help organizations make better use of their resources, time and infrastructure.

In outsourcing, the outsourcer and the outsourcing partner have a greater relationship when compared to the relationship between a buyer and a seller. In outsourcing, the outsourcer trusts the outsourcing partner with vital information. Outsourcing is no longer confined to the outsourcing of IT services. Outsourcers in the US and UK now outsource financial services, engineering services, creative services, data entry services and much more.

Most organizations are opting to outsource because outsourcing enables organizations to access intellectual capital, focus on core competencies, shorten the delivery cycle time and reduce costs significantly. Organizations feel outsourcing is an effective business strategy to help improve their business.
What is Insourcing?

The opposite of outsourcing can be defined as insourcing. When an organization delegates its work to another entity, which is internal yet not a part of the organization, it is termed as insourcing. The internal entity will usually have a specialized team who will be proficient in the providing the required services. Organizations sometimes opt for insourcing because it enables them to maintain a better control of what they outsource. Insourcing has also come to be defined as transferring work from one organization to another organization which is located within the same country. Insourcing can also mean an organization building a new business centre or facility which would specialize in a particular service or product.

Organizations involved in production usually opt for insourcing in order to cut down the cost of labor and taxes amongst others. The trend towards insourcing has increased since the year 2006. Organizations who have been dissatisfied with outsourcing have moved towards insourcing. Some organizations feel that they can have better customer support and better control over the work outsourced by insourcing their work rather than outsourcing it. According to recent studies, there is more wok insourced than outsourced in the U.S and U.K. These countries are currently the largest outsourcers in the world. The U.S and U.K outsource and insource work equally.
What is best for your organization?

If your organization has a number of non-core processes which are taking plenty of time, effort and resources to perform in-house, it would be wise to outsource these non-core functions. Outsourcing in this case, would help you save on time, effort, manpower and would also aid you in making quicker deliveries to your customers.

If you require expertise services in areas which do not fall under your core competency, then outsourcing will be a good option as you can get access to expertise services. For reducing costs and making faster deliverables, outsourcing is again a good option.

If your work involves production, then it would be more ideal for your organization to opt for insourcing, as you can save on transportation costs and exercise a better control over your project.

It is not necessary to choose outsourcing over insourcing or vice versa. Your organization can outsource and insource at the same time. By outsourcing and insourcing simultaneously, you can have the best of what both offers and your business can get a competitive advantage!



The Benefits of Outsourcing

Do you want to maximize your revenue and minimize your expenses? Do you want to get access to specialized skills and services? Do you want to concentrate more on your core business? Do you want to save on money, time and infrastructure?

If your answer is yes to any or all of the above questions, you might be interested in outsourcing. Outsourcing has several benefits. Outsource and take advantage of the benefits of offshore outsourcing. Read the following benefits of outsourcing to find out more about how outsourcing can give your business a competitive advantage!
1. Take advantage of the cost-advantages!

Outsourcing to countries such as India can give you access to cost-effective services. The same services with the same level of quality are offered in India for a much lower cost! This cost-advantage has increased the number of services that are being offered to India. Services such as call center services, teleradiology, medical billing, etc can help you save up to 60% of your total costs when outsourced! Getting access to high-quality services at a cost-effective price is the biggest benefit that you can get while outsourcing. Outsource and reap the benefits of outsourcing.
2. See an increase in your business

Another benefit of outsourcing is seeing a big increase in your profits, productivity, level of quality, business value, business performance and much more. Outsourcing can help you see an increase in almost every aspect of your business. Outsource and see your organization experience an increase in every aspect with these benefits of outsourcing.
3. Save Big!

One of the benefits of outsourcing is that you can save on every aspect of your business and increase your profits. When you outsource, you can save on time, effort, infrastructure and manpower. Since you don't have to invest in infrastructure, you can also save on making unnecessary fixed investments. Outsourcing removes the burden of changing or maintaining infrastructure. You can also save on capital expenditure. Outsourcing can also help you save on training costs, because you do not have to invest in manpower. These savings will help bring about an increase in your revenue. Your organization can also save on investing in expensive software and technologies.
4. Get access to specialized services

By outsourcing you can get expert and skilled services. This benefit of outsourcing has been the key reason why several outsourcers opt for outsourcing. The function that you outsource may not be your core competency but you can find an outsourcing partner who is specialized in that particular business process. Your outsourcing partner will be able to provide more proficient services. This is yet another benefit of outsourcing, because if you perform all your business processes in-house, you will not be able to provide specialized and skilled services. Outsourcing can give you this advantage.

Outsource2india is an organization that offers a wide range of specialized business process outsourcing solutions to global clients. Outsourcing business processes to us has enabled clients to cross-leverage our skills and expertise across industry verticals and technologies to achieve greater efficiency and quality levels in the outsourced process.

At Outsource2india, we have dedicated teams that offer outsourced services across a range of services which include Call center, Data Entry Servicesand Engineering Services, Healthcare Services, Financial Services, Software Development, Research and Analysis Services, Photo Editing Services, Creative Services and Web-analytics Services.

Outsource specific processes to our expert teams and increase your ROI. Contact O2I here.
5. Concentrate more on your core business

One of the benefits of outsourcing is that your organization will be free to concentrate on your core business. By outsourcing all your non-core functions, your employees can be put to better use and you will be able to see a huge growth in your core business.
6. Make faster deliveries to customers

Another benefit of outsourcing is that you can make quicker deliveries to customers. Your outsourcing partner will be able to provide faster deliverables and you in turn will be able to make quick deliveries to your customer. Faster deliveries can also help you save on time.
7. Improved customer satisfaction

With timely deliveries and high-quality services you can impress your customers. Outsourcing can help you benefit from increased customer satisfaction and your customers will remain loyal to your organization.
8. Benefit from time zone advantages

Outsourcing to countries such as India has a time zone advantage. Your night will be India's day. With this advantage, your outsourcing partner can complete critical work and send it to you the next day. Thus, your work is continued by your outsourcing partner even after your employees go home. This enables the work to be completed much faster and gives your business a competitive advantage. This is one of the benefits of offshore outsourcing.
9. Increased efficiency

Another benefit of outsourcing is increased efficiency. Your non-core business functions will be performed efficiently by your outsourcing partner, while your core functions can be efficiently carried out in-house. Thereby you can achieve overall efficiency and see an increase in your profits.
10. Give your business a competitive edge!

Outsourcing can help your organization gain a competitive edge in the market. You can also get access to specialized services for different business processes and thereby provide your customers with best-of breed services. Such strategic outsourcing can give your business a competitive edge among your peers. The benefits of outsourcing can give your organization a cutting-edge in the worldwide market. Outsource and take advantage of the benefits of outsourcing.
11. Outsourcing countries also benefit from outsourcing

Countries such as U.S, U.K, Norway and Australia amongst others can benefit by outsourcing. The economy of these countries has increased tremendously after outsourcing. In the U.S, after the outsourcing boom, the economy has increased, jobs have increased and the wages of American workers have increased.




REFERENCE:
http://www.outsource2india.com/why_outsource/articles/benefit_outsourcing.asp




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alma cabase



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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Sat Aug 29, 2009 9:14 pm

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AlyssaRae Soriano



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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Sun Aug 30, 2009 3:01 am

I actually go for OUTSOURCING. Very Happy Reasons are, paying an IT personnel to maintain your website for example would be costly than keeping someone who would be in charge of your site in a contract manner. I mean, there would be a big difference. If you actually go for customization all the time, then you must go insource. But if your budget is limited, outsourcing would be a great deal.

So, what is outsourcing? Outsourcing is contracting with another company or person to do a particular function. Almost every organization outsources in some way. Typically, the function being outsourced is considered non-core to the business. An insurance company, for example, might outsource its janitorial and landscaping operations to firms that specialize in those types of work since they are not related to insurance or strategic to the business. The outside firms that are providing the outsourcing services are third-party providers, or as they are more commonly called, service providers.

Although outsourcing has been around as long as work specialization has existed, in recent history, companies began employing the outsourcing model to carry out narrow functions, such as payroll, billing and data entry. Those processes could be done more efficiently, and therefore more cost-effectively, by other companies with specialized tools and facilities and specially trained personnel.

Currently, outsourcing takes many forms. Organizations still hire service providers to handle distinct business processes, such as benefits management. But some organizations outsource whole operations. The most common forms are information technology outsourcing (ITO) and business process outsourcing (BPO).

Business process outsourcing encompasses call center outsourcing, human resources outsourcing (HRO), finance and accounting outsourcing, and claims processing outsourcing. These outsourcing deals involve multi-year contracts that can run into hundreds of millions of dollars. Frequently, the people performing the work internally for the client firm are transferred and become employees for the service provider. Dominant outsourcing service providers in the information technology outsourcing and business process outsourcing fields include IBM, EDS, CSC, HP, ACS, Accenture and Capgemini.

Some nimble companies that are short on time and money, such as start-up software publishers, apply multisourcing -- using both internal and service provider staff -- in order to speed up the time to launch. They hire a multitude of outsourcing service providers to handle almost all aspects of a new project, from product design, to software coding, to testing, to localization, and even to marketing and sales.

In all cases, outsourcing success depends on three factors: executive-level support in the client organization for the outsourcing mission; ample communication to affected employees; and the client's ability to manage its service providers. The outsourcing professionals in charge of the work on both the client and provider sides need a combination of skills in such areas as negotiation, communication, project management, the ability to understand the terms and conditions of the contracts and service level agreements (SLAs), and, above all, the willingness to be flexible as business needs change.

The challenges of outsourcing become especially acute when the work is being done in a different country (offshored), since that involves language, cultural and time zone differences.

RESEARCH & DEVELOPMENT
The competitive pressures on firms to bring out new products at an ever rapid pace to meet market needs are increasing. As such, the pressures on the R&D department are increasing. In order to alleviate the pressure, firms have to either increase R&D budgets or find ways to utilize the resources in a more productive way. There are situations when a firm may consider outsourcing some of its R&D work to a contract research organizations or universities. Reasons why a firm could consider outsourcing are:

• new product design does not work
• project time and cost overruns
• loss of key staff
• competitive response
• problems of quality/yield.

The key drivers for R&D outsourcing are emerging mass markets and availability of expertise in the field. In this context, the two most populous countries in the world, China and India, provide huge pools from which to find talent. Both countries produce over 200,000 engineers and science graduates each year. Moreover both countries are low cost sourcing countries. Other strategic drivers for outsourcing R&D are access to expertise and intellectual property, filling gaps in the capabilities of the R&D function, managing risk better, reducing the time to market, and focusing on the core competence or activities of the firm.


