HomeHome  PortalPortal  CalendarCalendar  FAQFAQ  SearchSearch  MemberlistMemberlist  UsergroupsUsergroups  RegisterRegister  Log inLog in  

Share | 
 

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

View previous topic View next topic Go down 
Go to page : Previous  1, 2, 3, 4
AuthorMessage
kristine_delatorre



Posts : 58
Points : 60
Join date : 2009-06-21
Age : 26
Location : davao city

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Thu Oct 01, 2009 4:29 am



Making outsourcing a success is a learning process that demands careful planning, commitment and lots of communication.

"Converting to an outside contractor requires strong leadership and a cohesive school board," said James A. Williams, former superintendent in Dayton, Ohio. "You need to define the objectives and process and be open and honest with everyone. It may take several years to see results, but the right outsourcing arrangement ultimately will benefit pupils, teachers and employees."

School systems are using contract services that include custodial care, facility maintenance, energy management, grounds keeping, food service, security, transportation, technology, computers and networks, laundry and linen, supply and equipment purchasing and accounting and billing.

existing employees has been a sore issue in some outsourcing contracts. Some contractors prefer to transfer school district support employees to the contract firm's payroll under a variety of arrangements. In some cases, employees are placed on the contractor s payroll immediately. In others, employees continue to be employed by the district but are replaced with contract workers when they retire or leave. Some contractors will offer to interview existing employees but will not guarantee they will be hired.

Outsourcing non-instructional support services, such as transportation, food or janitorial and maintenance services, is a management tool used by school boards nationwide, because it allows them to sharpen their focus on providing core educational services while simultaneously right-sizing the academic bureaucracy.

it is cost daving. Outsourcing has a great help.

Information systems outsourcing, or IS outsourcing, is the practice of turning over part or all of an organization’s IS functions to external service providers (Grover and Cheon, 1996). Common IS outsourcing practices include IT infrastructure outsourcing (servers, communication networks, etc), business process outsourcing (data entry, data process, etc), application development outsourcing, system integration outsourcing and so on.

The features of IS outsourcing include: (1) IS outsourcing implies that firms use external entities to manage internal information systems. The information systems of customers (usually non-IT firms) are the objects of outsourcing. (2) Information systems are man-machine systems, which are related to not only information technologies but also human activities. So IS outsourcing service providers need to understand both IT issues and the business processes of customers. (3) IS outsourcing is part of the informationization of firms. In order to align with the overall objective of IT departments, IS outsourcing should be carried out base on IT planning.


First, pay more attention to topics related to the social environments of IS outsourcing. During the past several years, information systems research has focused less on technology development and more on the social context in which information technologies are designed and used (Sidorova and Evangelopoulos et al., 2008). Firms have realized that we should rely on the combination of technology and management to solve problems. We can see that up to now IS outsourcing research results based on sociology are rare. In the future, IS outsourcing research could draw more on the theoretical foundations in sociology. For example, are there any unique characteristics of the IS outsourcing practices in the social environment of China? If so, why are things in China different from those in North America and Europe?

Second, attempt to study new IS outsourcing patterns. For example, SaaS (Software as a Service) is a new pattern of IS outsourcing that deserves deep research by academia. Possible research topics include: What industries and firms are more suitable to use SaaS? What are the critical success factors for SaaS?

Third, investigate the relationships and differences between IS outsourcing and outsourcing of other functions. At present firms outsource more and more other functions besides IS. For instance, commercial banks outsource the function of cash transportation to public security service companies, firms outsource the job of employee recruitment to consulting companies, and firms outsource logistics to third-party logistics companies. Possible future research questions include: what are the relationships and differences between IS outsourcing and outsourcing of other functions? Will they bring different influences to firms?


Advantages of Outsourcing Information Technology IT

Information Technology (IT) is a critical part of the business process that can require technical competence beyond the scope of the current management. In this case, a third party should manage the IT function.

Here are some of the reasons why outsourcing is a better choice for managing the IT department, rather than maintaining IT internally:


Advantages
- IT costs become more visible as all billable hours must be accounted for
- Outsourced services are utilized as needed, and organizations pay only for what services are actually used
- An outsourced IT department can reduce costs by utilizing its extensive knowledge base of various IT specialists, as opposed to an organization maintaining a comprehensive in-house staff



Outsourcing Benefits
- Outsourced companies make performance reports and measurements available to their clients
- Communications between business functions improve at all levels and ensure that IT resources are not being misused
- Outsourced companies can provide 24x7 support at a fraction of the cost
- Outsource staff tend to drive planning and budgeting improvements
- Service Level Agreements (SLAs) can be established



Staffing Benefits
- Staffing levels can be adapted quickly to client requirements, thereby avoiding gaps due to attrition, business growth or economic downturns
- IT consultants are fully trained on the latest technologies
- Retention of technically qualified in-house personnel is more difficult when external job opportunities are rapidly changing
- Continuous IT support coverage without having to rely on only one or two key people



Advantages Outsourcing
- Outsourced services use established standards for equipment and software requirements, saving time and money
- Outsourced services use approved lists of reliable vendors, which improves the quality of goods and services received

Client can Focus on Core Business Competencies
- Client management can concentrate on core competencies and revenue generating activities, while leaving technology management to IT professionals
- Management of non-essential core functions is transferred to the outsourcer.


In the case of USEP, IT outsourcing is pretty much helpful. Through advance technology everything is possible.

http://findarticles.com/p/articles/mi_m0JSD/is_5_57/ai_77382343/
http://www.unameits.com/why_it/benefits_advantages_outsourcing_information_technology.jsp
http://www.pacis-net.org/file/2009/%5B57%5DA%20Survey%20and%20Analysis%20of%20the%20Literature%20on%20Information%20Systems%20Outsourcing.pdf
http://www.pacis-net.org/file/2009/%5B57%5DA%20Survey%20and%20Analysis%20of%20the%20Literature%20on%20Information%20Systems%20Outsourcing.pdf
Back to top Go down
View user profile http://kjdelatorre.blogspot.com/
Jan Neil Enanoria Gador



Posts : 32
Points : 32
Join date : 2009-06-22
Age : 27

PostSubject: Assignment 8: In-Source or Outsource?   Thu Oct 01, 2009 9:19 pm

First and foremost, if I were invited by the Dean of the Institute of Computing to attend a seminar – workshop on information systems planning together with some of the faculty of the Institute of Computing I would consider it as a big privilege and I would do my best to give my evaluation regarding the current information system of the school which was once outsourced and now shifted to in-house.

(Before I start I would like to define the terms involved in this post so that the ones who do not know may also know)

IN-SOURCE OR IN-SOURCING

From what I’ve posted in my personal blog in-house or in-sourcing refers to the business practice of using a company’s or organization’s own personnel, staff, funds and resources to produce a commodity or service for the company or the organization. This is in contrast to the production being outsourced or contracted out to another company. Organizations involved in production usually opt for in-sourcing in order to cut down the cost of labor and taxes because they would not to hire workers or outside service providers. This trend has increased since the year two thousand six (2006). Some organizations that shift or employ in-source are usually those who have been to outsource and was not satisfied with it. Some also think that through in-source they can have better people support and better control over the work outsourced by in-sourcing their work rather than outsourcing it.

OUTSOURCE OR OUTSOURCING

Outsourcing on the other hand is the agreement between two companies in which one company would provide its services to the other company that has usually provided in-house. Outsourcing has become a trend that is common in Information Technology and other industries wherein in some cases the entire information management of a company is outsourced. Organizations that choose outsourcing think that they could acquire a lot of advantages from it. Some organizations choose outsourcing because they get high reliability, less costs and high-quality services.

(Going on to my stand, by the way I choose In-sourcing for the university.)

Looking at the present situation of the information system of the school which has been shifted from outsource to in-source it would imply that the school was not contented of the outsourced system or the outsourced information system did not meet the needs of the school or maybe the outsourced information system was too expensive to maintain. Anyway, after reflecting about the current issue and after the sessions and sharing we had during our previous meetings in Management Information System 1 subject, I will take the position of in-sourcing. I have posted something about in-sourcing and outsourcing in my personal blog and I remember writing there that the decision of school to shift to in-sourced information system was not a good decision because they decided to shift abruptly. However, this time I would take my stand in in-sourcing the information system of the University of Southeastern Philippines. Why? Because this time we have time to evaluate the current information system of the university and since the current trend of the school is in-source. My decision to choose the side of in-sourcing is not solely because the current trend of the university but because this is a time to rethink. What if this is the first time that the school would acquire an information system, would it be in-sourced or outsourced?

I choose the side of in-sourcing considering the current situation of the school plus it gives a lot advantages like confidentiality of data, less cost, etc. However, I would like to imply that information systems planning takes time and I mean a long time to conjure something complex like an information system considering that there are steps or procedures that needs to be taken into account to be able to come up with an effective information system.
Why in-source? Let us first take into account the current situation of the university (University of Southeastern Philippines). The university lacks the budget to maintain funding an outsourced information system which was the trend of the university before. The university also has in-house staff, capable in-house staff that can be tapped to plan and create the information system of the school. Plus they already know the school’s system which makes them more adept. In-source or outsource has advantages and disadvantages and it matters on the situation of the organization or the company.

ADVANTAGES OF INSOURCING

I have identified advantages of in-sourcing, some of it came from me and some were searched through the internet.

Lessen Cost

I think that one of the big reasons why the university shifted to in-source is to be able to lessen the cost. Lessen the cost of hiring new personnel to administer the new information system. If the information system is in-sourced the people that would administer the information system are those who made the system. Plus the university would need to hire people who will train the personnel who will be in touch with the information system or the ones who will be using the information system because the staff that will create the system is already acquainted with it and he/she can also be utilized to train the other personnel without involving a big deal of money. Compared to outsourcing an information system you will need to hire a resource person who will train your personnel if ever the information system that you will be outsourcing is new to them, meaning they are not yet acquainted with the system. If it was in the case of a company or organization that is involved in producing certain products, in-sourcing will be a great advantage because these kind of business needs a big workforce and if they have the workforce they wouldn’t need to hire laborers from other companies and the like.

Better People Support and Control

In-house staff could train the personnel to be acquainted with the information system so there would be no need to hire a resource person who will be training the personnel in the university. On the time that the system will be implemented and deployed there will be times that the personnel using the information system will encounter problems that have not been encountered before. In this case in-house staff can quickly look into the information system to find out what is wrong and can also possibly fix it pronto. By this there will less time that the information system will be in idle state if ever it encounters problems compared to relying on the support from outsource companies which may not have a twenty-four hour available support for their information system if it encounters problems. Again this could also lessen cost of hiring someone who will check and maintain the functionality of the system and lessen the cost of maintenance. Control is one of the advantages of in-sourcing an information system because the ones who created the system will know how fix any problem that will be encountered in the information system. It is very important because without the ability to control, a lot of things will be affected including the performance and work of the personnel in the university. In the case of a business oriented organization or company the inability to control their own information system will greatly affect their business considering that their business relies on their system. If it so happened that they will encounter problems in their information system they would not know how to remedy it leaving the company idle and thus affecting their income too.

Confidentiality of Data

Because in-house staffs will be tapped to make the information system of the university there is a great reliability that the information or the data that will be used or involved in the system are kept within the school and maintained confidential. There may be a risk on the confidentiality of the data when you choose to outsource a certain information system because you may need to hand the data to them so they can transfer the data into the system that you or an organization purchased from the outsourcing company. In the case of a business oriented company or organization the confidentiality of data is a very important factor. Their data is considered as a vital element in their information system and if it falls in the wrong hands it could be the downfall of their company.

Promotes Direct Management

Most organizations would prefer direct management because they want to have hands-on control over their development in all aspects on their business. It is important because you compared to any other person or company is the one who really understands the business and flows within you company. It is much better compared to relinquishing or I may say hand over the control to an outsourcing company or firm who does not fully understand your business. In-sourcing allows you or the company to direct themselves and let their knowledge and direction guide the company to a more effective impact development process.

Timeliness

If you’re working on a tight schedule and you want you work to be done, you could just call your staff and have meeting regarding an urgent matter, a project perhaps. Then you could discuss timelines and because they are your employees they will surely abide the timeline. Plus you have an overview or update on the task that is being done and you will know what is happening, what is lacking and what is needed to be done. There are many scenarios where timeliness is involved.

There are many advantages and disadvantages in in-sourcing and even in outsourcing. My stand is based on the current situation of the university. This issue of in-sourcing and outsourcing has become a hot topic is forums and blogs. There had been many debates about this issue though it has been said that the choice between in-source and outsource depends on the current situation of a company or organization. I have a post similar to this one in my personal blog. The link to my personal blog can be found below. This post is open for criticism and I’m looking forward to add more information in this post.



Mus' Box: http://mus08.blogspot.com/2009/08/in-house-or-outsource-which-is-better.html


Back to top Go down
View user profile
fatima paclibar



Posts : 28
Points : 32
Join date : 2009-06-22

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Thu Oct 01, 2009 10:38 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 function of the school.

Required: You are to take a position- outsource or in-source and justify your position.

