Chapter 15 : Outsourcing in the 21st Century

OUTSOURCING PROJECTS

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

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

Ø Reasons companies outsource.

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

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

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

Ø Big selling point for offshore outsourcing “inexpensive good work”.

Ø Factors driving outsourcing growth include:

o   Core competencies

•     Many companies have recently begun to consider outsourcing as a means to fuel revenue growth rather than just a cost-cutting measure.

o   Financial savings

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

o   Rapid growth

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

o   Industry changes

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

o   The Internet

•    The pervasive nature of the Internet as an effective sales channel has allowed clients to become more comfortable with outsourcing.

o   Globalization

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

Ø According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger, and more profitable than those that do not”.

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

Ø Outsourcing Benefits

include:

o   Increased quality and efficiency.

o   Reduced operating expenses.

o   Outsourcing non-core processes.

o   Reduced exposure to risk.

o   Economies of scale, expertise, and best practices.

o   Access to advanced technologies.

o   Increased flexibility.

o   Avoid costly outlay of capital funds.

o   Reduced headcount and associated overhead expense.

o   Reduced time to market for products or services.

Ø Outsourcing Challenges

include:

o   Contract length

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

•         Difficulties in getting out of a contract.

•         Problems in foreseeing future needs.

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

o   Competitive edge

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

o   Confidentiality

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

o   Scope definition

•         Scope creep is a common problem with outsourcing agreements.

Chapter 14 : Creating Collaborative Partnerships

Ø  Teams, Partnerships, and Alliances.

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

·         Undertake new initiatives.

·         Address both minor and major problems.

·         Capitalize on significant opportunities.

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

Collaboration System

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

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

·         Core competency – an organization’s key strength, a business function that it does better than any of its competitors.

·         Core competency strategy – organization chooses to focus specifically on its core competency and forms partnerships with other organizations to handle nonstrategic business processes.

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

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

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

Ø  Collaboration Systems.

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

Ø  Collaboration system – an

·         IT-based set of tools that supports.

·         the work of teams by facilitating.

·         the sharing and flow of information.

Ø  Two categories of collaboration:

·         Unstructured collaboration (information collaboration) - includes document exchange, shared whiteboards, discussion forums, and e-mail.

·         Structured collaboration (process collaboration) - involves shared participation in business processes such as workflow in which knowledge is hardcoded as rules.

·         Collaboration Systems.

Ø  Collaborative business functions

Ø  Collaboration systems include:

·         Knowledge management systems.

·         Content management systems.

·         Workflow management systems.

·         Groupware systems.

·         Knowledge Management Systems.

Ø  Knowledge management (KM) – involves capturing, classifying, evaluating, retrieving, and sharing information assets in a way that provides context for effective decisions and actions.

Ø  Knowledge management system (KMS) – supports the capturing and use of an organization’s “know-how”.

Ø  Explicit and Tacit Knowledge.

Ø  Intellectual and knowledge-based assets fall into two categories:

·         Explicit knowledge – consists of anything that can be documented, archived, and codified, often with the help of IT.

·         Tacit knowledge - knowledge contained in people’s heads.

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

·         Shadowing – less experienced staff observe more experienced staff to learn how their more experienced counterparts approach their work.

·         Joint problem solving – a novice and expert work together on a project.

Ø  Reasons why organizations launch knowledge management programs.

Ø  KM Technologies.

Ø  Knowledge management systems include:

·         Knowledge repositories (databases).

·         Expertise tools.

·         E-learning applications.

·         Discussion and chat technologies.

·         Search and data mining tools.

Ø  KM and Social Networking.

Ø  Finding out how information flows through an organization.

Social Networking

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

·         SNA provides a clear picture of how employees and divisions work together and can help identify key experts.

·         Social Networking.

Ø  Content Management.

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

Ø  CMS marketplace includes:

·         Document management system (DMS).

·         Digital asset management system (DAM).

·         Web content management system (WCM).

Document management system (DMS)

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

Digital asset management system (DAM)

Ø  Similar to DMS, generally works with binary rather than text files, such as multimedia files types.

Web content management system (WCM)

Ø  Adds an additional layer to document and digital asset management that enables publishing content both to intranets and to public Web sites.

Ø  Content management system vendor overview.

WORKING WIKIS

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

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

Ø  Business wikis.

Ø  Workflow Management Systems.

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

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

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

Ø  Messaging-based workflow system – sends work assignments through an e-mail system.

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

Ø  Groupware Systems.

Ø  Groupware technologies.

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

VIDEOCONFERENCING

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

WEB CONFERENCING

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

INSTANT MESSAGING

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

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

Ø  Instant messaging application.