REASONS FOR OUTSOURCING
Organizations that outsource are seeking to realize benefits or address the following issues:

Cost savings. The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.

Focus on Core Business. Resources (for example investment, people, infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specialized IT services companies.

Cost restructuring. Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.

Improve quality. Achieve a step change in quality through contracting out the service with a new service level agreement.

Knowledge. Access to intellectual property and wider experience and knowledge.

Contract. Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.

Operational expertise. Access to operational best practice that would be too difficult or time consuming to develop in-house.

Access to talent. Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.

Capacity management. An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.

Catalyst for change. An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a Change agent in the process.

Enhance capacity for innovation. Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.

Reduce time to market. The acceleration of the development or production of a product through the additional capability brought by the supplier.

Commodification. The trend of standardizing business processes, IT Services and application services enabling businesses to intelligently buy at the right price. Allows a wide range of businesses access to services previously only available to large corporations.

Risk management. An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.

Venture Capital. Some countries match government funds venture capital with private venture capital for startups that start businesses in their country.

Tax Benefit. Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.

QUALITY RISKS OF OUTSOURCING
Quality Risk is the propensity for a product or service to be defective, due to operations-related issues. Quality risk in outsourcing is driven by a list of factors. One such factor is opportunism by suppliers due to misaligned incentives between buyer and supplier, information asymmetry, high asset specificity, or high supplier switching costs. Other factors contributing to quality risk in outsourcing are poor buyer-supplier communication, lack of supplier capabilities/resources/capacity, or buyer-supplier contract enforceability. Two main concepts must be considered when considering observability as it related to quality risks in outsourcing: the concepts of testability and criticality.

Quality fade is the deliberate and secretive reduction in the quality of labor in order to widen profit margins. The downward changes in human capital are subtle but progressive, and usually unnoticeable by the out sourcer/customer. The initial interview meets requirements, however, with subsequent support, more and more of the support team are replaced with novice or less experienced workers. India IT shops will continue to reduce the quality of human capital under the pressure of drying up labor supply and upward trend of salary, pushing the quality limits.

Such practices are hard to detect, as customers may just simply give up seeking help from the help desk. However, the overall customer satisfaction will be reduced greatly over time. Unless the company constantly conducts customer satisfaction surveys, they may eventually be caught in a surprise of customer churn, and when they find out the root cause, it could be too late. In such cases, it can be hard to dispute the legal contract with the India outsourcing company, as their staff are now trained in the process and the original staff made redundant. In the end, the company that outsources is worse off than before it outsourced its workforce to India.


PUBLIC OPINION
There is a strong public opinion regarding outsourcing (especially when combined with offshoring) that outsourcing damages a local labor market. Outsourcing is the transfer of the delivery of services which affects both jobs and individuals. It is difficult to dispute that outsourcing has a detrimental effect on individuals who face job disruption and employment insecurity; however, its supporters believe that outsourcing should bring down prices, providing greater economic benefit to all. There are legal protections in the European Union regulations called the Transfer of Undertakings (Protection of Employment). Labor laws in the United States are not as protective as those in the European Union. On June 26 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce commenting that the U.S. has outsourced too much and can no longer rely on consumer spending to drive demand.


LANGUAGE SKILLS
In the area of call centers end-user-experience is deemed to be of lower quality when a service is outsourced. This is exacerbated when outsourcing is combined with off-shoring to regions where the first language and culture are different. The questionable quality is particularly evident when call centers that service the public are outsourced and offshored.

The public generally find linguistic features such as accents, word use and phraseology different which may make call center agents difficult to understand. The visual clues that are present in face-to-face encounters are missing from the call center interactions and this also may lead to misunderstandings and difficulties.

In addition to language and accent differences, a lack of local social and geographic knowledge is often present, leading to misunderstandings or mis-communications.


SOCIAL RESPONSIBILITY
Outsourcing sends jobs to the lower-income areas where work is being outsourced to, which provides jobs in these areas and has a net equalizing effect on the overall distribution of wealth. Some argue that the outsourcing of jobs (particularly off-shore) exploits the lower paid workers. A contrary view is that more people are employed and benefit from paid work. Despite this argument, domestic workers displaced by such equalization are proportionately unable to outsource their own costs of housing, food and transportation.

On the issue of high-skilled labor, such as computer programming, some argue that it is unfair to both the local and off-shore programmers to outsource the work simply because the foreign pay rate is lower. On the other hand, one can argue that paying the higher-rate for local programmers is wasteful, or charity, or simply overpayment. If the end goal of buyers is to pay less for what they buy, and for sellers it is to get a higher price for what they sell, there is nothing automatically unethical about choosing the cheaper of two products, services, or employees.

Social responsibility is also reflected in the costs of benefits provided to workers. Companies outsourcing jobs effectively transfer the cost of retirement and medical benefits to the countries where the services are outsourced. This represents a significant reduction in total cost of labor for the outsourcing company. A side effect of this trend is the reduction in salaries and benefits at home in the occupations most directly impacted by outsourcing.

QUALIFICATIONS OF OUTSOURCERS
The outsourcer may replace staff with less qualified people or with people with different non-equivalent qualifications.

In the engineering discipline there has been a debate about the number of engineers being produced by the major economies of the United States, India and China. The argument centers around the definition of an engineering graduate and also disputed numbers. The closest comparable numbers of annual graduates of four-year degrees are United States (137,437) India (112,000) and China (351,537).

SOURCES:
http://www.sourcingmag.com/content/what_is_outsourcing.asp
http://en.wikipedia.org/wiki/Outsourcing Wink
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Ida Karla Duguran



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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Sun Aug 30, 2009 4:35 pm

Many institutions of higher education have been reluctant to outsource their IT functions for fear of losing control over a vital resource. This fear is even more pronounces when IT is an integral part of delivering a mission-critical product or service. In addition, colleges and universities go to great lengths to differentiate themselves from the commercial world by placing special emphasis on job security. Outsourcing is believed to undermine this principle.

Higher education may consider one or more forms of outsourcing IT operational services to deal with increasingly complex and time-sensitive demands. By considering the experiences of their peers and taking certain proactive steps, institutions can avoid common problems and ensure greater success when outsourcing IT functions.

In recent years, information systems have become increasingly crucial to the ability of an organization to compete effectively. However, the increasing importance of I/S has placed a strain on the ability of an organization to produce and manage information in a timely, relevant, and cost effective manner. Many organizations have begun to rely more heavily on external vendors to meet their I/S needs (outsourcing).

Relying on an external supplier for a resource may allow an organization to take advantage of economies of scale, thereby generating cost savings, but it also often means relinquishing some degree of control over that resource. Several factors must be considered by managers in order to make rational outsourcing decisions which do not adversely affect competitive strategy.

Over the last decade, the relationship between I/S and the competitive advantage of the firm has become an integral part of many organizations. While many believe that major gains in competitive advantage through I/S are increasingly difficult to achieve, the relationship between the two is still crucial to organizational survival. Surveys of I/S executives and general managers indicate that these managers believe that strategic planning and competitive advantage among the most important issues they face. Much of the literature in this area addresses the role of I/S in creating the competitive framework necessary to respond to opportunities rapidly and effectively. Little work addresses the issue of factors that may affect the ability of an organization to use I/S as a competitive weapon.

The following discussions will provide an assessment of the implications of the use of outsourcing with respect to the competitive advantage of an organization and will provide a framework within which outsourcing decisions may be made.

Despite the recognized importance of information systems as a competitive weapon, there is a gap “between strategic (I/S) planning and competitive strategy”. One reason for this gap is the relative lack of organizational knowledge about how to effectively utilize I/S as a strategic weapon.
However, even with better knowledge about strategic I/S, the capability to effectively use I/S meet to opportunities is still constrained by increasing demands and a shortage of I/S professionals. Backlogs of two to three years are not unusual in organizations today. There are too many demands and too few I/S professionals.

The need for information in strategic aspects of the firm places increased strain on the already overloaded information systems function. One response to the overload is the use of external vendors who are able to provide needed services in a timely, cost effective manner (outsourcing).

Organizations are spending more and more of their I/S budget on outside consultants both for basic functions and for more sophisticated applications. Outsourcing is projected to be a multi-billion worldwide industry by 1995, and includes activities ranging from facilities management and systems integration to hardware installation/maintenance and software development/support/training.

When an organization relies on an external entity to supply a critical resource, there may be a negative impact on competitive advantage. Organizations are beginning to see the detrimental effects on competitiveness caused by outsourcing the manufacturing function. If not properly managed, outsourcing the I/S function can pose an equally dangerous, although somewhat different, threat to competitive advantage. One study indicates that loss of control and competitive strategy are two reasons many organizations hesitate to use third party for business applications.
As suggested by Newman and Brock, whoever controls the “fabrication and flow” of information possesses a distinct advantage over the competition. “The goal of … (achieving competitive advantage) is to attempt to dominate the industry”. While industry domination may not always be the end result, I/S can serve as an important weapon in a firm’s competitive environment.

Forces of the Competitive Environment

Michael Porter has described five “forces” which combine to form the competitive environment. Porter’s description is broader than the traditional view of competition. While most people probably think of competitors as those businesses which sell a similar product and compete on a basis such as price or product differentiation, Porter includes forces such as suppliers and customers as competitors. “Competition in an industry is rooted in its underlying economic structure and goes well beyond the behavior of current competitors… The essence of formulating competitive strategy is relating a company to its environment.
A brief overview of Porter’s five forces is provided below.

Threat of Entry The threat of entry into an industry depends on the barriers to entry into that industry, such as economies of scale, capital requirements, switching costs, entrenched product differentiation (brand loyalties), and access to distribution channels. When the barriers to entry into an industry are high, the threat of entry is low and an existing industry player can compete more easily.

Intensity of Rivalry among Existing Competitors: The intensity of rivalry within an industry depends on the number of firms in the industry, on the balance of power among those firms, on the stability or growth of the industry market, and on the existence of barriers to exit from the industry.

Pressure from Substitute Products: Any industry can be vulnerable to competition from an industry that offers a product from which can perform the same function as its own product. The impact of substitute products is reflected by the industry’s overall elasticity of demand.
Bargaining Power of Buyers: A buyer group (customer) can be a significant influence in limiting the competitive advantage and overall financial return of a company or industry if the buyer group’s business constitutes a high percentage of the industry’s sales. Additionally, if the buyer group has “perfect” market information and low switching costs, the buyer group possesses similar influence.

Bargaining Power of Supplies: A supplier group can be a significant influence in limiting the competitive advantage and overall financial return of a company or industry.