To start, I will define first what is outsourcing and in-sourcing.
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.
Now, I’ll discuss what services and its processes that are mostly outsourced, how it works, what are the practices need to be considered, as well as the contract between the outsourcer and the outsourcing company, the relationship and participation of both parties within the project.
Outsourcing companies are also called as “service providers”, from the name itself it entails offer assistance which they specialize. An organization outsource a service when they are not that effective to that certain function of the business operation and when it’s not their expertise. 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.
Some nimble companies that are short on time and money, such as start-up software publishers, apply multi-sourcing -- 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.
The process of outsourcing generally encompasses four stages: 1) strategic thinking, to develop the organization's philosophy about the role of outsourcing in its activities; 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; 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.
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 opposite of outsourcing can be defined as in-sourcing. When an organization delegates its work to another entity, which is internal yet not a part of the organization, it is termed as in-sourcing. The internal entity will usually have a specialized team who will be proficient in the providing the required services. Organizations sometimes opt for in-sourcing because it enables them to maintain a better control of what they outsource. In-sourcing has also come to be defined as transferring work from one organization to another organization which is located within the same country. In-sourcing 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 in-sourcing in order to cut down the cost of labor and taxes amongst others. The trend towards in-sourcing has increased since the year 2006. Organizations who have been dissatisfied with outsourcing have moved towards in-sourcing. Some organizations feel that they can have better customer support and better control over the work outsourced by in-sourcing their work rather than outsourcing it. According to recent studies, there is more wok in-sourced 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 in-source work equally.
Within the advent of globalization, more and more jobs are being outsourced. The outsourcing brought economic trend brought huge economic benefits to many countries and their populations. It is more cost effective and high quality. You can make sure that with outsourcing, your companies is always ahead, steadfast through stable quality system and continuous improvement.

What are discussed above are the definition and the processes of outsourcing and in-sourcing. Now, we are going to enumerate the advantages and disadvantages of both parties, to help us decide whether our organization must implement or must adopt an outsourcing of non-core function of the business or to keep it in-house. Before jumping to any of it, let us weight first what is more appropriate to your organization which is more profitable, cost-effective, reduce management problem, keep your business ahead and made your business more competitive ever.

Here are the advantages of outsourcing of your non-core activities:

1. Cost effective - Outsourcing brings a lot of advantages to the home country where the business undertakings and to the country that the services will e provided. An auto manufacturing company is one good example. They usually buy raw materials to other country and merely assembles it to their own factories, doing this is more cost-effective. Outsourcing well give you access to high quality services at a lower cost.
2. Greater control over quality - Since, some of company’s services is being outsourced there’s a guarantee that you can concentrate to the core business and deliver a quality and satisfying services to your customers.
3. Greater Expertise - By outsourcing, companies are able to tap better into pools of expertise and gain access to intellectual property, as well as sustainable sources of skills. Moreover, this method avoids the time-consuming process of training to develop the particular services in-house. Also, by providing new service-level agreements in their contracts, enterprises are able to make sure that the quality of the outputs or products isn't lost. These contracts usually contain penalties or legal redress for transgressions.
4. Improve Productivity - It is possible that services are made available everyday, at any time of the week. This is achievable because the services can be done in different locations with time zones. When the organization from Country A goes off-duty, the organization from Country B can take over. Not only that, a product can also be speedily developed and marketed because of outsourcing, thereby improving productivity significantly.
5. Improve Efficiency - Going back the automobile company example, they can stock up on the different parts of cars in their warehouses, and just assemble. There is no time needed to manufacture the parts, and they are always at hand in their depots, thereby improving efficiency.

Now, here are the disadvantages of outsourcing.

1. Threat to security and confidentiality – 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.
2. Sometimes it is more cost-effective if you’ll conduct a particular business process in-house rather than outsourced it.
3. Difficulty in management – there are times that you’ll find a difficulty managing the business when you outsource some of the business processes when compared to managing it within the organization.
4. Hidden cost – outsourcing though cost effective, also have some hidden cost such as contract renewal fee and some legal costs. You might also spend a lot of time and effort in renewing a contract and ironing some legal issues.
5. You may lose control over the services that being outsourced.
6. Issue on devotion - 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

In the case of our university, lets evaluate first which is better or more appropriate and advantageous to implement if it is to outsource or to in-source. Considering that we have in our university one of the best programmer in Davao, who have a big brain and capable of developing an information system such as our university information system. When we say we are capable of making the said system in-house it means we have the edge to be more competitive than other and also we the system design and structure will be really suited to the needs of our organization, all the processes and flow is given more attention and consideration, for the reason that they have a first hand experience what all this processes and how these processes being done, what portion of it needs to be improve, how will it be improve and why all these things needs to reevaluated. But, knowing that the Institute of Computing only have a small number of faculty member, and I can say that all this instructor helps a lot in developing the potential best programmer of the new generation. Thus, every student must be given more importance and dedication to educate them to be able to develop a competitive graduate worldwide in accordance to the mission of the university. Outsourcing our information system is a cost-effective step for our university. The organization can focus on their most important function in our nation and it is to educate the Filipino people.

Back to top Go down
View user profile
janraysuriba



Posts : 34
Points : 35
Join date : 2009-06-20
Age : 29
Location : Davao City

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Fri Oct 02, 2009 2:52 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)

Base on previous discussions, and as what I learned based on my own understanding, I go for Outsourcing. As we all know, and it is posed all over this topic, Outsourcing is subcontracting a service 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. Outsourcing 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 involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider.[3] 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.

Outsourcing occurs when a company purchases products or services from an outside supplier, rather than performing the same work within its own facilities, in order to cut costs. The decision to outsource is a major strategic one for most companies, since it involves weighing the potential cost savings against the consequences of a loss in control over the product or service. Some common examples of outsourcing include manufacturing of components, computer programming services, tax compliance and other accounting functions, training administration, customer service, transportation of products, benefits and compensation planning, payroll, and other human resource functions. A relatively new trend in outsourcing is employee leasing, in which specialized vendors recruit, hire, train, and pay their clients' employees, as well as arrange health care coverage and other benefits.

The growth in outsourcing in recent years is partly the result of a general shift in business philosophy. Prior to the mid-1980s, many companies sought to acquire other companies and diversify their business interests in order to reduce risk. As more companies discovered that there were limited advantages to running a large group of unrelated businesses, however, many began to divest subsidiaries and refocus their efforts on one or a few closely related areas of business. Companies tried to identify or develop a "core competence," a unique combination of experience and expertise that would provide a source of competitive advantage in a given industry. All aspects of the company's operations were aligned around the core competence, and any activities or functions that were not considered necessary to preserve it were then outsourced. Today, outsourcing is embraced by companies of all sizes and industry orientations. As analysts Tom Osmond commented in Employee Benefit News, "many companies have decided that transactional and administrative functions are neither core competencies nor value-added activities. In fact, some companies are putting themselves at risk as a result of using outdated technology and not complying with government regulations. Vendors, by focusing on administration as part of their business model, provide better service enforced by contracts and service-level agreements."

Successful outsourcing requires a strong understanding of the organization's capabilities and future direction. As William R. King explained in Information Systems Management, "[d]ecisions regarding outsourcing significant functions are among the most strategic that can be made by an organization, because they address the basic organizational choice of the functions for which internal expertise is developed and nurtured and those for which such expertise is purchased. These are basic decisions regarding organizational design." Outsourcing based only upon a comparison of costs can lead companies to miss opportunities to gain knowledge that might lead to the development of new products or technologies.

Outsourcing can be undertaken to varying degrees, ranging from total outsourcing to selective outsourcing. Total outsourcing may involve dismantling entire departments or divisions and transferring the employees, facilities, equipment, and complete responsibility for a product or function to an outside vendor. In contrast, selective outsourcing may target a single, time-consuming task within a department, such as preparing the payroll or manufacturing a minor component, that can be handled more efficiently by an outside specialist.


Vendors providing outsourcing services are generally grouped into two models: Business Process Outsourcing (BPO) and Application Service Provider (ASP). In the BPO model, major resources and assets are transferred from the company to the vendor. Under the ASP model, on the other hand, vendors concentrate on providing selected services for multiple clients. But as Osmond told Employee Benefit News, many variations exist within these two models. "Each vendor has a particular focus and/or point of entry to the market, particularly in the ASP space," Osmond stated. "There is also a wide range of pricing models and option. The good news is that there is a seemingly endless combination of service, pricing, and delivery, providing a solution for most situations. The bad news is that it can be difficult to compare vendors on an apples-to-apples basis."

BENEFITS OF OUTSOURCING for SMALL BUSINESSES

Outsourcing — the practice of using outside firms to handle work normally performed within a company — is a familiar concept to many entrepreneurs. Small companies routinely outsource their payroll processing, accounting, distribution, and many other important functions — often because they have no other choice. Many large companies turn to outsourcing to cut costs. In response, entire industries have evolved to serve companies' outsourcing needs.

But not many businesses thoroughly understand the benefits of outsourcing. It's true that outsourcing can save money, but that's not the only (or even the most important) reason to do it. As many firms discovered during the outsourcing "mania" of the early 1990s, outsourcing too much can be an even bigger mistake than not outsourcing any work at all. The flat economy caused many companies into huge layoffs and subsequently outsourced functions that were better kept in-house. Wise outsourcing, however, can provide a number of long-term benefits:

Control capital costs. Cost-cutting may not be the only reason to outsource, but it's certainly a major factor. Outsourcing converts fixed costs into variable costs, releases capital for investment elsewhere in your business, and allows you to avoid large expenditures in the early stages of your business. Outsourcing can also make your firm more attractive to investors, since you're able to pump more capital directly into revenue-producing activities.

Increase efficiency. Companies that do everything themselves have much higher research, development, marketing, and distribution expenses, all of which must be passed on to customers. An outside provider's cost structure and economy of scale can give your firm an important competitive advantage.

Reduce labor costs. Hiring and training staff for short-term or peripheral projects can be very expensive, and temporary employees don't always live up to your expectations. Outsourcing lets you focus your human resources where you need them most.

Start new projects quickly. A good outsourcing firm has the resources to start a project right away. Handling the same project in-house might involve taking weeks or months to hire the right people, train them, and provide the support they need. And if a project requires major capital investments (such as building a series of distribution centers), the startup process can be even more difficult.

Focus on your core business. Every business has limited resources, and every manager has limited time and attention. Outsourcing can help your business to shift its focus from peripheral activities toward work that serves the customer, and it can help managers set their priorities more clearly.

Level the playing field. Most small firms simply can't afford to match the in-house support services that larger companies maintain. Outsourcing can help small firms act "big" by giving them access to the same economies of scale, efficiency, and expertise that large companies enjoy.

Reduce risk. Every business investment carries a certain amount of risk. Markets, competition, government regulations, financial conditions, and technologies all change very quickly. Outsourcing providers assume and manage this risk for you, and they generally are much better at deciding how to avoid risk in their areas of expertise.

Once a company has made the decision to outsource, there are still a number of factors it must consider in making a successful transition and forming a partner relationship with the vendor. First, the company should determine what sort of outsourcing relationship will best meet its needs. "Decide what's important," urged the Journal of Accountancy. "If a function is not strategic to your business—for instance, payroll services or health insurance needs in a recruiting agency with only ten employees—consider outsourcing it to an expert provider." Some businesses share strategic decision-making with their vendors, while others only outsource on a limited, as needed basis.

As Ethel Scully noted in National Underwriter, the company needs to obtain the support of key personnel during this time. Many companies encounter resistance from employees who feel that their jobs are threatened by outsourcing. Scully suggested forming a team consisting of an outsourcing expert, representatives from senior management and human resources, and the managers of all affected areas of the company to help address employee concerns about the decision.

Once your business has decided which functions to outsource, it should initiate a search process that utilizes referrals from other companies and service-provider directories. You can then begin contacting potential vendors and ask specific questions about the services they provide and their abilities to meet your company's unique and specific needs. Ideally, the vendor you select will have experience in handling similar business and will be able to give all of its clients' needs the priority they deserve. "Consider the service company's knowledge of the entirety of your business, its willingness to customize service, and its compatibility with your firm's business culture, as well as the long-run cost of its services and its financial strength," said service provider Carl Schwenker in Money. During this period, you should also reexamine your own company culture and business needs to make sure that the outsourcing arrangement under consideration is a good fit. Many outsourcing experts counsel businesses to select vendors that can effectively integrate all their outsourced business functions so that they do not have to find individual vendors for each function.

Finally, you should select a vendor you trust in order to develop a mutually beneficial partner relationship. It is important to develop tangible measures of job performance before entering into an agreement, as well as financial incentives to encourage the vendor to meet deadlines and control costs. The contract should clearly define responsibilities and performance criteria, outline confidentiality rules and ownership rights to new ideas or technology. It should also include a means of severing the relationship if the service does not meet your expectations. Since the vendor is likely to have more experience in preparing outsourcing agreements than a small client company, it may also be helpful to consult with an attorney during contract negotiations.

References:
file:///C:/Users/ImpulsE/Desktop/assign8/Outsourcing.htm
file:///C:/Users/ImpulsE/Desktop/assign8/outsourcing1.htmhttp://www.outsource2india.com/why_outsource/articles/benefit_outsourcing.asphttp://www.allbusiness.com/human-resources/workforce-management-hiring/1084-3.html
Back to top Go down
View user profile
Venus Millena



Posts : 41
Points : 41
Join date : 2009-06-23
Age : 27
Location : lacson ext., brgy. obrero, davao city

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Sat Oct 03, 2009 4:53 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)
Back to top Go down
View user profile http://venus_astarte16@yahoo.com
basith_jumat



Posts : 49
Points : 59
Join date : 2009-06-22
Age : 30

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Mon Oct 05, 2009 12:33 pm

Choosing between the outsourcing and In-sourcing its really hard for me to decide. But let’s us see what will be my stand after discussing this topic. Let’s me first define in-source and out-source. The Second, advantages and disadvantages of both for me to decide weather I stand in outsourcing or In-sourcing,
What is Insourcing?

