Page 75 - DCAP307_PLANNING_AND_MANAGING_IT_INFRASTRUCTURE

Unit 4: Business Process and IT Outsourcing

Notes
Example: One U.S. software manufacturer outsourced the code development for a new
release of its software to an Indian-based firm. To protect itself, the U.S. firm required the
employees of the Indian firm to sign a nondisclosure agreement—a contract in which parties
agree not to disclose important corporate information. However, an employee of the Indian
firm stole a copy of the code and tried to sell it to a competitor.

Did u know? Despite solid evidence gathered by the FBI, prosecutors in India have failed to
convict the man, who continues to work.
 Important technology issues: The outsourcing firm must be able to provide a high level of
system availability and network uptime and guarantee that all processing applications
operate efficiently and reliably. High IT reliability, availability, and efficiency are essential
so that business processes can be executed on a timely basis without significant service
interruptions. The potential for problems is exacerbated by offshore outsourcing with
service providers in developing parts of the world.

Now that we have identified many of the issues associated with outsourcing and offshore
outsourcing, we will outline an effective outsourcing process that manages these issues.

Self Assessment

Fill in the blanks:

10. The details of the outsourcing arrangement are documented in a .....................................
contract.
11. Outsourcing can greatly reduce the amount of direct ..................................... between a
company and its customers.

4.5 Planning Outsourcing Process
Outsourcing is like any other business initiative: it takes planning, knowledge, and skill to execute
well. As already discussed, roughly 50 percent of outsourcing efforts are considered successful,
while the other half are evaluated as so-so or outright disasters. Many of the organisations that
were successful carefully planned and executed their outsourcing efforts following a multi-step
process. This process is shown in Figure 4.1 and discussed in the following sections.

4.5.1 Establishing a “smart” Outsourcing Strategy

The critical component to obtaining successful results from any outsourcing activity is executive-
level understanding and support for a smart sourcing strategy. Smart sourcing is based on
analysing the work to be done, its associated current processes, and level of effectiveness and
resources required, and then determining the best way to do the work in the future—whether
with internal employees, on-shore or off-shore outsourcing firms, or some combination.
Organisations that move to smart sourcing recognise that outsourcing is not just about lowering
labour costs. Outsourcing can achieve strategic competitive advantages by reducing time to
market for new products, cutting the time required for problem resolution, and freeing up
resources to enable greater innovation. Armed with this more complete understanding of the
potential of outsourcing, the organisation can make better strategic decisions about appropriate
activities and projects for outsourcing, as well as which outsourcing firms they will hire. Smart
sourcing requires an organisation to work in a true partnership with the outsourcing provider.
This partnership must be built on a high level of collaboration, mutual trust and respect, and a
sharing of common goals.

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