Each of these five forces may affect the way in which an organization chooses to compete. There is also a general consensus in the literature that these forces relate to the use of I/S as a competitive weapon. For example, Newman and Brock outline a plan for creating an information system for competitive advantage based on Porter’s five basic forces. However, one force in particular becomes especially important when a firm considers outsourcing: the bargaining power of suppliers. If an outsourcer possesses an unequal amount of bargaining power in the outsourcer/client relationship, then the client organization may be limited in its ability to compete in its own marketplace.



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Ida Karla Duguran



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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Sun Aug 30, 2009 4:37 pm

[...continuation]

Because outsourcing is still evolving, there are a few proven examples of this situation arising. However, the possibility does not go unnoticed. For example, the Government Accounting Office (GAO) is currently investigating reports of reciprocal relationships between banks and their outsourcers. There are reports of outsourcers having members on the board of directors of client banks, as well as, purchasing stock from and making deposits into these client banks. This situation could give rise to unequal bargaining power between banks and their outsourcers. Therefore, the FDIC is reported to be considering regulations on outsourcing in order to “improve the soundness of the banking industry and the competitiveness of the computer outsourcing industry”. While these occurrences may not be widespread, evidence of unequal bargaining power does not occur outside of the banking industry. Porter indicates that there are several ways in which a situation of unequal bargaining power may arise. Five of these ways are discussed below.

Importance of Resource

A supplier group is powerful if its product is an important input to the buyer’s business. Many organizations can not operate without ready access to their systems. In such an organization, it is important that information be provided in a timely, relevant, and cost effective manner. Failure to provide this information may inhibit the capability of recognizing and responding to opportunities in the marketplace.

Note that some firms use I/S not to attain competitive advantage, but as more of an operational support tool. Many retail stores, for instance, have adopted point-of-sale technology, but they do not necessarily use the available capabilities to the fullest. Some stores may only use point-of-sale simply to generate sales and receipts. The information system in this case may not be as “important” to the company as many other information systems are.

Operation or development of an I/S internally does not always insure that the quality of information will be enhanced. However, getting control of a vital resource to an external vendor, if not properly managed, may result in diminished quality. For example, there is a possibility that services provided by an external vendor may fail to meet quality standards such as timely delivery. In addition, there is little precedence for who has the legal liability for poor quality. Although outsourcing contracts are not lifetime commitments, they usually extend over a two or three year period; a long time to incur poor service. In addition, even if there is no substantial penalty for breaking the contract, premature termination results in costs to the client in terms of either finding another outsourcer or bringing the outsourced activities back in-house.

Outsourcing contracts are binding commitments, and if clients are not careful, outsourcing can result in greater costs and lower quality. “While the outsourcing field is still in infancy, experts say the deck is stacked against you. Unless the outsourcer is blatantly negligent, abuses information or has negotiated a particular liability in writing, there is very little for which outsourcing vendors can be held liable”. Thus, if the outsourced activity is organization-critical, and the supplier (outsourcer) mismanages the activity, the client’s business may suffer and there may be little retribution for the client. If a system is especially important to an organization, giving a high degree of control over that system to another party is risky.

Switching Costs

Unequal bargaining power may arise if a supplier has built-up switching costs. When a firm agrees to let an external organization develop or operate a business-critical information system, these characteristics may exist. There may be a substantial costs associated with switching a systems supplier. After significant time and pesos/dollars have been invested in one supplier system, it is very difficult and expensive for an organization to basically, “start over” with another supplier. Additionally, an organization may be somewhat “tied” to one supplier because of existing equipment or software, or because of organizational expertise with a particular system.

One company was recently penalized for breaking an outsourcing contract when the company moved from mainframes to client/server systems and the outsourcer could not support the new/client server architecture. In this case, the client chose to switch, but the costs were substantial. However, remaining with the outsourcer would have inhibited the firm’s ability to pursue a newer, perhaps more cost effective platform. If an organization’s users particularly comfortable with a particular operating system, environment, or application, then the users will certainly resist switching to another system – even if the other system is better.

Competition Among Outsourcers

A supplier may be powerful if the supplier group is dominated by a few companies and is more concentrated than the industry itself. When you purchase a system built on proprietary technology from a supplier, for instance, there may be absolutely no competition for that supplier for subsequent system purchases and changes. If your purchased system utilizes the supplier’s special-purpose terminals, for instance, you may have no other source from which to purchase additional terminals. Mainframe computing users experience this situation far more frequently than do microcomputer users, who generally purchase much more “open” systems.

Importance of the Client

A supplier is powerful if the firm in not an important customer of the supplier. If the firm is one of many customers, and in particular, if the firm is one of the smaller customers, the outsourcer will be less likely to respond to the firm’s individual needs and will possess greater bargaining power. Additionally, outsourcing is a secondary business to many firms and may thus be seen by them as less important than their primary business. In most outsourcing systems cases, the system and contract are large, and the business is in fact important to the outsourcer, thereby reducing the power that the outsourcer has in the relationship. Nevertheless, every supplier has some customers who are more important than others, and if you are a smaller, less important customer, then bargaining power is seriously reduced. Such an “insignificant” customer may have trouble getting prompt service or required changes to a system.

Threat of Vertical Integration

A supplier is powerful if it poses a credible threat of forward integration. Although there are very few cases of this outcome to date, there is always the danger that the outsourcing firm, having learned a great deal about the firm’s business through its contact with the firm’s information systems, will eventually enter the same business. When IBM contracted with Microsoft to write the original MSDOS, they certainly could not have foreseen the extent to which Microsoft would later extend their product offerings in both software and hardware. Microsoft is now a threat to enter just about any market, and has significant power in dealing with virtually any other company.


Outsourcing has become a big business that is expected to rapidly expand for the next several years. Of properly managed, outsourcing can be used to enhance an organization’s ability to use I/S in order to compete more effectively. However, before deciding to outsource, one issue firms should consider is the potential effect on the firm’s competitive position if outsourcing enhances the power of the supplier are (1) the importance of the outsourced activities to the client firm; (2) the cost associated with switching to another outsourcer either at the end of or during the current contract; (3) the extent of competition among relevant outsourcers; (4) the importance of the client firm to the outsourcer; and (5) the potential for the outsourcer to enter the client firm’s business through vertical integration. Any one of these factors could counteract the benefits of outsourcing and, in worse case scenario, could negatively affect the client firm’s business.

Outsourcing decisions must be made with care regardless of whether the outsourced activities are basic functions such as hardware maintenance or are critical to the firm’s strategic mission. However, firms should be especially careful if they decide to outsource activities related to their competitive position. Otherwise, they could encounter a variety of problems ranging from diminished quality to finding themselves actually competing with their outsourcer for business.




Reference:
http://jitm.ubalt.edu/IV-2/article4.pdf

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vanessa may caneda



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PostSubject: outsourcing..   Sun Aug 30, 2009 4:43 pm

Information is the lifeblood of any organization. Damaged or lost data can cause disruptions in normal business activities leading to financial losses and lawsuits. Information systems, which comprise hardware, software, data, applications, communication and people, help an organization to better manage and secure its critical corporate, customer and employee data. Information systems also improve integration and work processes.

The role of information system in an organization is to monitor and document the operations of systems, which are called target systems. An information system owes its existence to the target system. For example, production activities would be the target system for a production scheduling information system; human resources would be the target system of a human resource information system. It could be that every reactive system may have a subsystem that can be considered as an information system whose objective is to monitor and control such a system. The main functions of an information system may be input, processing, output, storage and control.

Outsourcing vs. Insourcing:

Outsourcing began in the early eighties when organizations started delegating their non-core functions to an external organization that was specialized in providing a particular service, function or product. In outsourcing, the external organization would take on the management of the outsourced function.

Most organizations choose outsourcing because outsourcing offers a lot of advantages. When organizations outsource to countries like India, they benefit from lower costs and high-quality services. Moreover organizations can concentrate more on core functions once they outsource their non-core functions. Outsourcing can also help organizations make better use of their resources, time and infrastructure.

In outsourcing, the outsourcer and the outsourcing partner have a greater relationship when compared to the relationship between a buyer and a seller. In outsourcing, the outsourcer trusts the outsourcing partner with vital information. Outsourcing is no longer confined to the outsourcing of IT services. Most organizations are opting to outsource because outsourcing enables organizations to access intellectual capital, focus on core competencies, shorten the delivery cycle time and reduce costs significantly. Organizations feel outsourcing is an effective business strategy to help improve their business.

The opposite of outsourcing can be defined as Insourcing. When an organization delegates its work to another entity, which is internal yet not a part of the organization, it is termed as insourcing. The internal entity will usually have a specialized team who will be proficient in the providing the required services. Organizations sometimes opt for insourcing because it enables them to maintain a better control of what they outsource. Insourcing has also come to be defined as transferring work from one organization to another organization which is located within the same country. Insourcing can also mean an organization building a new business centre or facility which would specialize in a particular service or product.

Organizations involved in production usually opt for insourcing in order to cut down the cost of labor and taxes amongst others. Organizations who have been dissatisfied with outsourcing have moved towards insourcing. Some organizations feel that they can have better customer support and better control over the work outsourced by insourcing their work rather than outsourcing it. According to recent studies, there is more wok insourced than outsourced in the U.S and U.K. These countries are currently the largest outsourcers in the world. The U.S and U.K outsource and insource work equally.

If an organization has a number of non-core processes which are taking plenty of time, effort and resources to perform in-house, it would be wise to outsource these non-core functions. Outsourcing in this case, would help save on time, effort, and manpower and would also be aid in making quicker deliveries to customers. For reducing costs and making faster deliverables, outsourcing is again a good option.

If the work involves production, then it would be more ideal for the organization opt for insourcing, as it can save on transportation costs and exercise a better control over your project.

If given a chance to point out my opinion regarding outsourcing or insourcing in our university,I may choose to have it insource. We all know that the university is a public institution. Money is kinda a big issue when it comes to some implementations. Since outsourcing cost much, it would be a lot better if the university had an insource system since it lessens cost. . The university has good programmers that can do all the systems needed by the university. Why not give them the responsibility to do such system that definitely helps the university. They are competent enough and thus have enough knowledge when it comes in making and maintaining the Information Systems. They are definitely familiar with the flow of the system they come up with. So when problem arise, they can easily solve it since they are the ones who made it. They can always do better and develop their ideas. We all know that in outsourcing the time the system’s down, security and data integrity is then lost. Since the one using that system doesn’t have the knowledge to solve the problem, then it’s a hassle on their part because they cannot solve it alone. With in sourcing of course they surely deal with the problems easily and can secure the data thoroughly.