The opposite of outsourcing can be defined as in-sourcing. When an organization delegates its work to another entity, which is internal yet not a part of the organization, it is termed as in-sourcing. The internal entity will usually have a specialized team who will be proficient in the providing the required services. Organizations sometimes opt for in-sourcing because it enables them to maintain a better control of what they outsource. In-sourcing has also come to be defined as transferring work from one organization to another organization which is located within the same country. In-sourcing 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 in-sourcing in order to cut down the cost of labor and taxes amongst others. The trend towards in-sourcing has increased since the year 2006. Organizations who have been dissatisfied with outsourcing have moved towards in-sourcing. Some organizations feel that they can have better customer support and better control over the work outsourced by in-sourcing their work rather than outsourcing it. According to recent studies, there is more wok in-sourced than outsourced in the U.S and U.K. These countries are currently largest outsourcers in the world. The U.S and U.K outsource and in-source work equally.

To make it shot, in-sourcing is a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems.

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.

Outsourcing is an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house.


The Advantages of outsourcing:

• Outsourcing your non-core activities will give you more time to concentrate on your core business processes

• Off shoring can give you access to professional, expert and high-quality services
• 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 more 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 processes are being carried out efficiently, proficiently and within a fast turnaround time

• Off shoring can help your organization save on capital expenditures

• 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 cater to the new and challenging demands of your customers

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

• Sharing your business risks is possible with outsourcing

• 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.

In addition to the above mentioned benefits on outsourcing, I have here some to take on consideration:
• Ability to focus on core competencies. By handing over noncore activities to a trusted third party, a company can concentrate on activities central to its value proposition and increase its competitive positioning.

• Faster and higher-quality service and improved efficiency. Vendors’ economies of scale, combined with service level guarantees, translate into increased operational efficiency for a company. For
Example, outsourcing vendors typically offer service level agreements (SLAs) for availability of at least 99.9%, and many include financial penalties for downtime. Along with higher-quality service, many
Outsourcers claim to reduce cost of management by up to 25%.

• Access to new skills and technology. Outsourcing gives a company access to resources not available internally, such as modern, up-todate technology and skilled human capital.

• Greater flexibility. The flexibility gained through outsourcing helps a company react quickly to changing market conditions, fluctuating demand cycles, and increased competition.

• Staff reallocation. Personnel whose job responsibilities are reduced or eliminated by outsourcing can be reassigned to other, more strategic tasks.

• Lower long-term capital investments. In a typical IS outsourcing contract, the vendor takes ownership of and responsibility for managing all or part of the client’s IS operations or infrastructure, thus eliminating the client’s ongoing investments in computer equipment. The capital funds previously allocated for computer equipment are freed for spending elsewhere.

• Improved predictability of costs. Outsourcing provides a company with predictable yearly costs for the management of all or part of the IS infrastructure.

• Assistance with organizational changes. A third-party IT service firm can help build new infrastructures or merge two existing infrastructures during or shortly after a merger, acquisition, or
joint venture.

• Assistance with globalization. A company looking to move into international markets can rely on a global outsourcer for assistance in broadening infrastructure and operational reach.

The Disadvantages 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

• Off shoring can create potential redundancies for 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, poor quality and delayed services amongst others.

The advantages of in-sourcing:

Low risk is perhaps the primary advantage of insourcing: Direct control over the resources doing the work permits better control over the results. An internal LPM directly coordinates and manages each activity with resources that can be in nearby offices. In this model, the people doing the work also directly coordinate it.

Direct control over the localization resources can produce noticeable cost savings. At one point when employing the total out-sourcing model, we discovered we were paying for as many as six levels of management and coordination on a project—the files, instructions, and other information passed through six other people on the supplier end before reaching the linguist
doing the translation. One can easily understand why messages were so different by the time the worker received them. Direct control of the resources also allows greater flexibility over such factors as resource utilization, staff selection, and labor cost. For example, paying a higher
wage to linguistic resources may result in lower workforce turn-over, higher quality, and a greater ROI (return on investment).

Factors to consider include:

• Reduce recurring costs associated with managing a Help Desk including staffing and training
• Improve service levels and increase professionalism among Help Desk staff
• Realign your staffing as necessary
• Take advantage of existing Help Desk infrastructure and recent call management software implementation
• Predictable monthly service charge for service

• Scalable
• Company retains control
• Company owns technology and data
• Direct knowledge transfer of best practices to your company
Pros
• Scalable
• Company retains control
• Company owns technology and data
• Direct knowledge transfer of best practices to your company
• Allows 2nd Level Support to focus on more difficult technical problems


The Disadvantages of In-housing

A potential major disadvantage is the sheer volume of personnel needed to meet the localization requirement. This model can be perfectly viable when localizing into
just a few languages but becomes less so—if not economically infeasible—when localizing products into many languages.

Factors to consider include:

• Work frequency in each language – in-house personnel must have enough work on a regular
basis to remain cost effective.
• Infrastructure – in-house personnel need offices, computers, telephones, office supplies, and so forth to function properly. The key to success is keeping these resources utilized on value-add activities. Under-utilization means excess capacity that can quickly consume the savings that insourcing provides over out-sourcing.

• Will require significant staff changes
• Must invest time in management of insourcing company
• Investment in technology and process
• Facility and technology must be provided and managed by your company

Cons
• Will require significant staff changes
• Must invest time in management of in sourcing company
• Investment in technology and process
• Facility and technology must be provided and managed by your company


What is best for our organization?

Here are some tips for us to be able to decide on what to choose: insource or outsource.

• 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.


Hybrid Model

As I had doing my researches with this topic I had discover that we can do three approaches to project resourcing; out-sourcing (using external agencies), insourcing (using internal resources), or a combination of the two, we can called the hybrid model. Intel IT has adopted a hybrid model that combines the advantages of both out-sourcing and in-sourcing. But Intel IT uses this approach for large corporations whose documents require localization.

This approach may not applicable to our school as it stated above it is used in large corporation or big organizations or companies. But I just want it to include to this topic.


Hybrid Model

Historically, large corporations often vacillate between total out-sourcing and total in-sourcing. While these shifts may seem appropriate based on changing economic factors, constant switching adds costs and delays the return on the investment each time it occurs. Intel IT has adopted a successful hybrid approach that has helped break this cycle.

A hybrid model combines in-sourcing and out-sourcing and is configured to meet the localization project’s specific needs. We constructed the Intel Linguistic Services (ILS) as part of our localization effort. ILS consists of a large,
worldwide network of freelance linguists covering over 30 languages. ILS also maintains a few in-house linguists for the core (high demand) languages. Translators, editors, desktop publishers, and so forth populate the freelance base according to language specific needs. Most freelancers reside in the target countries to ensure their work conforms to the latest vocabulary and cultural adaptations.

The small number of in-house linguists provides overall direction, consistency, consulting, and advanced expertise in their respective languages.

Advantages

Advantages to this hybrid model include:

• High resource utilization – freelance base works on an as-needed basis, avoiding the possibility of large amounts of excess capacity sitting unused.
• Competitive cost – freelance base is PPV and allows us to directly contact the workforce, saving middle-man costs.
• Managed risk – direct access gives us greater control of the quality and timeliness of our deliverables.

We use a simple database to track all of these efforts. Our LPMs use the database to access individual name, language, contact information, quality rating, and other data. For payroll issues, we hire individual freelancers through sponsoring suppliers that handle most of the payroll activities.

Disadvantages

Managing individual assignments for so many workers is certainly more effort for the project manager than under a total out-sourcing model. Internal localization teams are responsible for understanding and handling such factors as individual availability and the no-work holidays of specific countries. This duty requires a more intensive ability and overall discipline to organize and track data than out-sourcing requires. Managing a network of freelancers also requires in depth skills in mass communication and management. At times, style guides, encryption keys, and other kinds of non-project specific information must go out to the entire network.

In a large corporate environment, a company has three models for completing its localization projects. Intel IT developed and adopted a hybrid model that combines in-house linguists with a worldwide network of freelance
resources. This combination optimizes risk management, resource utilization, and cost savings. Depending on the scope of work and number of target languages, this model may be well suited for implementation at other large companies whose content requires localization.

My opinion:

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 in-source. Even me I still get confuse with is best and preferable to apply in our school. We can mention a lot of good reasons and bad reasons for both at the end of the day what is important stand in our own personal needs.

If I have to look above In-sourcing is gives a lot of benefits to the company but let us look or defined what kind of organization that we are trying to criticize. The University of Southeastern Philippines (USEP) is a state university owned and controlled by the Philippine government. Meaning the USEP is a centralized organization. They can not decide or easily approved the budget for their system. In outsourcing although it is so expensive but in the long run they can save in outsourcing.
For me the best way for the USEP is to outsource their system. It’s hard for the faculty and Staff of the IC to program at same time teaching, If the university will suggest to In-source their system possible for them to add a new employee which to expensive for the government in the long run.
That’s all about this topic. See you guy’s for the next topic…. Thank you for reading!!!



please try to visits my blog:: http://0514vashtrigger.blogspot.com

http://www.outsource2india.com/why_india/articles/outsourcing-versus-insourcing.asp
http://www.google.com/search?hl=en&safe=strict&q=outsoucing+vs.+in-sourcing&aq=f&oq=&aqi=
Back to top Go down
View user profile
Venus Millena



Posts : 41
Points : 41
Join date : 2009-06-23
Age : 27
Location : lacson ext., brgy. obrero, davao city

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Mon Oct 05, 2009 5:28 pm

Asking for my stand whether to go or be favorable between insourcing and outsourcing, it simply depends on the usability, facility, resources and awareness of an organization. Making decision of choosing either of the two must be weigh thoroughly and definitely have the one which much significant and weigh as the useful and convenient of the organization. The organization must have consideration that must be taken and take account to such as financial, user-friendliness and accuracy.

Let’s first make the distinction between outsourcing and insourcing because they are often used interchangeably. Outsourcing refers to the subcontracting practice of taking company business functions and contracting them out to a third party. Outsourcing 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.

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 Vs Offshoring
Generally these questions strikes up when you have a project to outsource or offshore. We often mix both the terms though they have technical differences. Outsourcing is when a company hires some expert or professionals to complete a certain task. This can happen in many cases, including minimizing capital expenditure, high productivity, improved customer support and specialized skill. Outsourcing means corresponding with the provider or an expert within his area of expertise and getting the work done for the same. However, in offshoring a company can outsource its work or project outside the country or anywhere across the globe. The benefit of low cost, educated labor pool and pleasing time zones are diverting the attraction of many SMB’s to offshore their work around the globe. It indicates towards the assigning some particular function of a company to another country, which could be forever or for some given period of time.


Rising Globalization has led increasing number of outsourcing and offshoring projects around the world. Small medium organizations can outsource and offshore their business to compete with the large businesses across the global while cutting down on their expenses. This also brings good news for many freelancers and part-timers as they can get a chance to exhibit their expertise while earning a few bucks too.

But there is a lot of hidden cost involved in offshoring or outsourcing the project. Language barriers, cultural barriers and sometimes timezone challenges can be a hindrance in successfully executing the project. To overcome these barriers and to ensure successful outsourcing and offshoring there are many new online services which are coming to the online market. Elance, Guru, Rentacoder and LimeExchange are some of the interesting names which are coming into the business of outsourcing as well as offshoring. These services are affordable as they are not too heavy on pockets. They charge decent percentage of the amount paid to the provider after the completion of a project. Elance charges 8 to 10%, Rentacoder rates 15% but LimeExchange takes only 8% of the total amount, wherein it provides free registration and some impressive features to mitigate the risks related to outsourcing and offshoring.

Outsourcing enables companies to focus on their core competencies. Companies can have the following needs outsource to technology companies or outsourcing service companies:
1. Customer support or call centers.
2. Business process outsourcing such as accounting, billing and collections.
3. Telecommunications services and management.
4. Fulfillment, CRM and inventory management.
5. Technology hardware and software.
For example, USA companies are outsourcing software development needs to India and customer call center support to the Philippines. This is mainly done for economical reasons, as it is cheaper for these companies to have the service outsourced rather than done in-house.
Advantages of Outsourcing
The benefits of outsourcing are:
1. Less capital expenditure - For example, by outsourcing information technology requirements, a company does not have to buy expensive hardware and software.
2. Less management headache - For example, by outsourcing business process such as accounting, a company no longer has to hire and manage accounting personnel.
3. Focus on core competencies - Outsourcing non-core related processes will allow a business to focus more on it's core competencies and strengths, giving it a competitive advantage.

Reasons for outsourcing
Organizations that outsource are seeking to realize benefits or address the following issues:[12][13][14]
• 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.[15]
• 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.[16]
• Contract. Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.[17]
• 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.[4][18]
• 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.[19][20]
• 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.[21]
• Venture Capital. Some countries match government funds venture capital with private venture capital for startups that start businesses in their country.[1]
• Tax Benefit. Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.
Disadvantages of Outsourcing
Before deciding on outsourcing your company's business process, keep in mind the disadvantages of outsourcing:
1. Less managerial control - It may be harder to manage the outsourcing service provider as compared to managing your own employees.
2. 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.
3. May be more expensive - Sometimes it is cheaper to keep a process in-house as compared to outsourcing.
4. 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.
Criticisms of outsourcing
1. Quality Risks 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.
2. 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.
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.
3. 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.
4. 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.
5. 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.
6. Staff turnover
The staff turnover of employee who originally transferred to the outsourcer is a concern for many companies. Turnover is higher under an outsourcer and key company skills may be lost with retention outside of the control of the company. In outsourcing offshore there is an issue of staff turnover in the outsourcer companies call centers. It is quite normal for such companies to replace its entire workforce each year in a call center. This inhibits the build-up of employee knowledge and keeps quality at a low level.
7. Company knowledge
Outsourcing could lead to communication problems with transferred employees. For example, before transfer staff have access to broadcast company e-mail informing them of new products, procedures etc. Once in the outsourcing organization the same access may not be available. Also to reduce costs, some outsource employees may not have access to e-mail, but any information which is new is delivered in team meetings.
8. Qualifications of outsourcers
The outsourcer may replace staff with less qualified people or with people with different non-equivalent qualifications.
9. Failure to deliver business transformation
Business transformation promised by outsourcing suppliers often fails to materialize. In a commoditized market where many service providers can offer savings of time and money, smart vendors have promised a second wave of benefits that will improve the client’s business outcomes.
10. Productivity
Offshore outsourcing for the purpose of saving cost can often have a negative influence on the real productivity of a company. Rather than investing in technology to improve productivity, companies gain non-real productivity by hiring fewer people locally and outsourcing work to less productive facilities offshore that appear to be more productive simply because the workers are paid less. Sometimes, this can lead to strange contradictions where workers in a developing country using hand tools can appear to be more productive than a U.S. worker using advanced computer controlled machine tools, simply because their salary appears to be less in terms of U.S. dollars.
In contrast, increases in real productivity are the result of more productive tools or methods of operating that make it possible for a worker to do more work. Non-real productivity gains are the result of shifting work to lower paid workers, often without regards to real productivity. The net result of choosing non-real over real productivity gain is that the company falls behind and obsoletes itself overtime rather than making investments in real productivity.
11. Standpoint of labor
From the standpoint of labor within countries on the negative end of outsourcing this may represent a new threat, contributing to rampant worker insecurity, and reflective of the general process of globalization. While the "outsourcing" process may provide benefits to less developed countries or global society as a whole, in some form and to some degree - include rising wages or increasing standards of living - these benefits are not secure. Further, the term outsourcing is also used to describe a process by which an internal department, equipment as well as personnel, is sold to a service provider, who may retain the workforce on worse conditions or discharge them in the short term. The affected workers thus often feel they are being "sold down the river."
12. Security
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.
Fraud is a specific security issue that is criminal activity whether it is by employees or the supplier staff. However, it can be disputed that the fraud is more likely when outsourcers are involved, for example credit card theft when there is scope for fraud by credit card cloning. In April 2005, a high-profile case involving the theft of $350,000 from four Citibank customers occurred when call center workers acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank.

Point of Views towards Outsourcing if it will be implemented in the university
When we talk of businesses outside world, outsourcing is very prominent. Almost every company adopts this system. The reason is simple, it is said to be the new concept in the business world that develops complex systems, elevates the economic growth, increases the competitiveness and enhances performance of the organization. Outsourcing is a great opportunity especially for the individuals who are lucky to have the job and it’s more advantageous for the company who is doing this kind of strategy. However, school is another story to talk about especially if we will talk about my very own school. Outsourcing could be of help in a way that the school can get programs outside that cannot be found or made inside the school. New ideas, strategies and implementations one cannot get we only rely on in-source. It would free the professors to teach students instead of trying to manage the systems inside the school. The professors would be given more time to spend with their students instead of trying to improve the Information System. The first priority of professors should be to teach and not to create or to manage the IS facilities. It would also lessen the worries involved. All the University has to do is to find a party that offers the services needed for the school including the maintenance/check-ups of the equipment to be used and to allot the appropriate budget for it. Troubleshooting and problems that arise would be the problem of the provider and not of the school. Of course the school will be affected if problems will arise but the solution for the problems should be given by the provider and not by the school.

Outsourcing will be better to our school but not in this time for the faculty and students are not yet ready for this kind of change

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.
In regards to University issue about insourcing and point of view.
While, insourcing, is the opposite of outsourcing; it means “contracting in”. In insourcing, an entity or a company personnel who can be said to be an expert in the field to be tested is the one who will deliver/create and manage what the university needs (eg. Creating databases or websites). University security and integrity is much more ensured and there will be less irregularities and faster data compilation can be done because the person who is gathering it works in the company, thus he knows how the company functions and what is its exact needs than an person outside the company but I believe that outsourcing offers a lot more.
He’s familiar with the flow, he can figure out the best thing to do. Second, the school can lessen the cost if it will hire person inside, this is very important especially in the case of my school that the fund is very poor. Third, person inside can always do better, they can get ideas outside, and they can develop what they have. And lastly, the school can make sure that the information is safe and protected.
It is less hustle instead easy to access manpower. When the university wants to have outsourcing, they will look for the person/people to do the systems. It's a time consuming and more expensive routine. Rather than searching for an unknown well-being programmers, why not talked to the best programmers inside the university. Next, the system can be easily developed. Since the programmers is located inside, it is easily for that programmer to look for a new resource for the systems he/she made. He/she can observed what the university's needs. And other factors, he/she can suggest new things for the best of the systems he/she made.
Information’s confidentiality. Choosing personnel within a company can assure the company's operations and process kept secret because nowadays, its very hard to find trustworthy personnel. Second, with regard to expertise, we know that there are lots of skilled IT professionals who are working in this institutions, so why we need to get people not working within the company wherein we already have people who can make or perform that particular job.


But I rather choose the insourcing. Why? For the reason of patronizing our own resources. Resources in terms of making use your IT personnel, programmers and technical literate staffs to work hand on hand to make use their ability in making company own system which basically intended to they company alone. It will naturally address on the company needs and do make an accurate solution to solve the difficulty that the company is craving for.
In regards to the university I would suggest that it is better to buy an operated and functional system. Having the bought system and legally authorized to be owned by the university, what we going to do to be considered in inducing insource is when we will be able to develop it and technically improved by our skilled and brilliant staff. In doing so, we paid for the ready to use system but still we are the one who is responsible in developing it, it still cost-effective because we use the university staff instead of purchasing another system to address the future problem exist. It might be good in the part of the staff cause they will be able to practice their expertise at the same time involving into the actual scenario in which will be witnessed by the student and help them be inspired and motivated. It will challenge the staff as well as the student to do their best and yet be involved their selves and be the best.

Mediocrity knows nothing higher than itself, but talent instantly recognizes genius.
-Sir Arthur Conan Doyle


It just merely my opinion, I hope your not offended and consider my opinion. Thank you readers! Have a nice day and blissful day to all!

Reference:
http://www.ictstandards.com/IT_Outsourcing.htm
www.wikipedia.com
Back to top Go down
View user profile http://venus_astarte16@yahoo.com
Michelle Adlawan



Posts : 34
Points : 36
Join date : 2009-06-23
Age : 27
Location : Lupon, Davao Oriental

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Tue Oct 06, 2009 7:14 pm

If I’m invited by the Dean of the Institute of Computing to attend a seminar-workshop on information systems planning with some of the faculty members and asked to present your evaluation about outsourcing the information systems functions of the school, I would take into account on what position I should take in. Honestly, there’s a lot to consider on which side should be taken in. Let’s just discus first what insourcing (in-house) and outsourcing means and its benefits in applying it in the school.

Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. It 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.

Basically, outsource service providers offer higher quality services at a lower cost. This makes the advantages of IT development outsourcing obvious. As I’ve searched on the internet, I saw its good sides and bad sides in adapting it to the company. One of its given advantages are the following:

  • Outsourcing IT development is a most effective way to stretch your budget. When managers plan IT development outsourcing, they usually make it their aim to cut down the company's expenditures by 30%. This is a figure that speaks for itself. Of course, there's always the risk of failure, but if you outsource prudently, you'll afford to implement projects of such a scale that would be impossible for you to reach on your own.


  • If you need to have state-of-the-art IT solutions worked out and innovations implemented with small losses, outsourcing may be the only way out. It will save you from the nightmare of retraining your employees (or even hiring new ones) and/or paying for re-equipment.


  • Cutting your costs and upgrading the quality of the services you offer will allow you to expand the competitive capacity of your business. I suppose the state the IT market is in today makes this simple argument a crucial one.


  • When you outsource IT development to an outside company, you can concentrate on your core activities. You won't be able to completely forget all about the project or its part that you have chosen to outsource as soon as you sign a contract with an outsource service provider, but you won't have to get scattered, either.


  • If you deal with an experienced and highly qualified vendor, you'll be able to gain valuable expertise in support of your IT capacity. Almost any vendor will surely try to set a dependency trap for you, but it doesn't mean you have to acquire the dependency pattern instead of learning everything you can derive from the vendor's expertise.


However, there are also certain facts of disadvantages in outsourcing. Various studies show that 20% to 35% of IT outsourcing contracts is not revived after they expire. Needless to say that most customers in these cases are not satisfied with the quality and/or price of the services. Here some other facts:

  • You will 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 any business involved in outsourcing faces. This is the risk you have to take. It is inevitable that outsource service providers should take control - at least in part - over outsourcing projects. However, they are not supposed to abuse the confidence reposed in them by their customers. In order to minimize the risk, you have to be extremely careful studying the background of your potential vendor. Once you decide in favor of this or that company and begin negotiating the contract, you should try to make the whole process of the project implementation as transparent for you as it is possible.


  • An outsource service provider might be trying to diversify the business so zealously that achieving progress in one particular area becomes questionable. The solution to this problem lies in the company's portfolio. Examine the relevant case studies and success stories, ask the vendor for references, and, if you are still uncertain, do not hesitate to check these references.


  • A number of problems may arise due to the incompetence of a customer who is a 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 the way the customer wants it, which finally leads to a total mess-up.



On the other hand, insourcing (in-house), the opposite of outsourcing often term as 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.

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.

Same with outsourcing there are also certain benefits for having in-house programmers in the university. Here are some:

  • An internal employee is more likely to have a deeper understanding of your business and the industry. This knowledge and insight definitely comes in handy in choosing the right keywords to optimize for. An in-house programmer is already familiar with the language, brands and product lines involved.


  • Direct control over the resources doing the work permits better control over the results. An internal LPM directly coordinates and manages each activity with resources that can be in nearby offices. In this model, the people doing the work also directly coordinate it.


  • Reduce recurring costs associated with managing a Help Desk including staffing and training.


  • Improve service levels and increase professionalism among Help Desk staff.


  • Realign your staffing as necessary


  • Take advantage of existing Help Desk infrastructure and recent call management software implementation


  • Predictable monthly service charge for service


In spite of the advantages mentioned, there are also disadvantages in adapting in-source in an organization.

  • The sheer volume of personnel needed to meet the localization requirement can be perfectly viable when localizing into just a few languages but becomes less so—if not economically infeasible—when localizing products into many languages.


  • Work frequency in each language – in-house personnel must have enough work on a regular basis to remain cost effective.


  • Infrastructure – in-house personnel need offices, computers, telephones, office supplies, and so forth to function properly. The key to success is keeping these resources utilized on value-add activities. Under-utilization means excess capacity that can quickly consume the savings that insourcing provides over out-sourcing.


  • Require significant staff changes


  • Invest time in management of insourcing company


  • Requires investment in technology and process


  • Facility and technology must be provided and managed by the organization



With the mentioned advantages and disadvantages of in-source and outsource, it is good to believe that the university can apply with both of these functions. Either could still be helpful in the operations in the school. However, it is just to consider the will and capabilities of the qualified personnel in the school that can perform the said the outgoing process of developing the systems used in the university. Since the school has one of the best programmers here in the city, why don’t we try to adapt in-sourcing in the school? It’s true that altering the school from outsource to in-source would make such difficulties. However, difficulties are always accompanied in advancing to modern modification. Having spent the past few years handing over control of troublesome processes to service providers, it is just right to o bring control of problematic systems back in-house. The school should apt to take the challenge and I believe that the university can still overcome the changes later on. Of course, it needs considerable analysis and examinations in getting the perfect picture. Adapting in-source takes a big planning and if the university can discuss firmly the needs of the system, then it would be appropriate to utilize in-source programmers in the school.


Sources:
http://www.outsource2india.com/why_india/articles/outsourcing-versus-insourcing.asp
http://dictionary.bnet.com/definition/insourcing.html
http://www.searchenginepanel.com/top-five-advantages-to-in-house-link-building/

Back to top Go down
View user profile
Lynneth C. Llemit



Posts : 16
Points : 19
Join date : 2009-06-23
Age : 27
Location : Davao City

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Sun Oct 11, 2009 11:19 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)
Back to top Go down
View user profile http://angbantotmo.blogspot.com/
Sarah Jean Tisara



Posts : 29
Points : 29
Join date : 2009-06-19
Age : 27

PostSubject: Outsourcing Vs. Insourcing   Sun Oct 11, 2009 11:44 pm

Arrow What is outsourcing? What is in-source? Which is better outsource or in-source? Before anything else and before I state my stand on this topic, let us be acquainted with outsource and in-source, and what are their advantages and disadvantages.

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 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. 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. 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.

Due to the complexity of work definition, codifying requirements, pricing, and legal terms and conditions, clients often utilize the advisory services of outsourcing consultants 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.

Here are some reasons why companies prefer outsourcing:

Arrow 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 are focused on developing the core business. For example often organizations outsource their IT support to specilaised IT services companies.

Arrow 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.

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

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

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

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

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

Arrow 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.

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

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

Arrow 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.

Arrow 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.

Idea When done for the right reasons, outsourcing will actually help your company grow and save money. There are other advantages of outsourcing that go beyond money and here are some of them:

cyclops 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.

cyclops 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.

cyclops Reduced Overhead. Overhead costs of performing a particular back-office function are extremely high. Consider outsourcing those functions which can be moved easily.

cyclops 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.

cyclops 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.

cyclops 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.

Along with its advantages are the disadvantages and criticism of the public about outsourcing. Here are some of them.

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, 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 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.
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.

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.

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 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.

The staff turnover of employee who originally transferred to the outsourcer is a concern for many companies. Turnover is higher under an outsourcer and key company skills may be lost with retention outside of the control of the company.

In outsourcing offshore there is an issue of staff turnover in the outsourcer companies call centers. It is quite normal for such companies to replace its entire workforce each year in a call center. This inhibits the build-up of employee knowledge and keeps quality at a low level.