Reference:
http://www.outsource2india.com/why_india/articles/outsourcing-versus-insourcing.asp



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PostSubject: MIS Assignment # 8   Mon Aug 31, 2009 3:02 am

bounce bounce As a student I may not know the real meaning of Out-source position and In-source position. But as I surf the net I found out the terms, advantages and disadvantages of this matter. Let me first discuss my chosen position which stands for Out-source. bounce bounce


There are many arguing that outsourcing jobs to other countries is taking jobs away from people of this country. This is a major concern to most; however, this is not the topic most under debate in most organizations today. In just about every major company, upper level management is meeting on how to increase the value of there company. Outsourcing is the topic under debate. Top executives are researching this topic and whether they should make (in-house) or buy (outsource). Let us look at the different types of outsourcing. Also , let examine the problems so many companies have with this decision and look at a strategic sourcing model that can aide them in making this decision.

Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources. Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labour. Out sourcing in the information technology field has two meanings. One is to commission the development of an application to another organization, usually a company that specializes in the development of this type of application. The other is to hire the services of another company to manage all or parts of the services that otherwise would be rendered by an IT unit of the organization. The latter concept might not include development of new applications. Outsourcing also allows companies to focus on other business issues while having the details taken care of by outside experts.


Overview
Outsourcing involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider. The client organization and the supplier enter into a contractual agreement that defines the transferred services. Under the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client agrees to procure the services from the supplier for the term of the contract. Business segments typically outsourced include information technology, human resources, facilities, real estate management, and accounting. Many companies also outsource customer support and call center functions like telemarketing, CAD drafting, customer service, market research, manufacturing, designing, web development, print-to-mail, content writing, ghostwriting and engineering. Offshoring is the type of outsourcing in which the buyer organization belongs to another country.
Outsourcing and offshoring are used interchangeably in public discourse despite important technical differences. Outsourcing involves contracting with a supplier, which may or may not involve some degree of offshoring. Offshoring is the transfer of an organizational function to another country, regardless of whether the work is outsourced or stays within the same corporation/company.
Multisourcing refers to large outsourcing agreements (predominantly IT). Multisourcing is a framework to enable different parts of the client business to be sourced from different suppliers. This requires a governance model that communicates strategy, clearly defines responsibility and has end-to-end integration.
Activities for outsourcing
Research & Development
The competitive pressures on firms to bring out new products at an ever rapid pace to meet market needs are increasing. As such, the pressures on the R&D department are increasing. In order to alleviate the pressure, firms have to either increase R&D budgets or find ways to utilize the resources in a more productive way. There are situations when a firm may consider outsourcing some of its R&D work to a contract research organizations or universities.

Reasons why a firm could consider outsourcing are:
• new product design does not work
• project time and cost overruns
• loss of key staff
• competitive response
• problems of quality/yield.

The key drivers for R&D outsourcing are emerging mass markets and availability of expertise in the field. In this context, the two most populous countries in the world, China and India, provide huge pools from which to find talent. Both countries produce over 200,000 engineers and science graduates each year. Moreover both countries are low cost sourcing countries. Other strategic drivers for outsourcing R&D are access to expertise and intellectual property, filling gaps in the capabilities of the R&D function, managing risk better, reducing the time to market, and focusing on the core competence or activities of the firm.

Reasons for outsourcing
Organizations that outsource are seeking to realize benefits or address the following issues:
• Cost savings. The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.
• Focus on Core Business. Resources (for example investment, people, and infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specilaised IT services companies.
• Cost restructuring. Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.
• Improve quality. Achieve a step change in quality through contracting out the service with a new service level agreement.
• Knowledge. Access to intellectual property and wider experience and knowledge.
• Contract. Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.
• Operational expertise. Access to operational best practice that would be too difficult or time consuming to develop in-house.
• Access to talent. Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.
• Capacity management. An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.
• Catalyst for change. An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a Change agent in the process.
• Enhance capacity for innovation. Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.
• Reduce time to market. The acceleration of the development or production of a product through the additional capability brought by the supplier.
• Commodification. The trend of standardizing business processes, IT Services and application services enabling businesses to intelligently buy at the right price. Allows a wide range of businesses access to services previously only available to large corporations.
• Risk management. An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.
• Venture Capital. Some countries match government funds venture capital with private venture capital for startups that start businesses in their country.
• Tax Benefit. Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.

Criticisms of outsourcing

Quality Risks
Quality Risk is the propensity for a product or service to be defective, due to operations-related issues. Quality risk in outsourcing is driven by a list of factors. One such factor is opportunism by suppliers due to misaligned incentives between buyer and supplier, information asymmetry, high asset specificity, or high supplier switching costs. Other factors contributing to quality risk in outsourcing are poor buyer-supplier communication, lack of supplier capabilities/resources/capacity, or buyer-supplier contract enforceability. Two main concepts must be considered when considering observability as it related to quality risks in outsourcing: the concepts of testability and criticality.
Quality fade is the deliberate and secretive reduction in the quality of labor in order to widen profit margins. The downward changes in human capital are subtle but progressive, and usually unnoticeable by the out sourcer/customer. The initial interview meets requirements, however, with subsequent support, more and more of the support team are replaced with novice or less experienced workers. India IT shops will continue to reduce the quality of human capital, under the pressure of drying up labor supply and upward trend of salary, pushing the quality limits. Such practices are hard to detect, as customers may just simply give up seeking help from the help desk. However, the overall customer satisfaction will be reduced greatly over time. Unless the company constantly conducts customer satisfaction surveys, they may eventually be caught in a surprise of customer churn, and when they find out the root cause, it could be too late. In such cases, it can be hard to dispute the legal contract with the India outsourcing company, as their staff are now trained in the process and the original staff made redundant. In the end, the company that outsources is worse off than before it outsourced its workforce to India.

Public opinion
There is a strong public opinion regarding outsourcing (especially when combined with offshoring) that outsourcing damages a local labor market. Outsourcing is the transfer of the delivery of services which affects both jobs and individuals. It is difficult to dispute that outsourcing has a detrimental effect on individuals who face job disruption and employment insecurity; however, its supporters believe that outsourcing should bring down prices, providing greater economic benefit to all. There are legal protections in the European Union regulations called the Transfer of Undertakings (Protection of Employment). Labor laws in the United States are not as protective as those in the European Union. On June 26 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce commenting that the U.S. has outsourced too much and can no longer rely on consumer spending to drive demand.

Language skills
In the area of call centers end-user-experience is deemed to be of lower quality when a service is outsourced. This is exacerbated when outsourcing is combined with off-shoring to regions where the first language and culture are different. The questionable quality is particularly evident when call centers that service the public are outsourced and offshored.
The public generally find linguistic features such as accents; word use and phraseology different which may make call center agents difficult to understand. The visual clues that are present in face-to-face encounters are missing from the call center interactions and this also may lead to misunderstandings and difficulties.
In addition to language and accent differences, a lack of local social and geographic knowledge is often present, leading to misunderstandings or mis-communications.
Social responsibility

Outsourcing sends jobs to the lower-income areas where work is being outsourced to, which provides jobs in these areas and has a net equalizing effect on the overall distribution of wealth. Some argue that the outsourcing of jobs (particularly off-shore) exploits the lower paid workers. A contrary view is that more people are employed and benefit from paid work. Despite this argument, domestic workers displaced by such equalization are proportionately unable to outsource their own costs of housing, food and transportation.
On the issue of high-skilled labor, such as computer programming, some argue that it is unfair to both the local and off-shore programmers to outsource the work simply because the foreign pay rate is lower. On the other hand, one can argue that paying the higher-rate for local programmers is wasteful, or charity, or simply overpayment. If the end goal of buyers is to pay less for what they buy, and for sellers it is to get a higher price for what they sell, there is nothing automatically unethical about choosing the cheaper of two products, services, or employees.
Social responsibility is also reflected in the costs of benefits provided to workers. Companies outsourcing jobs effectively transfer the cost of retirement and medical benefits to the countries where the services are outsourced. This represents a significant reduction in total cost of labor for the outsourcing company. A side effect of this trend is the reduction in salaries and benefits at home in the occupations most directly impacted by outsourcing.

Quality of service
Quality of service is measured through a service level agreement (SLA) in the outsourcing contract. In poorly defined contracts there is no measure of quality or SLA defined. Even when an SLA exists it may not be to the same level as previously enjoyed. This may be due to the process of implementing proper objective measurement and reporting which is being done for the first time. It may also be lower quality through design to match the lower price.
There are a number of stakeholders who are affected and there is no single view of quality. The CEO may view the lower quality acceptable to meet the business needs at the right price. The retained management team may view quality as slipping compared to what they previously achieved. The end consumer of the service may also receive a change in service that is within agreed SLAs but is still perceived as inadequate. The supplier may view quality in purely meeting the defined SLAs regardless of perception or ability to do better.
Quality in terms of end-user-experience is best measured through customer satisfaction questionnaires which are professionally designed to capture an unbiased view of quality. Surveys can be one of research. This allows quality to be tracked over time and also for corrective action to be identified and taken.




Source: http://en.wikipedia.org/wiki/Outsourcing#Overview



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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Mon Aug 31, 2009 6:01 am

(1st Post)

As a student, you were invited by the Dean of the Institute of Computing to attend a seminar-workshop on information systems planning with some of the faculty members. In one of the sessions, a discussion of outsourcing came up. You have been asked to present your evaluation about outsourcing the information systems functions of the school.

Required:

You are to take a position- outsource or in-source and justify your position. (3000words)
Given a chance to be invited by the Dean of the Institute of Computing to attend a seminar-workshop on information systems planning with some of the faculty members, I will present an evaluation about Outsourcing. I will discuss to them the benefits about outsourcing, the advantages and disadvantages.

Lets identify first the outsourcing and in sourcing.

Outsourcing vs. In-sourcing

Outsourcing - refers to a company that contract with another company to provide services that might otherwise be performed by in-house employees. Many large companies now outsource jobs such as call center services, e-mail services, and payroll. These jobs are handled by separate companies that specialize in each service, and are often located overseas.

Insourcing - is a business practice in which work that would otherwise have been contracted out is performed in house.
Insourcing often involves bringing in specialists to fill temporary needs or training existing personnel to perform tasks that would otherwise have been outsourced. An example is the use of in-house engineers to write technical manuals for equipment they have designed, rather than sending the work to an outside technical writing firm. In this example, the engineers might have to take technical writing courses at a local college, university, or trade school before being able to complete the task successfully. Other challenges of insourcing include the possible purchase of additional hardware and/or software that is scalable and energy-efficient enough to deliver an adequate return on investment (ROI).
Insourcing can be viewed as outsourcing as seen from the opposite side. For example, a company based in Japan might open a plant in the United States for the purpose of employing American workers to manufacture Japanese products. From the Japanese perspective this is outsourcing, but from the American perspective it is insourcing. Nissan, a Japanese automobile manufacturer, has in fact done this.