Outsourcing could lead to communication problems with transferred employees. For example, before transfer staff have access to broadcast company e-mail informing them of new products, procedures etc. Once in the outsourcing organization the same access may not be available. Also to reduce costs, some outsource employees may not have access to e-mail, but any information which is new is delivered in team meetings.

Failure to deliver business transformation
Business transformation has traditionally been promised by outsourcing suppliers, but they have usually failed to deliver. In a commoditised market where any half-decent service provider can do things cheaper and faster, smart vendors have promised a second wave of benefits that will improve the client’s business outcomes. According to Vinay Couto of Booz & Company “Clients always use the service provider’s ability to achieve transformation as a key selection criterion. It’s always in the top three and sometimes number one.” Often vendors have promised transformation on the basis of wider domain expertise that they didn’t really have, though Couto also says that this is often down to client’s unwillingness to invest in transformation once an outsourcing contract is in place.

Productivity
Offshore outsourcing for the purpose of saving cost can often have a negative influence on the real productivity of a company. Rather than investing in technology to improve productivity, companies gain non-real productivity by hiring fewer people locally and outsourcing work to less productive facilities offshore that appear to be more productive simply because the workers are paid less. Sometimes, this can lead to strange contradictions where workers in a developing country using hand tools can appear to be more productive than a U.S. worker using advanced computer controlled machine tools, simply because their salary appears to be less in terms of U.S. dollars.
In contrast, increases in real productivity are the result of more productive tools or methods of operating that make it possible for a worker to do more work. Non-real productivity gains are the result of shifting work to lower paid workers, often without regards to real productivity. The net result of choosing non-real over real productivity gain is that the company falls behind and obsoletes itself overtime rather than making investments in real productivity.

Security
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.
Fraud is a specific security issue that is criminal activity whether it is by employees or the supplier staff. However, it can be disputed that the fraud is more likely when outsourcers are involved, for example credit card theft when there is scope for fraud by credit card cloning. In April 2005, a high-profile case involving the theft of $350,000 from four Citibank customers occurred when call center workers acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank.

Idea I already mentioned some advantages and disadvantages of Outsourcing, and in addition I will site what Insourcing and its advantages and disadvantages.

Exclamation 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.

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.

Idea If I were to choose between Outsorcing and Insourcing, my stand would be with Insourcing. On my own opinion, it is much better if the school will do insourcing due to the following reasons: the university has the capable individuals that can perform the task regarding the information system, it is safer for the university to let its own employee manage the system than letting others manipulate it, and it is also cheaper to insource because free resources are abundant nowadays. While in ousourcing, 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.
Back to top Go down
View user profile
Sarah Jean Tisara



Posts : 29
Points : 29
Join date : 2009-06-19
Age : 27

PostSubject: Outsourcing Vs. Insourcing   Sun Oct 11, 2009 11:46 pm

Arrow What is outsourcing? What is in-source? Which is better outsource or in-source? Before anything else and before I state my stand on this topic, let us be acquainted with outsource and in-source, and what are their advantages and disadvantages.

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 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. 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. 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.

Due to the complexity of work definition, codifying requirements, pricing, and legal terms and conditions, clients often utilize the advisory services of outsourcing consultants 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.

Here are some reasons why companies prefer outsourcing:

Arrow 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 are focused on developing the core business. For example often organizations outsource their IT support to specilaised IT services companies.

Arrow 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.

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

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

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

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

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

Arrow 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.

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

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

Arrow 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.

Arrow 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.

Idea When done for the right reasons, outsourcing will actually help your company grow and save money. There are other advantages of outsourcing that go beyond money and here are some of them:

cyclops 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.

cyclops 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.

cyclops Reduced Overhead. Overhead costs of performing a particular back-office function are extremely high. Consider outsourcing those functions which can be moved easily.

cyclops 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.

cyclops 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.

cyclops 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.

Along with its advantages are the disadvantages and criticism of the public about outsourcing. Here are some of them.

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, 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 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.
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.

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.

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 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.

The staff turnover of employee who originally transferred to the outsourcer is a concern for many companies. Turnover is higher under an outsourcer and key company skills may be lost with retention outside of the control of the company.

In outsourcing offshore there is an issue of staff turnover in the outsourcer companies call centers. It is quite normal for such companies to replace its entire workforce each year in a call center. This inhibits the build-up of employee knowledge and keeps quality at a low level.

Outsourcing could lead to communication problems with transferred employees. For example, before transfer staff have access to broadcast company e-mail informing them of new products, procedures etc. Once in the outsourcing organization the same access may not be available. Also to reduce costs, some outsource employees may not have access to e-mail, but any information which is new is delivered in team meetings.

Failure to deliver business transformation
Business transformation has traditionally been promised by outsourcing suppliers, but they have usually failed to deliver. In a commoditised market where any half-decent service provider can do things cheaper and faster, smart vendors have promised a second wave of benefits that will improve the client’s business outcomes. According to Vinay Couto of Booz & Company “Clients always use the service provider’s ability to achieve transformation as a key selection criterion. It’s always in the top three and sometimes number one.” Often vendors have promised transformation on the basis of wider domain expertise that they didn’t really have, though Couto also says that this is often down to client’s unwillingness to invest in transformation once an outsourcing contract is in place.

Productivity
Offshore outsourcing for the purpose of saving cost can often have a negative influence on the real productivity of a company. Rather than investing in technology to improve productivity, companies gain non-real productivity by hiring fewer people locally and outsourcing work to less productive facilities offshore that appear to be more productive simply because the workers are paid less. Sometimes, this can lead to strange contradictions where workers in a developing country using hand tools can appear to be more productive than a U.S. worker using advanced computer controlled machine tools, simply because their salary appears to be less in terms of U.S. dollars.
In contrast, increases in real productivity are the result of more productive tools or methods of operating that make it possible for a worker to do more work. Non-real productivity gains are the result of shifting work to lower paid workers, often without regards to real productivity. The net result of choosing non-real over real productivity gain is that the company falls behind and obsoletes itself overtime rather than making investments in real productivity.

Security
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.
Fraud is a specific security issue that is criminal activity whether it is by employees or the supplier staff. However, it can be disputed that the fraud is more likely when outsourcers are involved, for example credit card theft when there is scope for fraud by credit card cloning. In April 2005, a high-profile case involving the theft of $350,000 from four Citibank customers occurred when call center workers acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank.

Idea I already mentioned some advantages and disadvantages of Outsourcing, and in addition I will site what Insourcing and its advantages and disadvantages.

Exclamation 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.

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.

Idea If I were to choose between Outsorcing and Insourcing, my stand would be with Insourcing. On my own opinion, it is much better if the school will do insourcing due to the following reasons: the university has the capable individuals that can perform the task regarding the information system, it is safer for the university to let its own employee manage the system than letting others manipulate it, and it is also cheaper to insource because free resources are abundant nowadays. While in ousourcing, 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.
Back to top Go down
View user profile
Lynneth C. Llemit



Posts : 16
Points : 19
Join date : 2009-06-23
Age : 27
Location : Davao City

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Mon Oct 12, 2009 2:28 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)

------------------------------------------------------------------------------------------------------
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.



Outsourcing-utsourcing is subcontracting a service such as product design or manufacturing, to a third-party company.[1] 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

i think outsourcing would be better:

advantages:

*Outsourcing can save you money.

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.

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.

There are many cases where inter-organizational sharing is possible, but each case must be examined carefully.

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.

*Outsourcing can help you share risk.

Another type of synergy that can cross corporate boundaries is the sharing of risk. In financial circles, this is called the "portfolio effect."

In investing, it's best to diversify your portfolio rather than put all your money in one stock. By spreading your risk, you reduce your total risk.

Why does diversification reduce risk? If the whole market goes down, you'll lose, no matter what you do. But if the market goes up while one company makes some serious mistakes, the rest of your portfolio may still do well, and you are not as vulnerable as you would have been had you put all your money into a single stock.

In business investments, the same is generally true. Outsourcing may permit multiple companies to share risk.

To continue with manufacturing as an example, if all your work is done in one plant, an outage or a labor dispute could put you out of business. If you spread your workload across a number of plants, a labor dispute in one country may not affect the operations of other plants. Thus, you reduce your risk.

In a very large operation, it may be that the company can afford multiple plants. But in smaller companies -- or in the production of small-run specialty parts -- it may be cheaper to spread the work across a number of existing vendor plants via outsourcing than it is to build a number of small plants yourself.


* Outsourcing can help accommodate peak loads.

Outsourcing can be used to minimize fluctuations in headcount that could result from peaks and valleys in demand.

To protect staff from fluctuations in demand, every entrepreneur should staff to the valleys and outsource the peaks.

The added expense per hour of contractors must be balanced against the expense of hiring enough staff to handle the peaks and then wasting time between peak periods. If peak loads are frequent and the valleys are short in duration, hiring may be more economic than outsourcing. If peaks are occasional, contractors will save money in spite of their higher costs per hour.

*Outsourcing can help develop your internal staff.


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.

By contrast, "contractors" simply do work in place of employees. This is sometimes called “staff augmentation.” They should be limited to the commodity work described in point 1.

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.

sources:


http://www.sourcingmag.com/content/c051011a.asp
http://en.wikipedia.org/wiki/Main_Page
Back to top Go down
View user profile http://angbantotmo.blogspot.com/
aeros salaga



Posts : 45
Points : 63
Join date : 2009-06-21
Age : 25
Location : Davao City

PostSubject: Assignment 8: IT outsourcing   Mon Oct 12, 2009 5:48 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.

Outsourcing IT

Perhaps the most crucial contemporary issue of information management is whether to outsource all or some of the information technologies to specialized-services firms. The issue is not a transient phenomenon; the shift from company-management computing to outsourcing is accelerating. The decision when, how, and where to outsource is likely to be one of the few information-management issues that will be coming up for review at board meetings.
So far, there is only one good explanation that fits almost every case of outsourcing information technologies: The outsourcing corporations are trying to return to profitability by cutting employment.
That is not, however, the rationale one finds in press releases announcing the transfer of most information-processing assets to an outsourcer. One hears assertions about computers no longer being a core competency. "Partnership for innovation" is another oft-quoted phrase. The plain fact is that top executives have become disenchanted with their capacity to digest information technologies. Massive divestment of a corporation's IT resources appears to be more like an emetic than a miracle cure.
One would expect outsourcing to be a widely spread occurrence throughout the Fortune 1,000 if it does indeed improve strategic fit, realizes lower costs, takes advantage of vendor's skills, and overcomes the dearth of technical expertise. Outsourcing should be an equally good solution for anyone. It would work well for all corporations, without regard to size, industry, assets, profitability, or growth, as each finds that one or more of the many claimed benefits satisfy their needs.
Applying such reasoning, outsourcing would show up as a random phenomenon, modestly biased in favor of growth corporations seeking added resources to enhance their capabilities. Statistical analysis would then reveal whether outsourcing is a random, evenly spread phenomenon or clustered around some causal connection.
//Outsourcing is, in reality, only one aspect of a currently popular downsizing trend among troubled corporations. It takes place under a more palatable label, just as reengineering is, in most cases, a euphemism for cutbacks.
The IT community has consistently ranked, in a wide range of surveys, as one of the least admired corporate functions and therefore becomes an attractive target when there is a new quota regarding how many bodies must leave.
Cutting staff, divesting business, and getting rid of hundreds of person-years of accumulated skill seems to be a prevailing compulsion among large firms that are seeking to improve profitability by shrinking their size. Although the number of papers that deal with outsourcing is considerable, only a 1993 work by MIT researchers Erik Brynjolfsson and Loren Hitt has studied the relationship between outsourcing and profitability.
They noted that, "Companies that try to jump on the outsourcing bandwagon may be chasing a parked car. We found no association between outsourcing and success. If anything, companies that outsourced more of their information systems work tend to have lower productivity and profitability. The only performance measure heavy outsourcers did well on was stock-market returns. In the short term, the market reacts favorably to outsourcing. Whether the market will continue to react favorably, especially if productivity doesn't improve, remains to be seen."
One could say that outsourcing has many of the attributes of anorexia nervosa. People with anorexia have a distorted self-image that makes them feel fat even when emaciated; preoccupation with food, low self-esteem, and emphatic denial of the problem characterize most anorexics. Similarly, executives in companies with poor financial performance seem to concentrate on downsizing as the preferred method for restoring competitiveness.
Unfortunately, shareholders and investors don't have a clue about the losses to the firm whenever knowledgeable workers leave in droves. There is no such thing as a balance-sheet write-off for human capital. When machinery or buildings become scrap, the auditors reflect that cost with a great deal of precision. The government even allows taking decisions to scrap as a tax deduction. Because outsourcing always takes computers off the list of financial assets, the accountants see that reduction in costs while neglecting the loss of the employees' know-how and commitment to serve the enterprise.
There's always a test to see if a corporation did or did not abandon its essential information capabilities, and it's a simple one: Does the firm retain the choice to repatriate, or move its systems to another vendor without excessive expense, no matter what has been outsourced? If that exit option from outsourcing has an executable plan, then the essential managerial competence of the firm remains intact.
I am in favor of outsourcing for any of the good reasons that would take advantage of somebody else's capacity to accumulate knowledge faster than when it remains homegrown. It should not be a substitute for the corporate version of an emetic. I shall find encouragement about the prospects for outsourcing when I see a large list of prosperous and growing organizations that use this option to enhance their mastery of information management.


There are good and sufficient reasons for selectively outsourcing:
• The organization is incapable of attracting or retaining talent for specialized technologies, especially for innovative uses. It is increasingly true in the public sector.
• The budgeting and capital-investment process is spasmodic, short-term-oriented, and subject to reversals in top management's goals, objectives, and preferences. Increasingly, this characterizes much of the industry, as well as most of the public sector.
• The learning curve for a new or risky technology is especially steep. Therefore, it pays to have an experienced firm introduce the technology at a much lower cost. If the new service becomes attractive, one can always reconsider the outsourcing decision. I have used this strategy over the years with considerable success by negotiating a favorable licensing and technology-transfer agreement as a clause in the initial agreement.
• The organization is internally in turmoil and cannot manage IT because its managerial energies are concentrating on the survival of the firm.
• The organization is very profitable but does not wish to devote scarce managerial resources to managing IT. This calls for inventing new forms of relationships that may not be arm's-length commercial contracts.
Reference: http://www.strassmann.com/pubs/outsourcing.shtml

In-sourcing IT

IT insourcing, or bringing previously outsourced IT functions back in-house, is on the rise, experts say, as the global economic recession, IT outsourcing scandals and the potential cost savings of decreasing the number of outsourced contracts have caused companies to give insourcing another look.
"The pros of insourcing are the speed and control of business change," said Ben Trowbridge, CEO of Alsbridge Inc., a Dallas-based IT outsourcing and business process optimization consulting firm. Trowbridge said his company's IT insourcing evaluations have increased about 15% this year. "There's a sense of intimacy with the business users that's hard to achieve with outsourcing. And it can mean saving jobs."
Dave Rice, previously global CIO at Insight Enterprises Inc., said he once pulled IT help desk and customer service functions back in-house when outsourcing companies were not properly meeting his organization's needs.
"We had some unpleasant experiences -- our customers were unhappy," said Rice, currently CEO at True Cloud LLC, a cloud computing services firm. "I wasn't satisfied that we were getting the same proximate IT services. You have to be very, very careful with anything that affects the broader perception of IT, and make sure you don't diminish that service -- people will immediately notice."
Only 9% of CIOs said they planned to increase IT outsourcing this year, according to the latest update to Gartner Inc.'s 2009 CIO Agenda survey, and many are considering insourcing previously outsourced functions.
In most cases, the newly insourced work previously involved contract programmers and consultants, according to Mark McDonald, group vice president and head of research at the Stamford, Conn.-based consultancy and author of the CIO Agenda study. "For the average company, the cutback is temporary as investments are delayed or postponed," McDonald said.
Rice said a slowdown in outsourcing activities this year could stem from companies reaching a "saturation point." He also posited that it is very difficult to get sustainable cost savings out of outsourcing.
"It's intriguing, because of the initial cost benefit -- you look like a hero in the short term," Rice said. However, when it comes time for clients to renew their contracts, their companies have often grown or added requirements that might drive up the price of the IT outsourcing contract.
Rice said he takes a good, hard look at which functions to outsource and which to keep in-house in the first place. In his experience, when moving toward outsourcing a hosted infrastructure, "that's a step you don't come back from," he said. To bring it back in-house would basically entail hiring and training an entire in-house workforce.
Trowbridge said insourcing is strongest around applications and development, although it varies from company to company. In addition, virtualization has given infrastructure outsourcing less of an edge.
"Virtualization could take the upside out of outsourcing and make it more effective to do it yourself," Trowbridge said.
Doing so, of course, demands a lot of work, and Trowbridge warned that it's a difficult task involving application and server work. Plus, given the number of layoffs over the past year, many companies are currently short on skill sets if not the number of employees that would be needed to insource previously outsourced IT functions.
Why IT insourcing appears to be on the upswing
Insourcing has been attractive in the past for businesses in the throes of change, but market conditions are ripe these days as well. The economic recession and the scandal at IT outsourcing firm Satyam Computer Services Ltd. have led some companies to renegotiate lower prices in exchange for more flexibility in how outsourcers complete the work.
These same factors are also causing companies to look in-house to see if internal staff could do the work for even less money or greater benefits than a renegotiated outsourcing contract could provide. A company's decisions should largely depend on whether the right labor is located in its geographic marketplace. "If the labor's not there, you could get into a pretty high-cost game," Trowbridge said. "The question is, is it more efficient?"
Rice said that good candidates for insourcing are smaller, auxiliary services that affect the external perception of the business. Whenever renewing an outsourcing contract, "it's certainly worth a conversation" whether to bring the work in-house, Rice said.
Trowbridge advises companies to benchmark prices in the market before making any decisions.
"Look at what you would spend to do it yourself, and make a good, measured decision on this," Trowbridge said.
Reference: http://searchcio.techtarget.com/news/article/0,289142,sid182_gci1359601,00.html

In-Source Benefits

Reduced Costs

-The cost of an In-Source professional could be 75% lower than the total cost for an IT worker in the U.S.
Increased Professional Resources
-Integrate 3 or 4 In-Source professionals for the total cost of one U.S employee.

Direct Management

-Our clients choose in-sourcing because they prefer hands-on control through the development life cycle of their projects. Instead of relinquishing control to an outsourcing firm who does not understand your business as you do, In-Source allows your knowledge and direction to more effectively impact the development process.

Turnkey Services

-In-Source provides a turnkey solution including facilities, recruitment, human resource management, payroll and benefits administration, tax filings, and communication tools, so you can spend more time focused on your core business.

Reduced Operational Expenses

-We operate a state-of-the-art IT facility in Bangalore, the Silicon Valley of India, at a significantly reduced rate compared to U.S. facilities.

Extended Productivity Hours

-Because of the time difference between the United States and India, your projects could be developed and supported nearly 24/7, including many of the major U.S. holidays, which are not holidays in India. In-Source offers flexible shift times to allow overlap and coordination with your IT professionals.

Faster Time to Market

-Complete projects faster with a larger IT development team.
Increased Company Profitability
-With reduced costs, increased development resources at an affordable price, and faster development periods, In-Source clients can significantly increase profitability.

Reference: http://www.in-source.com/benefit.html

Information Technology (IT) is a critical part of the business process that can require technical competence beyond the scope of the current management. In this case, a third party should manage the IT function.
Here are some of the reasons why outsourcing is a better choice for managing the IT department, rather than maintaining IT internally:

Improve Cost Management Control

• IT costs become more visible as all billable hours must be accounted for
• Outsourced services are utilized as needed, and organizations pay only for what services are actually used
• An outsourced IT department can reduce costs by utilizing its extensive knowledge base of various IT specialists, as opposed to an organization maintaining a comprehensive in-house staff

Improve Service Quality

• Outsourced companies make performance reports and measurements available to their clients
• Communications between business functions improve at all levels and ensure that IT resources are not being misused
• Outsourced companies can provide 24x7 support at a fraction of the cost
• Outsource staff tend to drive planning and budgeting improvements
• Service Level Agreements (SLAs) can be established

Staffing

• Staffing levels can be adapted quickly to client requirements, thereby avoiding gaps due to attrition, business growth or economic downturns
• IT consultants are fully trained on the latest technologies
• Retention of technically qualified in-house personnel is more difficult when external job opportunities are rapidly changing
• Continuous IT support coverage without having to rely on only one or two key people
Equipment and Software Tools
• Outsourced services use established standards for equipment and software requirements, saving time and money
• Outsourced services use approved lists of reliable vendors, which improves the quality of goods and services received

Client can focus on business core Competencies

• Client management can concentrate on core competencies and revenue generating activities, while leaving technology management to IT professionals
• Management of non-essential core functions is transferred to the outsourcer

Reference: http://www.unameits.com/why_it/benefits_advantages_outsourcing_information_technology.jsp

INSOURCING

Advantages Disadvantages
• High degree of control. • Reduces strategic flexibility.
• Ability to oversee the entire process. • Requires high investment.
• Economies of scale and/or scope. • Potential suppliers may offer superior
products and services.

OUTSOURCING
Advantages Disadvantages
• High strategic flexibility. • Possibility of choosing a bad supplier
• Low investment risk. • Loss of control over the process
• Improved cash flow. • & core technologies
• Access to state-of-the-art • "Hollowing out" of the corporation
products and services.

Reflection:

As an IT student of the University, if the dean would invite me to attend a workshop-seminar on Information system planning it will be an advantage to me to enhance my knowledge about information system strategies and plans. This workshop is a very important thing to IT personnel because of the techniques and the information that you can get.

As the workshop goes on, in one of the sessions, a discussion of outsourcing came up. I have been asked to present your evaluation about outsourcing the information systems functions of the school. In my own, evaluating the outsourcing of the information system of the University is really a big task to me as an IT student. If I’m going to evaluate the IT outsourcing of the University I would first need to know the outsource of their information system. I am really thinking what are the things need to learned by outsourcing. As you have seen the data above about the outsourcing and the in-sourcing of the information system is nearly or almost opposite on its advantages and disadvantages. To evaluate it, the University has a very good choice of information system strategy because it is public University or under government services therefore by expecting the capacity of the University about the cost to be needed in the implementation of the information system, outsourcing of its information system is a very good solution. The university has a low risk of investment and had choose the right supplier or a right information system outsourcing, therefore there is nothing to worry about security of the data.
In choosing the position about the plan of the implementation of information system of the University I choose outsourcing. As to categorize the company status or the profile of the University, in-sourcing is not capable or the right plan for the university. Outsourcing is the best pick because University is just a school and besides a government establishment. In-sourcing is just good if the company is private and owned by a single person or manage by a single management that can afford the cost.
Back to top Go down
View user profile http://aerosusep.blogspot.com
emilio jopia jr.



Posts : 47
Points : 47
Join date : 2009-06-22

PostSubject: MIS Assignment 8   Tue Oct 13, 2009 2:50 am

As a student, I 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. I have been asked to present your evaluation about outsourcing the information systems functions of the school.

If the Dean of the Institute of Computing will invite me to attend a seminar-workshop these are the things that I will present in my evaluation about outsourcing the information systems functions of the school:

Outsourcing is subcontracting a service 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 has assumed strongly negative connotations in certain circles. To some, outsourcing today means low-cost labour, performing low-value work in substandard or even exploitative conditions. When combined with offshoring, outsourcing has led to rising unemployment and other economic and social ills. Outsourcing and offshoring have become symbols of globalisation’s adverse side effects, and so both practices have become politically volatile.

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.[15]
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.[16]
Contract. Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.[17]
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.[4][18]
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.[19][20]
• Reduce time to market. The acceleration of the development or production of a product through the additional capability brought by the supplier.
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.[21]
Venture Capital. Some countries match government funds venture capital with private venture capital for startups that start businesses in their country.[1]
Tax Benefit. Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.


Drawbacks of Outsourcing

Outsourcing can provide considerable benefits to your company. However, there are definitely a number of drawbacks that you need to be aware of in order to make a good assessment:
Management & Control Problems
Effectively managing the operation of a department within your own company is challenging enough. Effectively controlling an offshore operation is difficult due to the geographical distance, time-zone difference, and lack of face-to-face communication.
Failure to Deliver
With external sources, you are trusting a third party to deliver a certain quantity/quality of deliverables. Should your provider fail to deliver, you are likely to suffer the consequences despite the Service Level Agreements (SLAs) you had in place.
Exposure
Outsourcing exposes a certain part of your business to a third party. Unless you completely shield your offshore operation, you might expose your company to a breech of confidentiality, malicious use of system access, and other vulnerabilities in your organization.
Negative Reputation
Outsourcing has gained a negative reputation and even though studies have proven otherwise, the general public opinion remains that offshoring eliminates domestic jobs. Your employees, clients, and partners might not appreciate the fact that you are offshoring certain business processes especially if that means that you are terminating a part of your domestic operation.
Company Value
The major risk of outsourcing is that you may not be building the value of your company in terms of personnel, in-house knowledge, and infrastructure. In this case, the value of an outsourcing agreement with a provider will be less effective than an internal department.


If I had to take a position I would choose in-sourcing.

In-Sourcing is the opposite of outsourcing; that is in sourcing (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. In sourcing 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.

Why Insource?
Insourcing can also reduce variability and help the manufacturer develop and test line extensions with a higher degree of security than with outsourcing. A manufacturer’s response to a crisis, such as tampering, destruction, or compromise, can also be quicker than if its goods are with an outsourcer. However, both insourcing and outsourcing can help an OEM recover from catastrophes, or alleviate short- or long-term capacity issues.
Insourcers can also enjoy improved responsiveness over contract partners. Because they are closer to their customers, insourcers can react more quickly than those that are simply managing a larger supply chain. With the control of insourcing, relationships can be leveraged for additional cost savings. Insourcing is particularly suited for noncommodity products, because companies can provide competitive quotes and lower their cost of goods sold. Finally, if companies do not achieve quality enhancements through outsourcing, they should consider keeping control in-house.


There are cost benefits to insourcing, of course. Average salaries and benefits for qualified staff in Manila are about a third of market rates in other major cities throughout the world, and even lower than high-cost jurisdictions, such as London and New York.
Rents, utilities and other fixed costs are also more affordable in Manila, and they are expected to remain so for the foreseeable future.
As a result, the firm’s global marketing team saves more than half a million dollars annually by doing most of its graphic design and desktop publishing work in Manila. In addition, we have realised similar savings by consolidating much of our software-development work globally in GSM.