Why Outsourcing?.....


Outsourcing in general can be defined as passing of service provision or production to another internal or external party. The chief reason of outsourcing is to reduce capital expenditure over a business process. Also management gets more time to concentrate over core competencies. This also reduces the dependency upon internal resources and increases the flexibility to meet the changing business and commercial conditions.
Outsourcing allows companies to focus on other business issues while having the details taken care of by outside experts. This means that a large amount of resources and attention, which might fall on the shoulders of management professionals, can be used for more important, broader issues within the company. The specialized company that handles the outsourced work is often streamlined, and often has world-class capabilities and access to new technology that a company couldn't afford to buy on their own. Plus, if a company is looking to expand, outsourcing is a cost-effective way to start building foundations in other countries. Outsourcing is an arrangement in which one company provides services for another company that could also be or usually have been provided in-house. Outsourcing is a trend that is becoming more common in information technology and other industries for services that have usually been regarded as intrinsic to managing a business. In some cases, the entire information management of a company is outsourced, including planning and business analysis as well as the installation, management, and servicing of the network and workstations. Outsourcing can range from the large contract in which a company like IBM manages IT services for a company like Xerox to the practice of hiring contractors and temporary office workers on an individual basis.
There are some disadvantages to outsourcing as well. One of these is that outsourcing often eliminates direct communication between a company and its clients. This prevents a company from building solid relationships with their customers, and often leads to dissatisfaction on one or both sides. There is also the danger of not being able to control some aspects of the company, as outsourcing may lead to delayed communications and project implementation. Any sensitive information is more vulnerable, and a company may become very dependent upon it’s outsource providers, which could lead to problems should the outsource provider back out on their contract suddenly.
While outsourcing may prove highly beneficial for many companies, it also has many drawbacks. It is important that each individual company accurately assess their needs to determine if outsourcing is a viable option.
There are many reasons that companies outsource various jobs, but the most prominent advantage seems to be the fact that it often saves money. Many of the companies that provide outsourcing services are able to do the work for considerably less money, as they don't have to provide benefits to their workers and have fewer overhead expenses to worry about.
In this journal, How Outsourced IT Provided Wireless for the Citizens Cut the Crime Rate, and Helped Minneapolis during a Crisis. This explains the relationship's goal was to make IT valuable to the city's agencies and voters. The City of Minneapolis wanted to outsource its IT infrastructure, which eventually included management of its security cameras and 911 applications; everything was past end of life. The city also needed to build a tier-3 data center.
Only a limited number of suppliers responded to the city's original RFP because the city council required the supplier to hire up to 20 of its staff and locate the data center in Minnesota. "Those requirements reduced the number of finalists to two suppliers that could provide the service," says Willenbring.
Outsourcing in general can be defined as passing of service provision or production to another internal or external party. The chief reason of outsourcing is to reduce capital expenditure over a business process. Also management gets more time to concentrate over core competencies. This also reduces the dependency upon internal resources and increases the flexibility to meet the changing business and commercial conditions.
Lessons from the Outsourcing Journal:
• Technology can improve safety and the quality of life in a community. Suppliers become deeply involved in these types of outsourcing relationships because they see the palpable results and take pride in their work.
• Investing in futuristic IT infrastructure helps cities deal with unexpected disasters. Having an outsourcing supplier there to help contributes to a successful intervention.
• Second-generation outsourcing contracts often attack strategic projects after the first generation tackled the tactical issues.




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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Mon Aug 31, 2009 6:03 am

(2nd post) continuation...

Here are other advantages of outsourcing that go beyond money. Here are the top seven advantages of outsourcing.

1. Focus On Core Activities
In rapid growth periods, the back-office operations of a company will expand also. This expansion may start to consume resources (human and financial) at the expense of the core activities that have made your company successful. Outsourcing those activities will allow refocusing on those business activities that are important without sacrificing quality or service in the back-office.
Example: A company lands a large contract that will significantly increase the volume of purchasing in a very short period of time; Outsource purchasing.

2. Cost And Efficiency Savings
Back-office functions that are complicated in nature, but the size of your company is preventing you from performing it at a consistent and reasonable cost, is another advantage of outsourcing. Economies of scale save money when unit costs go down as volumes increase. External service providers can achieve economies of scale unavailable to individual firms when they combine the volumes of multiple companies.
In manufacturing, for example, an external vendor may have a shop that specializes in a certain type of machining. The machinery represents a significant capital investment. If larger machines are more efficient, and if they can be used to produce any sort of parts for any customer, then this vendor may very well produce parts at a lower cost than a firm could by setting up such a shop internally.
Economies of scale are not limited to physical processes. Other precious assets -- including money, relationships, and people -- may be shared.
The pharmaceuticals industry can be used to illustrate economies of scale in relationships. Clinical trials of experimental drugs require just the right patients -- healthy in most all respects but the one indication being treated, and willing to submit themselves to experimentation. It takes a significant investment of time and money to develop relationships with the hospitals and clinicians (and the triage nurses in their emergency rooms) that supply patients for the trials.
Clinical trials also require just the right medical investigators -- doctors and medical researchers who are well respected in their industries. Again, it takes size to attract the best investigators. The most sought-after investigators look for organizations that can supply them with interesting and publishable research projects and with support services (such as data collection and well-managed processes) that make their jobs easier and their results more reliable.
And so a lucrative outsourcing industry has evolved to manage clinical trials of experimental drugs for pharmaceutical companies. [The author thanks Patricia Seymour, Covance Biotechnology Services, Research Triangle Park, North Carolina, for this case study.]

To be specific, there are three conditions that must be met before outsourcing saves money:
1. Economies of scale must exist. That is, there must be some economic advantage to larger size or greater numbers before outsourcing can pay off; for example, unit costs must drop as volumes increase.
2. The economies must be accessible across corporate boundaries. That is, savings only occur if outsourcers can combine the volumes of multiple clients.
For example, it's easy for many companies to share the huge fixed costs of a telecommunications infrastructure owned by long-distance carriers. Laying one's own fiber or leasing a private satellite channel is unlikely to be economic, so outsourcing is an obvious choice.
However, outsourcing an IT computer center may not work as well, since hardware may not offer significant economies of scale and many software licenses are corporation-specific.
3. The savings must be sufficient to outweigh the additional cost of paying other shareholders a profit.
Some executives have said that at least a 20% savings (after vendor profit margins) is necessary to compensate the firm for the legal costs and the risks of long-term dependence on people you can’t control.


Example: A small doctor’s office that wants to accept a variety of insurance plans. One part-time person could not keep up with all the different providers and rules. Outsource to a firm specializing in medical billing.
3. Reduced Overhead
Overhead costs of performing a particular back-office function are extremely high. Consider outsourcing those functions which can be moved easily.
Example: Growth has resulted in an increased need for office space. The current location is very expensive and there is no room to expand. Outsource some simple operations in order to reduce the need for office space. For example, outbound telemarketing or data entry.

4. Operational Control
Operations whose costs are running out of control must be considered for outsourcing. Departments that may have evolved over time into uncontrolled and poorly managed areas are prime motivators for outsourcing. In addition, an outsourcing company can bring better management skills to your company than what would otherwise be available.
Example: An information technology department that has too many projects, not enough people and a budget that far exceeds their contribution to the organization. A contracted outsourcing agreement will force management to prioritize their requests and bring control back to that area.

5. Staffing Flexibility
Outsourcing will allow operations that have seasonal or cyclical demands to bring in additional resources when you need them and release them when you’re done.
Example: An accounting department that is short-handed during tax season and auditing periods. Outsourcing these functions can provide the additional resources for a fixed period of time at a consistent cost.

6. Continuity & Risk Management
Periods of high employee turnover will add uncertainty and inconsistency to the operations. Outsourcing will provided a level of continuity to the company while reducing the risk that a substandard level of operation would bring to the company. Internal staff has a history with the firm that provides them with a better understanding of clients' businesses, strategies, people, cultures and politics. And with the expectation of continuity, people know they'll be around to deal with the consequences of their actions. All else being equal, this results in improved partnerships, which pay off in both greater client satisfaction and improved strategic alignment.
Example: The human resource manager is on an extended medical leave and the two administrative assistants leave for new jobs in a very short period of time. Outsourcing the human resource function would reduce the risk and allow the company to keep operating.

7. Develop Internal Staff
A large project needs to be undertaken that requires skills that your staff does not possess. On-site outsourcing of the project will bring people with the skills you need into your company. Your people can work alongside of them to acquire the new skill set.

Well-managed outsourcing can enhance the development of employees. Two strategies can accomplish this:
1. Contractors can be used to off-load less interesting "commodity" or end-of-life work, or to handle peak loads. This leaves staff free to pursue new, developmental opportunities.
On the other hand, contractors should never be used to perform new, growth-oriented activities while internal staff is left with obsolescent work. This would deny staff learning opportunities, while building dependence on the vendor. Perhaps worse, it sends a message to staff that the company is not willing to invest in their professional growth.
2. Consultants and vendors can be used to bring in new ideas and to train internal staff.
It might be useful to distinguish two terms: External "consultants" transfer their skills and methods to improve employees' effectiveness; they teach staff, often while working together on real projects. Consultants may be used by anyone whenever justifiable, since the benefits are lasting.
There are many cases that meet these four criteria where outsourcing pays off. But each case must be examined carefully to make sure the fundamentals are there. Remember: Paying other shareholders a profit margin makes outsourcing inherently more expensive. It's only worthwhile if these other benefits compensate the firm for its added costs.
Example: A company needs to embark on a replacement/upgrade project on a variety of custom built equipment. Your engineers do not have the skills required to design new and upgraded equipment. Outsourcing this project and requiring the outsourced engineers to work on-site will allow your engineers to acquire a new skill set.

If the outsourcing disadvantages outweigh the advantages of outsourcing, then you should avoid outsourcing those operations.
Disadvantages of Outsourcing
• Lose of control
• Quality problems
• Slow response time
• Can't understand foreign accents
• >Slow resolution times
• Can't produce desired results
• Reduced sales
• Irritated customers
• >Irritated employees, unions, people within community

1. Loss Of Managerial Control

Whether you sign a contract to have another company perform the function of an entire department or single task, you are turning the management and control of that function over to another company. True, you will have a contract, but the managerial control will belong to another company. Your outsourcing company will not be driven by the same standards and mission that drives your company. They will be driven to make a profit from the services that they are providing to you and other businesses like yours.


2. Hidden Costs
You will sign a contract with the outsourcing company that will cover the details of the service that they will be providing. Any thing not covered in the contract will be the basis for you to pay additional charges. Additionally, you will experience legal fees to retain a lawyer to review the contacts you will sign. Remember, this is the outsourcing company's business. They have done this before and they are the ones that write the contract. Therefore, you will be at a disadvantage when negotiations start.
3. Threat to Security and Confidentiality
The life-blood of any business is the information that keeps it running. If you have payroll, medical records or any other confidential information that will be transmitted to the outsourcing company, there is a risk that the confidentiality may be compromised. If the outsourced function involves sharing proprietary company data or knowledge (e.g. product drawings, formulas, etc.), this must be taken into account. Evaluate the outsourcing company carefully to make sure your data is protected and the contract has a penalty clause if an incident occurs.
4. Quality Problems
The outsourcing company will be motivated by profit. Since the contract will fix the price, the only way for them to increase profit will be to decrease expenses. As long as they meet the conditions of the contract, you will pay. In addition, you will lose the ability to rapidly respond to changes in the business environment. The contract will be very specific and you will pay extra for changes.

5. Tied to the Financial Well-Being of Another Company
Since you will be turning over part of the operations of your business to another company, you will now be tied to the financial well-being of that company. It wouldn't be the first time that an outsourcing company could go bankrupt and leave you holding-the-bag.

6. Bad Publicity and Ill-Will
The word "outsourcing" brings to mind different things to different people. If you live in a community that has an outsourcing company and they employ your friends and neighbors, outsourcing is good. If your friends and neighbors lost their jobs because they were shipped across the state, across the country or across the world, outsourcing will bring bad publicity. If you outsource part of your operations, morale may suffer in the remaining work force.
Another disadvantage is that outsourcing can also prove to be a threat to the security and confidentiality of issues of a company. If your company is outsourcing business process such as payroll, confidential information such as salary will be known to the outsourcing service provider. Therefore one must be very careful in choosing which business process to outsource and which one not.
Outsourcing may also result into the possible loss of flexibility in reacting to changing business conditions, lack of internal and external customer focus and sharing cost savings. Loss of internally generated talent is yet another problem associated with the outsourcing as it may hamper the growth of an employee by depriving him from the experience he would have gained by handling the business issue himself then by passing it over to some other external party.
Thus before a company decides to outsource its business process, it must examine all the factors carefully. It may not happen that outsourcing becomes a reason for company to regret later.



http://www.wisegeek.com/what-is-outsourcing.htm
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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Mon Aug 31, 2009 1:04 pm

Insource or Outsource
1/3

OUTSOURCING
Outsourcing literally means getting source from outside. The term is referring to sub-contracting of a set of functions or processes by one organization or company to another, or to a group of people. The said organization is often in another location, or another country.

Outsourcing is an arrangement in which one company provides services for another company that could also be or usually have been provided in-house. Outsourcing is a trend that is becoming more common in information technology and other industries for services that have usually been regarded as intrinsic to managing a business. In some cases, the entire information management of a company is outsourced, including planning and business analysis as well as the installation, management, and servicing of the network and workstations. Outsourcing can range from the large contract in which a company like IBM manages IT services for a company like Xerox to the practice of hiring contractors and temporary office workers on an individual basis.

Outsourcing is practiced as a very good business strategy. Especially in the current economic scenario, since it enables a single organization to focus on most potential areas, in which they’re competent at. It also set the firm free from resource and labor intensive functions, which are now performed by trained personnel in a much lower costs. The processes or activities that are being outsourced could range from customer service and telemarketing, to IT management, software development, market research and even financial portfolio management.

Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources[citation needed]. Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labour.Out sourcing in the information technology field has two meanings One is to commission the development of an application to another organization, usually a company that specializes in the development of this type of application. The other is to hire the services of another company to manage all or parts of the services that otherwise would be rendered by an IT unit of the organization. The latter concept might not include development of new applications.

Outsourcing refers to a company that contract with another company to provide services that might be performed by in-house employees. Many of the large companies today outsource jobs such as, the very popular in the Philippines, call center services, e-mail services, and payroll. These jobs are handled by separate companies that are specialized in the certain service, and are mostly located overseas.

Outsourcing involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider. The client organization and the supplier enter into a contractual agreement that defines the transferred services. Under the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client agrees to procure the services from the supplier for the term of the contract. Business segments typically outsourced include information technology, human resources, facilities, real estate management, and accounting. Many companies also outsource customer support and call center functions like telemarketing, CAD drafting, customer service, market research, manufacturing, designing, web development, print-to-mail, content writing, ghostwriting and engineering. Offshoring is the type of outsourcing in which the buyer organization belongs to another country.

Outsourcing and offshoring are used interchangeably in public discourse despite important technical differences. Outsourcing involves contracting with a supplier, which may or may not involve some degree of offshoring. Offshoring is the transfer of an organizational function to another country, regardless of whether the work is outsourced or stays within the same corporation or company.

With increasing globalization of outsourcing companies, the distinction between outsourcing and offshoring will become less clear over time. This is evident in the increasing presence of Indian outsourcing companies in the United States and United Kingdom. The globalization of outsourcing operating models has resulted in new terms such as nearshoring, noshoring, and rightshoring that reflect the changing mix of locations. This is seen in the opening of offices and operations centers by Indian companies in the U.S. and UK. A major job that is being outsourced is accounting. They are able to complete tax returns across seas for people in America.

Multisourcing refers to large outsourcing agreements (predominantly IT). Multisourcing is a framework to enable different parts of the client business to be sourced from different suppliers. This requires a governance model that communicates strategy, clearly defines responsibility and has end-to-end integration.

Strategic outsourcing is the organizing arrangement that emerges when firms rely on intermediate markets to provide specialized capabilities that supplement existing capabilities deployed along a firm’s value chain (see Holcomb & Hitt, 2007). Such an arrangement produces value within firms’ supply chains beyond those benefits achieved through cost economies. Intermediate markets that provide specialized capabilities emerge as different industry conditions intensify the partitioning of production. As a result of greater information standardization and simplified coordination, clear administrative demarcations emerge along a value chain. Partitioning of intermediate markets occurs as the coordination of production across a value chain is simplified and as information becomes standardized, making it easier to transfer activities across boundaries.

Due to the complexity of work definition, codifying requirements, pricing, and legal terms and conditions, clients often utilize the advisory services of outsourcing consultants (see sourcing advisory) or outsourcing intermediaries to assist in scoping, decision making, and vendor evaluation.

The competitive pressures on firms to bring out new products at an ever rapid pace to meet market needs are increasing. As such, the pressures on the R&D department are increasing. In order to alleviate the pressure, firms have to either increase R&D budgets or find ways to utilize the resources in a more productive way. There are situations when a firm may consider outsourcing some of its R&D work to a contract research organizations or universities. Reasons why a firm could consider outsourcing are:

* new product design does not work
* project time and cost overruns
* loss of key staff
* competitive response
* problems of quality/yield.

The key drivers for R&D outsourcing are emerging mass markets and availability of expertise in the field. In this context, the two most populous countries in the world, China and India, provide huge pools from which to find talent. Both countries produce over 200,000 engineers and science graduates each year. Moreover both countries are low cost sourcing countries. Other strategic drivers for outsourcing R&D are access to expertise and intellectual property, filling gaps in the capabilities of the R&D function, managing risk better, reducing the time to market, and focusing on the core competence or activities of the firm.
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shane sacramento



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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Mon Aug 31, 2009 1:05 pm

Insource or Outsource
2/3


An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a change agent in the process.

* Enhance capacity for innovation

Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.

* Reduce time to market

The acceleration of the development or production of a product through the additional capability brought by the supplier.

* Commodification

The trend of standardizing business processes, IT Services and application services enabling businesses to intelligently buy at the right price. Allows a wide range of businesses access to services previously only available to large corporations.

* Risk management

An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.

* Venture Capital

Some countries match government funds venture capital with private venture capital for startups that start businesses in their country.

* Tax Benefit

Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.

Most of the outsourcing firms are based in the USA, some in the United Kingdom or Australia and a small number in Europe, while most of the outsourced workforce is Asian.

There have been loud protests against outsourcing in the USA, and more recently in Australia, due to cases like dislocation of some professionals, which is usually caused by shifting of processes and when this happen jobs are of course shifted too. But, this kind of problem is mostly temporary and there are very few skilled professionals who lose their jobs because of outsourcing.

DISADVANTAGE
One of the disadvantages that outsourcing brings is, it often eliminates direct communication between a company or organization and its clients. This stops a certain company from building solid relationship with their customers, and it often leads to dissatisfaction on one or both sides.
Another disadvantage is the danger of not being able to control some of the aspects in the company itself, as outsourcing may lead to delay of communications and implementation of projects.

Thirdly, sensitive information is more vulnerable. This means that the company won’t be able to control the flow of information thus, leading to leakage of important information, which often is private.

The most critical is it may come that a company will become very dependent on its outsource service providers, which could lead to problems when the outsource provider backs out on the contract suddenly.

Though outsourcing may be proven highly beneficial for many companies, it also has its disadvantage. Thus, it is very important that each company should accurately provide solution to their needs to determine if outsourcing is a good option.

http://www.wisegeek.com/what-is-outsourcing.htm
http://www.indianchild.com/outsourcing/what_is_outsourcing.htm
http://en.wikipedia.org/wiki/Outsourcing
http://searchcio.techtarget.com/sDefinition/0,,sid182_gci212731,00.html
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shane sacramento



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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Mon Aug 31, 2009 1:06 pm

Insource or Outsource
3/3

INSOURCING
Insourcing is a business practice in which work that would otherwise have been contracted out is performed in-house.

Insourcing often involves bringing in specialists to temporary fill temporary needs or training existing personnel to perform tasks that would have been outsourced. An example is the use of in-house engineers to write technical manuals for equipment they have designed, rather than sending the work to an outside technical writing firm. In this example, the engineers might have to take technical writing courses at a local college, university, or trade school before being able to complete the task successfully. Other challenges of insourcing include the possible purchase of additional hardware and/or software that is scalable and energy-efficient enough to deliver an adequate return on investment (ROI).

Insourcing is the opposite of outsourcing; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation. Insourcing is a business decision that is often made to maintain control of critical production or competencies. An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility.

Insourcing is widely used in an area such as production to reduce costs of taxes, labor (e.g., American labor is often cheaper than European labor), transportation, etc.

Insourcing at United Parcel Service (UPS) was described in the bestselling book The World Is Flat, by Thomas Friedman.

According to PR Web, insourcing was becoming more common by 2006 as businesses had less than satisfactory experiences with outsourcing (including customer support). Many outsourcing proponents responded to a negative consumer opinion backlash resulting from outsourcing their communications management to vendors who rely on overseas operations.

To those who are concerned that nations may be losing a net amount of jobs due to outsourcing, some point out that insourcing also occurs. According to a study by Mary Amiti and Shang-Jin Wei, in the United States, the United Kingdom, and many other industrialized countries more jobs are insourced than outsourced. They found that out of all the countries in the world they studied, the U.S. and the U.K. actually have the largest net trade surpluses in business services. Countries with a net deficit in business services include Indonesia, Germany and Ireland.

Insourcing is loosely referred in call centers who are doing the work of the outsourcing companies. Companies that outsource include Dell, Hewlett Packard, Symantec, and Linksys. The callcenters and technicians that are contracted to handle the outsourced work are usually over-seas. Customers may refer to these countries as "India" technical support if they are hard to understand over telecommunications. These insourcing companies were a great way to save money for the outsourcing of work, but quality varies, and poor performance has sometimes harmed the reputations of companies who provide 24/7 customer or technical support.

The Organization for International Investment, a Washington D.C. trade association, uses the term to describe the creation of jobs through foreign direct investment within the United States.

There are two views of the meaning of insourcing:

First, is the the type of insourcing that represents almost an opposite form of outsourcing. May be the most common definition is when companies look at the potential of employees inside the organization or company to find those who may be tapped to do certain jobs or functions for the said company. They may offer these employees extra training or they may just find the employees that already possess the skills to take on specialized work.

This form of insourcing has become fairly common as a money saving practice. Some company uses this method to also save money, because hiring new employees takes lots of money, and being able to redirect a current employee to new work can be much easier. Even if there is financial outlay for special training, a business may still save money, and it doesn’t have the negative connotations associated with many forms of outsourcing. Some companies practice this regularly and may boast to employees that they always promote from within, which can be an attractive point when employees are looking for jobs that will allow them opportunities to advance in their careers.

The second form of insourcing doesn’t utilize current employees but instead temporarily hires specialists to work onsite at a company. Occasionally these specialists help train employees on specialized equipment or methods, and part of this may also involve the leasing of various types of equipment. Even though the temporary employee comes from outside of the company, the fact that he or she is “brought in” means he can be considered insourced.
Sometimes the definition of insourcing is a matter of perspective. When a large company sets up part of their business in a foreign country, that company is outsourcing. However, to the country where the business is established, the new work there may be considered as insourced. This is a less common use of the term, but one that may help demonstrate the differing ways in which outsourcing work is viewed.

To have a better understanding and as a summary insourcing can be viewed as outsourcing as seen from the opposite side. For example, a company based in Japan might open a plant in the United States for the purpose of employing American workers to manufacture Japanese products. From the Japanese perspective this is outsourcing, but from the American perspective it is insourcing. Nissan, a Japanese automobile manufacturer, has in fact done this.
Setting up shop in another country, especially one that doesn’t have lower pay standards, (for instance Japanese automakers creating plants in the US) can prove of benefit to the company. Because they have created jobs somewhere else, the company’s products may be known more favorably. This may make consumers more likely to purchase products or use the company’s services because they know that part of their payment benefits their fellow citizens.
http://whatis.techtarget.com/definition/0,,sid9_gci1185946,00.html
http://www.wisegeek.com/what-is-insourcing.htm
http://en.wikipedia.org/wiki/Insourcing

If I have to take side, I would prefer insourcing. Yes, it is true that outsourcing may be a good step to extend company reach but, I find it critical due to some of the parts of the project team will not be supervised, which I think will lower the quality of a certain product or service, in which the company provides. Another thing that disappointed me with regards to outsourcing is the security of information, which I think would put the company at risk. I have concluded how important information is to be kept within the company. But, with outsourcing, I find it risky.

I am more favor in insourcing, because the fact that they always find potential and skilled employees within the company first, before hiring new ones. Another thing is I think it will increase good relationship within the employer and employees, because the employee will feel that they are taken cared of by the company, due to special training given to them when they have potential. And as a result, a strong bond and trust to both sides, employer and employee.
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Gleizelle Jen Dieparine



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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Mon Aug 31, 2009 3:33 pm




As a student, you were invited by
the Dean of
the Institute of Computing to attend a seminar-workshop
on information
systems planning with some of the faculty members. In one of the
sessions, a discussion of outsourcing came up. You have been asked to
present your evaluation about outsourcing the information systems
functions of the school.

Required
You are to take a position- outsource or in-source and justify your position.
(3000words)

If I were asked to present my evaluation about outsourcing the information
system functions of the school.The first thing to do is to analyze the problem
,I should know what is the function of information systems of the school and
what is outsourcing and why should be implemented or should used by the
school.Lets define Outsourcing


Outsourcing



a process
that signs a contract to perform part or all of the obligations of
another's contract.a process, such as product design
or manufacturing,
to a third-partyThe
decision to outsource is often made in the interest of lowering
cost or making better use of time and energy costs,redirecting
or conserving energy directed at the competenciesof
a particular business,
or to make more efficientuse
of land, labor,capital,(information)
technology
and resources[
citationneeded].
Outsourcing became part of the business lexicon during the 1980s. It
is essentially a division of labour.Out sourcing in the information
technology field has
two meanings One is to commission the development of an
application to another organization, usually a company that
specializes in the development of this type of application. The other
is to hire the services of another company to manage all or parts of
the services that otherwise would be rendered by an IT unit of the
organization. The latter concept might not include development of new
applications.


BENEFITS



Costsavings. The lowering of the overall cost of the service to the
business. This will involve reducing the scope, defining quality
levels, re-pricing, re-negotiation, cost re-structuring. Access to
lower cost economies through offshoring called "labor
arbitrage" generated by the wage gap between industrialized and
developing nations.



Focuson Core Business. Resources (for example investment, people,
infrastructure) are focused on developing the core business. For
example often organizations outsource their IT support to
specilaised IT services companies.




Costrestructuring.
Operating
leverage is a measure that compares fixed costs to variable
costs. Outsourcing changes the balance of this ratio by offering a
move from fixed to variable cost and also by making variable costs
more predictable.




Improve quality. Achieve a step change in quality through contracting
out the service with a new service level agreement.




Knowledge.
Access to intellectual property and wider experience and knowledge.




Contract.
Services will be provided to a legally binding contract with
financial penalties and legal redress. This is not the case with
internal services.




Operational
expertise
. Access to
operational best practice that would be too
difficult or time consuming to develop in-house.





Access
to talent
. Access to a
larger talent pool and a sustainable
source of skills, in particular in science and engineering.



Capacity management. An improved method of capacity management of
services and technology where the risk in providing the excess
capacity is borne by the supplier.




Catalyst for change.
An organization can use an outsourcing agreement as a catalyst for
major step change that can not be achieved alone. The outsourcer
becomes a Change
agent in the process.





Enhance capacity for innovation. Companies increasingly use external
knowledge service providers to supplement limited in-house capacity
for product innovation.



Reduce time to market. The acceleration of the development or
production of a product through the additional capability brought by
the supplier.




Commodification.
The trend of standardizing business processes, IT Services and
application services enabling businesses to intelligently buy at the
right price. Allows a wide range of businesses access to services
previously only available to large corporations.




Riskmanagement.
An approach to risk management for some types of risks is to partner with
an
outsourcer who is better able to provide the mitigation



VentureCapital.
Some countries match government funds venture capital with private venture
capital for startups that start businesses in their country



Tax Benefit. Countries offer tax incentives to move manufacturing
operations to counter high corporate taxes within another country.



QualityRisks


Qualityfade is the deliberate and secretive reduction in
the quality of
labor in order to widen profit margins. The downward changes in
human capital are subtle but progressive, and usually unnoticeable
by the out sourcer/customer. The initial interview meets
requirements, however, with subsequent support, more and more of the
support team are replaced with novice or less experienced workers.
India IT shops will continue to reduce the quality of human capital
under the pressure of drying up labor supply and upward trend of
salary, pushing the quality limits. Such practices are hard to
detect, as customers may just simply give up seeking help from the
help desk. However, the overall customer satisfaction will be
reduced greatly over time Unless the company constantly conducts
customer satisfaction surveys, they may eventually be caught in a
surprise of customer churn, and when they find out the root cause,
it could be too late. In such cases, it can be hard to dispute the
legal contract with the India
outsourcing company, as their staff
are now trained in the process and the original staff made
redundant. In the end, the company that outsources is worse off than
before it outsourced its workforce to India

Public
opinion




Negative Effect
There
is a strong public opinion regarding outsourcing (especially when
combined with
offshoring)that
outsourcing damages a local labor market. Outsourcing is the
transfer of the delivery of services which affects both jobs and
individuals. It is difficult to dispute that outsourcing has a
detrimental effect on individuals who face job disruption and
employment insecurity; however, its supporters believe that
outsourcing should bring down prices, providing greater economic
benefit to all. There are legal protections in the European
UnionTransferof Undertakings (Protection of Employment). Labor
laws in the
United
States are not as protective as those in the European Union. On June 26
2009, Jeff Immelt, the CEO of General Electric, called for the
United States to increase
its manufacturing base employment to 20%
of the workforce commenting that the U.S. has outsourced too much
 and can no longer rely on consumer spending to drive demand.


Insourcing


Insourcing is the opposite of outsourcing; that is
insourcing (or contracting in) is often defined as the delegation of operations
or jobs from production within a business to an internal (but 'stand-alone')
entity that specializes in that operation. Insourcing is a business decision
that is often made to maintain control of critical production or competencies.
An alternate use of the term implies transferring jobs to within the country
where the term is used, either by hiring local subcontractors or building a
facility.

Insourcing is loosely referred in call centers who are doing
the work of the outsourcing companies. Companies that outsource include Dell,
Hewlett Packard, Symantec, and Linksys. The callcenters and technicians that
are contracted to handle the outsourced work are usually over-seas. Customers
may refer to these countries as "India" technical support if
they are hard to understand over telecommunications. These insourcing companies
were a great way to save money for the outsourcing of work, but quality varies,
and poor performance has sometimes harmed the reputations of companies who
provide 24/7 customer/technical support.


 MY JUSTIFICATION


For me if I given a chance to justify my position to
information systems functions of the school. I would probably choose d
outsource simply because this institute is a university  not a business so
we should find a outsource
to study the needs of the school.The university should not used the faculty to
analyzed or do things that is not necessary for them to do. As I observed like
faculty in the institute of computing ,many faculty members were the one who
instantiate the information system that made the faculty overloaded but then d
same salary they get.

As we have understand outsourcing .It means looking for
people outside the firms. These would help for the firm not to used there human
resource to do task that they are not into.

So I hope the university could analyze these things for the
teacher can focus there self to the student, for us endure knowledge as we
grow.

Visit my blog:


http://gleizelle@blogger.com



Reference:

http://en.wikipedia.org/wiki/Insource



http://en.wikipedia.org/wiki/Outsourcing


 


 



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Roy Cuevas



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PostSubject: Insourcing or Outsourcing?   Mon Aug 31, 2009 7:24 pm

For me, with the current state and the situation of the school(Reader, I know you are a USEPian, so I think you have an idea what I’m talking about), I would choose insourcing rather than outsourcing. That’s just what I would prefer. Why?

First, the definition of insourcing from Wikipedia. I think this is the boring part, but we have to clarify first what we’re talking about here.
“Insourcing is the opposite of outsourcing; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation. Insourcing is a business decision that is often made to maintain control of critical production or competencies. An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility.”

Simply put, insourcing is using the company’s own resources (e.g. staff), to do the tasks that the companies does and not relying on third party companies outside the company or the country. That thing I mentioned there is also known as outsourcing, which is one of the choices in the question.

Again, let us the power of the Internet to supply us with knowledge that we need to do our assignments. This is the definition of outsourcing from Wikipedia.
“Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources. Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labour.”

In-sourcing for me is better for this school than outsourcing. First is, why outsource when we have capable people in the University that could develop and maintain information functions in this school? Presenting… the Institute of Computing! Here in the University of Southeastern Philippines, we have the Institute of Computing, located inside the USEP College of Engineering building. We have two courses available for the undergrads, which are Bachelor of Science in Information Technology, and Bachelor of Science in Computer Science. I could say that the faculty of the Institute of Computing are good and intelligent people, being a student of the said college itself. We have competent teachers here in the school that could do what is needed to do with the information systems of the school, so why find third party companies or people outside the school? Why waste time finding people outside when you have people that could do the job inside the school? Not to mention that these teachers also have passed the teaching standards of the school.

Think also that this lovable school of ours is a public school. That means that the school gets its funds from the government, right? And I think also from its income generating projects. I think there’s no need for me to tell you that the school is having problems with its budget, because I think you can see it clearly. So why settle to outsourcing, when it requires more money? I’ve read that companies result to insourcing because it reduces the cost of taxes. And the reduction of taxes means less money to spend. That’s a plus for the school. So that’s another reason why its good to insource than to outsource.

Next is, outsourcing has many disadvantages to the school. I got some disadvantages of outsourcing from Wikipedia, and I’m going to put it here. But I’m not just gonna “copy-paste” it. I have to point out those that are connected with the school, so “copy-paste” is not applicable. Here are those disadvantages:

DISADVANTAGES OF OUTSOURCING:

QUALITY RISK
First is Quality Risk. If the university is going to outsource the handling of its information systems, then there is a risk of the quality of services/products being not too good or at a low standard or something like that. That is a very big possibility because the university can’t always keep track and observe the supplier of the services. The supplier could meet the initial requirements of the university, but later on, it could replace its personnel with novice or less experienced workers, thereby degrading the quality of the products/services it provides. And according to my source, unless the company conducts customer satisfaction surveys, they may eventually be caught in a surprise of customer chum, and when they find out the root cause, it could be too late. For the university, if it wouldn’t listen to the complaints of the students, or the suggestions and the recommendations of the faculty and staff and those that have knowledge on the matter, then the University would just be spending big amounts of money for low quality services/products. And if the University finds out that the problem is the issue of outsourcing, and if it’s too late, then that would be a big problem for the University.

PUBLIC OPINION
There are several public opinions about outsourcing. According to what I have read from Wikipedia.com, there is a strong public opinion that says outsourcing (especially when compared with offshoring), damages a local market. That is true, because when a company outsources, then it will not have to depend on the labor coming locally, and that means unemployment for the local community. Then, unemployment could lead to loss of income and financial crisis.


SECURITY
Security is a very important and sensitive issue when it comes to outsourcing. In a company, the management is always liable for the actions that its employees and staff make. If someone does something illegal or something like that, it’s not only that person’s reputation at stake, but also the company’s. And from that, we can say that security is an issue to companies that don’t outsource and have their own line-up of staff, right? And also from that, we can say that the security issue that I’m talking about will become bigger if the company will outsource. Why? Because when you outsource, then that means that you transfer the tasks of your employees to an outsourcer that you seldom see and come in contact with, personally. This causes legal and security issues when problems arise and the task of the outsourcer is involved.


Last edited by Roy Cuevas on Thu Oct 01, 2009 6:36 pm; edited 1 time in total
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Jovylin O. Sandoval



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PostSubject: Outsourcing   Tue Sep 01, 2009 9:36 am



flower As a student, if I were to take a position between outsource and insource, I would go for outsource because as what I have knew, the companies of all sizes are now struggling with escalating costs of full-time employees. In addition, there are more things that you have to consider if you prefer insourcing like the hiring, training, administration, benefits, absenteeism, workspace and equipment for the employees which in the outsource not often considered.

And this time, I will now talk about the informations all about Outsourcing as what I have search on the net.

Outsourcing is growing at a rapid rate in the United States, Europe and Asia because organizations view outsourcing as a way to achieve strategic goals, reduce costs, improve customer satisfaction and provide other efficiency and effectiveness improvements. Like any organizational decision, outsourcing is not free of risk and requires effective management from the outset of the outsourcing evaluation through the life of the contractual relationship.
Outsourcing can be an extremely complex and complicated undertaking. Each facet of the exercise needs to be carefully considered and properly executed. There is little margin for error if full value is to be obtained.

However, this need not be a trauma, nor an adventure of blind exploration. The potential benefits are well documented, and strategic outsourcing is now mature enough for the path to have been trodden countless times previously.

Furthermore, we cannot also escape that even though Outsourcing has many advantages but still at the same time it has some disadvantages that cannot be ignored like

• The company that outsourcers can get into serious trouble if the service provider refuses to provide business due to bankruptcy, lack of funds, labor etc.
• Outsourcing requires the control of the process being outsourced by transferred to the service provider. Thus the company may loose control over its process
• The service provider in developing countries generally services many companies. So there are many chances of partiality owing to more payment by other parties
• The current employees in the company that outsourcers may feel threat due to outsourcing and may not work properly
• The attitude of people in the developed countries against companies that outsource is generally bad


Otherwise, while the Outsourcing advantages lies in the fact that it helps companies cut costs and stay ahead in the competition. Outsourcing also benefits the citizens in developed countries as it provides high quality products at a cheaper rate also with better customer service. And these reasons of Outsourcing are expounded below:

Reasons for outsourcing

Cost savings. The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.

Focus on Core Business. Resources (for example investment, people, infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specilaised IT services companies.

Cost restructuring. Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.

Improve quality. Achieve a step change in quality through contracting out the service with a new service level agreement.

Knowledge. Access to intellectual property and wider experience and knowledge.

Contract. Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.

Operational expertise. Access to operational best practice that would be too difficult or time consuming to develop in-house.

Access to talent. Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.

Capacity management. An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.

Catalyst for change. An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a Change agent in the process.

Enhance capacity for innovation. Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.

Reduce time to market. The acceleration of the development or production of a product through the additional capability brought by the supplier.

Commodification. The trend of standardizing business processes, IT Services and application services enabling businesses to intelligently buy at the right price. Allows a wide range of businesses access to services previously only available to large corporations.

Risk management. An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.

Venture Capital. Some countries match government funds venture capital with private venture capital for startups that start businesses in their country.

Tax Benefit. Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.


Aside from that reasons of why we prefer Outsourcing, we should also consider the critical factors which are very important that involves for successful Outsourcing. And these are stated below.

The Objectives of Outsourcing

Outsourcing must be done carefully, systematically, and with explicit goals. Companies that rush into outsourcing without fully understanding what they hope to gain may find themselves mired in a contractual battle with a chosen vendor or the recipient of services that worsen rather than improve. Sensible reasons to consider outsourcing include both strategic and tactical concerns on both a department and organizational level.

Outsourcing might be justifiable for a department with high costs that cannot be reduced or a lack of competency in specific areas. Organizational needs that generate consideration of outsourcing include the ability to compete globally with global services or relief from financial pressures achieved through immediate cost savings.

Outsourcing is not an excuse to wash management's hands of a poorly managed, costly, or misunderstood function. Understand the costs of a function and manage it effectively before evaluating its potential for outsourcing. Otherwise, you are probably deciding to outsource for the wrong reason, you may be giving the outsourcing vendor gains you could have reaped, and you may be starting a relationship that is destined to fail.

Organizations should consider (or reconsider) the overall merits of selective outsourcing every three to four years. Revisiting outsourcing may be particularly relevant under changing market conditions or when internal, industry, or technology changes have occurred.


Use a Methodical Approach

The process of deciding whether outsourcing is warranted involves numerous steps or phases. These are: identifying requirements; preparing and distributing a request for proposal (RFP); examining proposals; evaluating vendors; negotiating contracts; and implementing outsourcing. Adopt a methodology that describes the various steps to be performed and lays out the project plan necessary for a thorough evaluation. Just as applications development activities should be guided by a written, explicit methodology, the effort to consider and possibly implement outsourcing should be systematically conducted and documented.

The various phases are as follows:

Planning Phase. The objectives and scope of the outsourcing idea are defined and the feasibility of outsourcing is determined before a decision to proceed. The effort is planned in terms of time, budget and resources needed.

Analysis Phase. Baselines are determined and the service levels required of vendors are specified. Relationships between the information system function(s) to be outsourced and other functions that will remain in-house are also clarified so that contracts with vendors are certain to include proper interfaces with in-house services. The request for proposal is developed, responses are collected from vendors and analyzed, and a vendor is chosen.

Design Phase. Negotiations proceed with the vendor and a contract is developed and signed.

Implementation Phase. The transition from in-house provision of services to outsourcing is made.

Operations Phase. The outsourcing relationship with the vendor is managed and any maintenance or changes in the outsourcing relationship are negotiated and implemented.

Termination Phase. At the end of the contracting period the decision is made to negotiate another contract with the vendor or a new vendor, and the cycle begins again. Alternatively, a decision is made to bring the function back inside the organization.
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PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Today at 3:11 am

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