Advantages of In-Sourcing
• Substantial cost savings
• Increased Professional Resources
• Direct Management
• Reduced Operational Expenses
• Extended Productivity Hours

What about Outsourcing?
The quick answer to the outsourcing question used to be cost reductions. This still holds true for certain products and contexts. With the right partner, outsourcing can provide significant production scale without capital investment.
For small companies with limited access to capital, outsourcing provides a means to manage cash flow and inventories. Outsourcing is a good option for commodity manufacture, because third parties can offer economies of scale that individual companies cannot reach on their own.
The benefits of minimal capital investment and cash flow, however, may be offset by the increased inventory needed to support the long lead times inherent in outsourced manufacturing.
Managing outsource partners may result in greater personnel costs and a loss of flexibility and control. It’s also important to understand the implications of outsourcing for inventory and cash flow management. A common issue is deciding when an OEM should pay for its product (upon receipt, ex-works, etc.).
In fact, industry experts note that a key factor driving insourcing has been the failure of outsourcing to achieve the consistent, long-term, and significant cost savings that clients anticipate.3
Estimates from Compass Sourcing Services indicate that large outsourcing contracts show, on average, a cost reduction of 15% in the first 18 months of the agreement. However, experts also say that because of growing demand for services and sales charges of many outsourcing contracts, the client’s costs are often 30% higher than those of a well-managed internal operation by the end of the term.3
Another possible drawback of outsourcing material is quality. Although this problem is alleviated by choosing an outsourcer that emphasizes quality, there is a risk that the quality of the product will not meet the expectations of the manufacturer.
There are three key issues to balance in making the decision to outsource or insource manufacturing, as follows:
• The complexity of the product design. Commodity-type products can benefit from the economies of scale and purchasing power of their contract manufacturers.
• The maturity of the product design. Companies should be cautious about outsourcing brand-new products.
• The stability of the market need. Allowing the product and the market to stabilize before considering an outsourcing partner helps ensure a successful transition.
Products that may require future improvements or updates to address market needs may be difficult to outsource because partners may be unwilling to share in the cost of production changes. Depending on the lead times for manufacture, the volume of in-process inventory may be significant. Finally, OEMs must make sure that partners are willing to alter their processes to accommodate individual needs.
For success in outsourcing, it is critical to pick the right partner. No contract is bulletproof. It is important to understand that unexpected things will happen. OEMs must put plans in place to be ready to manage them when they do. Unforeseen changes in ownership or management can seriously alter a partnership and the terms of supply, price, and quality.

What is best for the organization?

If the 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 the 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 the 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. The 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!

References:
http://www.in-source.com/benefit.html
http://www.devicelink.com/mddi/archive/07/03/027.html







Back to top Go down
View user profile
JerusalemAlvaira



Posts : 46
Points : 48
Join date : 2009-06-23
Age : 28

PostSubject: Insourcing or Outsourcing?   Tue Oct 13, 2009 3:38 am

If I were invited by the university of southeastern Philippines dean of the Institute of Computing to attend a seminar-workshop on information systems planning with some faculty members regarding the outsourcing of the university's information system.

Let us first define the following:

o Information system

o Outsourcing

o Insourcing


Information system is composed of hardware, software and people. These components can be found in different business operations. Information system is different from information technology because the former has a component that interacts with information technology components. Information technology components help the people handle things that are beyond the capability of a human person like handling large amounts of data.

Having your Information System or any business operations insourced or outsourced is one of the major critical decisions that your company has to undergo. Before you choose one, you have to know the benefits you get in opting for one of the two processes or choosing both. Also, you have to know how much you are going to spend in one or both the processes.

Outsourcing is when one company does information technology or information systems services to another company. Also, outsourcing is a contracted business process. It can be any costumer - related services or any other business - related operations.

Insourcing is a business process that has no contracts since the company is assigning a specific job to someone within their own company. One example is hiring someone within the company to develop a Human Resource Information System for the company. Reasons for insourcing could happen when the company had had enough with the products or services they had outsourced.

Insourcing VS Outsourcing

Insourcing as defined, is the non - contract process of assigning an employee within the company to do a specific job, in this way, information technology people will be able to maintain or keep their jobs. It can also earn the development staff more incentives in creating the insourced system. Insourcing is a business process or information system that will somehow take away your worries about competitions in the hardware and software products that are available in the market. Furthermore, insourcing will save you from abiding with what is in the market trend since you will be using your own resources and employees to do the job for you. Other than that, having your company to insource a business process, you will be able to maintain 100% of the confidentiality of your databases.

Outsourcing, on the other hand, is the contracted business process. This is where you pay for the services or tasks that the other outsourcing company will do for you. Usually, the companies who opt for outsourcing are those companies that do not have their own resources, capabilities and/or time to do a specific task for their respective organization. When you outsource your business process and other information technology or information systems services, you will be given up to date products available in the market. They usually pay the outsourcing company while at the same time abiding by the contract that both companies made. Database security, however, can be a question for the reason that if you are dealing with an outsource company, most specially when you are just renting your business process or information technology or information system service, the outsourcing company will have access to the records in your database or any confidential information regarding your corporation. Other than that, you might be having other services that you might not need in what you had purchased or outsourced from them.

Advantages and disadvantages of insourcing and outsourcing:

Chapter 7: Insourcing/Outsourcing by Bozart and Handfield:

“Insourcing gives a company a high degree of control over its operations, which is particularly desirable if the company owns proprietary designs or processes. Insourcing can also lower manufacturing costs, but only if a company enjoys the business volume necessary to achieve economies of scale.”

“Outsourcing typically increases a firm's flexibility and access to state-of-the-art products and processes. As markets or technologies change, many firms find changing supply chain partners easier than changing internal processes. In addition to increasing a firm's strategic flexibility and access to new technologies, outsourcing improves its cash flow. With outsourcing, less investment is required up front in the resources needed to provide a product or service. The benefits can be significant.”

“Control is also an issue in outsourcing. Buying firms may need to create costly safeguards to regulate the quality, availability, confidentiality, or performance of outsourced goods or services. At the extreme, they may lose key skills and technologies that are part of their core competencies. To counteract such threats, many companies oversee key design, operations, and supply chain activities and keep current on what customers want and how their products or services meet those demands9.”

Effects of Insourcing
As I was browsing the internet regarding the effects of insourcing process in the Philippines, I have read a paragraph on an article posted posted 3 Mar 2008 in Volume 10 Issue 9, titled THE COMPELLING CASE FOR INSOURCING in Managing Partner regarding the Philippines. It was written, “GSM work is done to a consistently high standard of quality. The Philippines has a large pool of highly educated, well trained and ambitious young professionals, fluent in English and highly motivated to
be part a large international firm. So it’s no surprise that the work output we see from GSM is world class in every sense.” GSM, by the way, stands for Global Services Manila. The entry on the article increased my sense of pride as a Filipino. It also showed the good side of insourcing in the Philippines that the Filipino’s are very competent in the business world. Going back to the effects of insourcing, insourcing a business process can help increase the number of jobs in the country. Moreover, you will be able to know more about the capabilities and enhance their skills of your employees. The downside of insourcing is that this can demote job growth most especially to the outsourcing companies.
Effects of Outsourcing:
The outsourcing in the Philippines has made the economy strong amidst the global financial crisis that the international community is suffering. There has been an increase in employment in the country especially in those places where business process outsourcing companies are located.
According to the article written by Mary Thomas in her article titled Effects of Outsourcing Jobs - The Positive and Negative, “The positive effects of outsourcing jobs are now being experienced by those who were bold and innovative enough to hire individuals from other countries for certain jobs.
“There are many positive effects of outsourcing, the most obvious of which is getting cheap labor and saving money in the process.
“One of the best ways to save money is to outsource some of the task required in your business to individuals from other countries such as Philippines, China and India. You will be surprised about the professionalism of the workers in these countries. More surprising is how you can have them work for you for a very affordable price.”
Now, in the case of the University of Southeastern Philippines, Institute of Computing, we all know that we have the best and the most competent faculty members and staff in the institute. They are equipped with different knowledge in computer programming and computer networking which is undoubtedly true. However, considering the number of faculty members, we really are short in manpower. If the university president will hire one or two faculty members to develop a system, there is always the possibility of having the number of active teaching staff decreased. Just like what happened before in the institute when the university decided to develop their own enrollment system, our professor resigned and we were turned over to another professor and it happened twice.

That is one of the reasons why I would opt for the outsourcing of the University of Southeastern Philippines’ Information System. Through outsourcing, the University of Southeastern Philippines will be able to save not only manpower and time but also, it will spare the Institute of Computing students from hampering the learnings on a particular subject. Other than that, the University of Southeastern Philippines and most specially, the Institute of Computing will be able to focus on the core functions and education of the students in the university.

It was written in the article titled Outsourcing vs. Insourcing: What's 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!”
It is up to the company to decide whether they are going to opt for outsourced or insourced information system or any business operations because they are the ones who really know the capabilities and the needs of their organization.

References:
http://www.internetbasedmoms.com/internet-marketing/definition-of-outsourcing.html

http://www.mpmagazine.com/xq/asp/txtSearch.Information+Technology/exactphrase.1/sid.0/articleid.0EE11681-6505-4BF0-892C-B2A060BB54BE/qx/display.htm

http://answers.yahoo.com/question/index?qid=20080825111913AAVigRJ

http://ezinearticles.com/?Effects-of-Outsourcing-Jobs---The-Positive-and-Negative&id=2616295

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


for comments:
click here
Back to top Go down
View user profile
athina alorro



Posts : 43
Points : 46
Join date : 2009-06-23
Age : 26

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Tue Oct 13, 2009 7:30 am

Before I would state where I stand between in-house and outsourcing, I will first define the term in-house and outsourcing for the information of those who are not familiar with the terms yet. so here it goes.

What is outsourcing?

According to this SITE:

"..Outsourcing refers to a company that contracts with another company to provide services that might otherwise be performed by in-house employees."


Here is another definition of outsourcing according to this white paper that can be accessed through this link :
http://www.aramarkhighered.com/pdfs/articles/IHEP%20Outsourcing%20White%20Paper%209-05.pdf

"..Outsourcing is a form of privatization that generally refers to a higher education institution’s decision to contract with an external organization to provide a traditional campus function or service. The contractor either takes over the task of compensating and managing the employees of the university, paying the group according to its standards, or replaces the university employees with its own staff."


What is in-sourcing?

In-sourcing (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.
from : wikipedia.com

Based on my opinion, I think it would be better for the university to apply in-house instead of outsource. why? the following are my reasons.

If we have the manpower, why not utilize it?

If in terms of skilled professionals, I believe that our university probably has some of the best IT professionals in Mindanao if not the whole Philippines. It's undeniable that all our faculty (especially in the IC department) are very competent and world class. We are not called a “university” for nothing. Most of our faculties are really good at their field of expertise. Since our faculties are competent enough, why not utilize those skills that we 'already' have in order to improve our system in our university?
I believe that tapping our "well equipped faculties" will definitely increase the morale of the faculties and the university in general for utilizing and recognizing the talents that we have. Tapping our faculties to make our systems will also serve as an inspiration and example to students to have an idea of what would be their role when they will go out in the real world. The students will have higher respect and admiration to the faculties knowing that they do not only teach pure theories but they can also apply it to the real world.

Outsourcing is cheaper. I beg to disagree.

During our interview with the MIS programmer of DOLE Philippines, when we asked her what are the advantage of having an in-house information system in a company, she said that in a long-run if you will compute the cost that will be generated...in-housing is much cheaper compared to outsourcing.
Most people think that outsourcing is cheaper compared to in-housing. Well, I beg to disagree. Yes, at first the university will pay more in the first few months in in-housing compared to outsourcing. But if you calculate how much is the university will be paying for let’s say five years in outsourcing, it’s definitely higher compared to what can the university can pay on in-housing. All the university have to do is to pay additional incentives for the faculty for the maintenance of the whole system which is way to cheaper compared to outsourcing the system.

To support this idea, here is an excerpt of the article entitled “Outsourced customer service operations can cost almost a third more than those retained in-house, according to a new study by Gartner.” by Alexa Bona which can be found on this SITE:


...The research firm found that outsourced operations are 30 percent more expensive than the top quartile of in-house customer service operations.

Alexa Bona, research director at Gartner, said businesses often fail to take hidden costs, such as in-house backup support to the outsourced function, into account.

"The outsourced service is often more efficient, but then outsourcers need to make a profit too," she said.

Gartner also said 80 percent of organizations that outsource their customer management operations purely to cut costs will fail to do so, while 60 percent of those who outsource parts of the customer-facing process will have to deal with customer defections and hidden costs that outweigh any potential savings offered by outsourcing.

"If all you are trying to do is save money, you are not going to be successful," Bona said.


This just goes to show that people tend to disregard the long term effects of outsourcing which is losing a considerable amount of money in the long run. I think we should also look on the positive benefits of in-house in the long run.

Security and data integrity

In comes to data security and integrity, it is safe to say data that is generated from in-house is much more secure and private compared to outsourcing. Since in-house system is generated from the mother institution, it is safe to say that because of loyalty and self preservation, data generally cannot get-out from the walls of the institution.There is also the danger of not being able to control some aspects of the institution, 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.
http://www.wisegeek.com/what-is-outsourcing.htm

Easier access to support for better communication

Since the in-house personnel are already located within the institution itslef, the support for the system is much more accessible compared to outsourcing. All you have to do is call the faculty downstairs if there is any problem which can be solve right then and there. Compared to outsourcing where they have to travel from somewhere before they can go to the university and solve the problem.Lack of communication between the outsourcer and the company may also be a problem. This poor communication may result in the misunderstanding of the job to be done with unsatisfactory results. This is another disadvantage of outsourcing for a large organization such as our university because there is the difficulty in managing the relationship with the vendor/third party.
http://caribbeanresumes.com/career_tools/articles/outsource-or-not-outsource


Other issues of Outsourcing that discouraged me.

According to this SITE,
"..Outsourcing critics claim that private business practices are contrary to the established traditions of shared governance and to the academic profession, which require substantial professional autonomy, peer rather than hierarchical authority, and a less materialistic culture. Further, critics of outsourcing point out the human resources consequences, including lost jobs or decreased loyalty to the university."

To sum up,
According to an outsourcing white paper from this site:
http://www.aramarkhighered.com/pdfs/articles/IHEP%20Outsourcing%20White%20Paper%209-05.pdf

The apprehensions on choosing outsourcing are due to the following major concerns on educational institutions such as our university:
“..They are:
(1) loss of control and ability to manage the contractor,
(2) service quality and customer satisfaction inconsistency,
(3) employee displacement or morale, and
(4) impersonal nature, loss of identity, community, culture,and collegiality (Norris and Olson 2003).
The first three of these concerns are issues that would be found in any organization to some degree—whether public or private, small or large, business or university. It is the fourth concern—loss of identity, community, and collegiality—that is particularly unique to the academy. “
Back to top Go down
View user profile http://www.athina09.blogspot.com
mae m. mara



Posts : 41
Points : 41
Join date : 2009-06-22
Age : 27

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Wed Oct 14, 2009 5:54 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.

For me, as a student in this organization and was governed by the government I would choose Out-sourcing. It’s costly unlike in-sourcing but there are many advantages in the long run. The organization can benefit financially. Eventhough you haven’t see the entire process but out-sourcing has a high strategic flexibility. Let’s discuss Out-sourcing and in-sourcing first.
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!
INSOURCING

Advantages Disadvantages
• High degree of control. • Reduces strategic flexibility.
• Ability to oversee the entire process. • Requires high investment.
• Economies of scale and/or scope. • Potential suppliers may offer superior
products and services.

OUTSOURCING
Advantages Disadvantages
• High strategic flexibility. • Possibility of choosing a bad supplier
• Low investment risk. • Loss of control over the process
• Improved cash flow. • & core technologies
• Access to state-of-the-art • "Hollowing out" of the corporation
products and services.
Back to top Go down
View user profile
jealou azucena



Posts : 25
Points : 27
Join date : 2009-06-23
Age : 27
Location : Davao City

PostSubject: Assignment #8   Thu Oct 15, 2009 12:29 pm

- - - - -
OUTSOURCING FOR THE UNIVERSITY


Actually, I’m a little torn between insourcing and outsourcing for the university.

It’s very difficult to take a stand on the issue since I have a very limited knowledge on what is the present and real situation of the university’s information system. Other than that there are many factors involved in the decision that I do not grasp.
In this case a thorough and extensive study must be done on which action the university must do in order to maximize benefits.

I mean, at a given time insourcing could be more advantageous and beneficial than outsourcing, at another situation it could be another way around.

With my position right now I think the university should outsource its Information System.
Why?
First, outsourcing is cheaper than insourcing.
While insourcing has the advantage of high degree control over system since the developer is insource. Aside from the fact that insource programmer knows the requirement and just what the university exactly needs, I don’t think that the administration is willing to spend more money in this particular matter. If we do the system insource it means that the university will provide all the necessary needs in completing the project.
If we outsource it will be less costly since we have different options in the market and system vendors nowadays competes. Commonly systems are now package complete with support.
In the light of the university’s recent event insourcing, (I think…) it causes resistance from some of the high ranking officials in the school.

Second, while insourcing boost the morale of the faculty the extra work distracts them from teaching.
The university is a learning institution therefore it must prioritize the students. If we insource and something went wrong with the system the faculty are pulled out from their classes to attend the problem leaving the student hanging. This practice is really not good in learning. Whereas if we outsource, all the troubleshooting, maintenance and check up of the hardware and software (the likes…) will be the problem of the provider this also means that with outsourcing we get support for the IS.

With outsourcing the professor can perform their primary role which is teaching in the university.



on the other hand…


About insourcing…

Insourcing is also a good option for the university, since we have competent faculty for the job why not use our resources. With insource the system is more secured and the university can have high degree of control over it.

In the end the final decision is still in the hands of the university administration. Presently, I think we are insourcing…but I don’t know what’s happening now with the system.
According to last update about the information sytem which was used last semesters enrollment, it is being modified for errors…(from what I’ve heard…)

We hope for a better enrollment next sem…^^

Note: Sir, I know you ask for a 3000 words explanation but I don’t want answer a ‘couple of copy pastes’…



jealou azucena lol!

Back to top Go down
View user profile
Edsa Fe Esio



Posts : 30
Points : 30
Join date : 2009-06-23

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Fri Oct 16, 2009 10:04 am

Outsource or In-source

Neutral Neutral Neutral Neutral

Most organization nowadays already engaged in automation. Technology plays a great role in the success of a business and to be competitive in the market. Adopting the way of technology, gadgets and hardware are necessary as well as its software and people ware. One of the wide issues covered by technology is outsourcing and in-sourcing. Every business, university or organization has to determine whether they should perform a service themselves in-source or outsource. However, it is not essential or required to limit the option by choosing only side of the coin because in business things are viewed in different directions to see the right angle to make the decision more accurate based on the current situation of the company.

Outsourcing refers to the subcontracting practice of taking company business functions and contracting them out to a third party. While, in-sourcing, is the opposite of outsourcing; it means “contracting in”. In in-sourcing, an entity or company personnel who can be said to be an expert in the field to be tested is the one who will deliver/create and manage what the university needs in regards to information system.

In taking the sides on where to stand between outsource or in-source depends on the situation of the school if what would be the best option for them. There are cases that outsourcing is a good thing to do. However, in-sourcing could also be a better choice if the school holds a number of skilled individual who can do programs better than what they can get outside. In any stand there are factors of advantage and disadvantage effects to the school. These factors are essential to know and identify well to come to the right decision in concern to the current situation and resources of the company.

Resources would be the biggest factor that can effect the decision whether to choose outsourcing or in-housing of information system. The company or the school would see to it that they have sufficient funds for their forwarded action. The decision is a case-to-case basis. As a decision maker, I must have the list of all the information, advantages and disadvantages between the two proceedings.

Here are some of the advantages and disadvantages of outsourcing and in-housing of Information System.

In outsourcing, some of the advantages are:
- through outsourcing it can be used to bring in new ideas and to train internal staff,
- it ca also increased productivity and it is more service guaranteed.
- lower personnel costs
- Can focus on your core competencies
- Don't have to worry as much about keeping current in outsourced activities
- Frees up space that can be put to alternative uses
- Increases speed of delivery for outsourced activities
- Increases quality of delivery for outsourced activities
- Frees up management time
- Can reduce cash outflow
- 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 are:
- more expensive,
- risk in data security


While in in-sourcing some of the advantages are:
- less expensive,
- more likely to be data secured,
- easy to access the manpower,
- offers easy access to maintenance,
- IT support if any complications occurred.
In my own opinion, taking a stand on whether to outsource or in-source the IS functions of the schools would first require a thorough study on the matter. Define the pros and cons of the two situations and weigh the two against each other. The one that has more benefits should be the action that would be taken.

To take it seriously, choosing between the two without knowing the parameters and the situations to be considered in decision making is critical. In relation to the school, outsourcing maybe good and fair. Outsourcing is mostly made to organizations that do not have the resources in making the information system. All that is needed to do is to find the people who are capable and competent enough to do the job. Tap these people to do the work and let them do there task inside the school. Present to them the functions that the school wants to be the process of the system. After that, a little assessment to the system then waits until the system is fully made. In addition, the maintenance after the making of the system is also taken cared of by the provider. The school won’t problem anymore the installation and maintenance after. But, the greatest negative factor to it is the school need to allot money for hiring the people that is enough and sufficient to support the project all the way. In which, monetary is the problem in the school.

However, in-sourcing may offer advantages to the school. Since, we have the resources of people that are capable and competent to make the system it would lessen the budget in making the system. Aside from that the data are more secured compare if the maker of the system is from outside of the school. Since, in-source the maker of the system is more reliable to the confidential data of the school. On the other side, the makers of the system will mostly the faculty member of the school which probably affects the teaching performance of the faculty maker. Where the main purpose of the instructor is to inculcate its student would possibly affect. Since, we all know that the first priority of professors should be to teach and not to create or to manage the IS facilities.

Razz Razz Razz

Back to top Go down
View user profile
Karen Palero



Posts : 40
Points : 41
Join date : 2009-06-23
Location : Davao

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Fri Oct 16, 2009 12:49 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.

study Overview about insourcing and outsourcing:

Arrow 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. - http://en.wikipedia.org

Arrow Outsourcing is subcontracting a service 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. Outsourcing 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. 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.- http://en.wikipedia.org

Idea My Stand:
Outsourcing
As mentioned in the overview outsourcing 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. Since our university can't seem to have enough budget to insource, I opt to outsource. Besides, contracting an expert who is already employed in the university might be complicated, as what I have noticed and observed. We are aware that one of our instructors is one of the experts contracted by the university to create systems. It was more than once that his class has been transferred to other classes for him to (I think) concentrate on making the system. Additionally, this will serve as an opportunity to broaden our horizon by learning from the work of people outsede the school's control. So what I'm saying is, since this is a school, as a learning institution they should put attention into what it does best, educating students. Additionally, outsourcing creates a competitive environment where different institions would have to compete for the project. Since more and more are competing, the cost would become cheaper. This is also an opportunity to broaden our horizon by learning from the work of people outside the school's control.

I have also browsed through the internet top 7 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.

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.

3. Reduced Overhead
Overhead costs of performing a particular back-office function are extremely high. Consider outsourcing those functions which can be moved easily.

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.

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.

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.

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.


Enough to make me say, that it would be better for our university to outsource.


References:
http://www.wikipedia.org
http://operationstech.about.com/od/officestaffingandmanagem/a/OutSrcAdvantg.htm
http://rsg0927.forumsmotion.com/management-information-systems-1-f1/assignment-9-due-before-september-192008-1300hrs-t167.htm
Back to top Go down
View user profile http://www.misallabouts.blogspot.com
ailaine adaptar



Posts : 50
Points : 57
Join date : 2009-06-19
Age : 97

PostSubject: Re: Assignment 8 (Due: August 28, 2009, 13:00hrs)   Sat Oct 17, 2009 2:54 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)


================================================


Review on terms:

Idea Information Systems Planning is an important topic for managers and researchers alike. Advances in information provision have led organizations to attempt to develop IS/IT strategies which interrelate with their business strategies and which together support corporate missions. Strategic information systems planning (SISP) has become an accepted part of the overall corporate strategic planning process. The proliferation of methods and the variations in satisfaction indicate a need to provide a framework for classifying and comparing SISP approaches which will provide guidance on use and to explain why certain approaches are more commonly used than others. Develops a classification framework based on complexity and describes tools for using the framework and provides indication as to the nature of a complete classification and comparison method for SISP based on complexity, scope and fit.

Idea 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.

Idea 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/Insourcing Assessment:

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.

The Advantages of Outsourcing

• Outsourcing your non-core activities will give you more time to concentrate on your core business processes
• Offshoring can give you access to professional, expert and high-quality services
• 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 more 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 processes are being carried out efficiently, proficiently and within a fast turnaround time
• Offshoring can help your organization save on capital expenditures
• 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 cater to the new and challenging demands of your customers
• Outsourcing can help your organization to free up its cash flow
• Sharing your business risks is possible with outsourcing
• 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.

The Disadvantages 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
• Offshoring can create potential redundancies for 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, poor quality and delayed services amongst others.
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.

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.
• With the insourcing team managing the overall and technical project issues, the project life cycle is different:
• Requirements are defined with use cases again.
• We use QuickWebWorkshops to build small, proof of concept prototypes that teach the in house staff how to do development and validate the user requirements clearly.
• The custom application engineering for the company's project beats generic best practices solutions by lowering total development hours dramatically in many situations.
• In design, we use all the company's existing software that can be reused along with IBM tools for iSeries such as JTOpen and WDSC and a wide variety of open-source and other third-party tools.
• Instead of a few big code drops during the project, we have smaller, iterative drops for user testing and feedback with the in house staff providing tighter control to the project.
• During the development stages, the in house staff is actively involved both in design, lending their application knowledge to our designers, and developing significant portions of the application.
• With tighter communication, the company is involved in most of the engineering and design detail decisions even where we are building the frameworks.
• Throughout the project, the in house staff that will inherit the application is involved in documenting and testing it using automated tools wherever possible.
• Leveraging the broad market of open-source tools lowers the total project hours a lot and provides no-charge, flexible licensing for software components.
• If we have large amounts of application coding that can't be done by in house staff we have the option of doing that with hourly offshore resources under the control of the insourcing team to keep costs low.

We all know that a significant portion of business processes and activities in most organizations depends completely on information systems, and could not function without them. But a question always take place is that what Information system to use, Insource or Outsource Information System.

In our situation, I would suggest that our school will Insource its Information System. Aside from the reviews on Insource Informastion system above, my concern is on our faculty. We have competitive faculty which I am sure will amke our system in its best. It will help both sides: extra income to the faculty and insurance to the security, affordability, fuction satisfaction of USEP's IS.

Reference:
http://www.theoutsourcerzone.com/why.htm
http://www.theoutsourcerzone.com/it.htm
http://www.theoutsourcerzone.com/application.htm
http://www.theoutsourcerzone.com/hr.htm
http://whatis.techtarget.com/definition/0,,sid9_gci1185946,00.html
http://www.outsource2india.com/why_outsource/articles/advantages-disadvantages-outsourcing.asp
http://search400.techtarget.com/tip/0,289483,sid3_gci996709,00.html
Back to top Go down
View user profile
Sponsored content




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

Back to top Go down
 
Assignment 8 (Due: August 28, 2009, 13:00hrs)
View previous topic View next topic Back to top 
Page 4 of 4Go to page : Previous  1, 2, 3, 4
 Similar topics
-
» Amendments to the Revised IRR through GPPB Resolution No. 06-2009
» A Boutique and an assignment against me.
» Transitory Provisions for Revised IRR
» New Baby, New Assignment, Old Dress
» UPDATED[MediaFire]3 Idiots • 2009 • 550MB • X264 DVDRiP • English SubTitles •

Permissions in this forum:You cannot reply to topics in this forum
USEP-IC  :: MIS 1-
Jump to: