CHAPTER 15 : OUTSOURCING IN THE 21st CENTURY

Learning Outcomes

1. Describe the advantages and disadvantages of in sourcing, outsourcing, and offshore outsourcing

2. Describe why outsourcing is a critical business decision

OUTSOURCING PROJECTS

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

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

- Reasons companies outsource

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

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

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

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

- Factors driving outsourcing growth include:

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

- Financial savings

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

- Rapid growth

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

- Industry changes

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

- The Internet

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

- Globalization

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

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

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

Outsourcing Benefits

Outsourcing benefits include:

• Increased quality and efficiency 
• Reduced operating expenses
• Outsourcing non-core processes
• Reduced exposure to risk
• Economies of scale, expertise, and best practices
• Access to advanced technologies
• Increased flexibility 
• Avoid costly outlay of capital funds
• Reduced headcount and associated overhead expense
• Reduced time to market for products or services

Outsourcing Challenges

Outsourcing challenges include:

- Contract length 

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

1. Difficulties in getting out of a contract
2. Problems in foreseeing future needs
3. Problems in reforming an internal IT department after the contract is finished

- Competitive edge

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

- Confidentiality

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

-Scope definition

• Scope creep is a common problem with outsourcing agreements

CHAPTER 14 : CREATING COLLABORATIVE PARTNERSHIPS

Learning Outcomes

1.Identify the different ways in which companies collaborate using technology

2.Compare the different categories of collaboration technologies

3.Define the fundamental concepts of a knowledge management system

4.Provide an examples of a content management system along with its business purpose

5.Evaluate the advantages of using a workflow management system

6.Explain how groupware can benefit a business

Teams, Partnerships, and Alliances

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

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

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

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

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

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

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

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

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

Collaboration Systems

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

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

- Two categories of collaboration

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

- Collaborative business functions

Collaboration systems include:

• Knowledge management systems
• Content management systems
• Workflow management systems
• Groupware systems

Knowledge Management Systems

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

Explicit and Tacit Knowledge

Intellectual and knowledge-based assets fall into two categories

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

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

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

Reasons why organizations launch knowledge management programs

KM Technologies

Knowledge management systems include:

• Knowledge repositories (databases)
• Expertise tools
• E-learning applications
• Discussion and chat technologies
• Search and data mining tools

KM and Social Networking

Finding out how information flows through an organization

• Social networking analysis (SNA) – a process of mapping a group’s contacts (whether personal or professional) to identify who knows whom and who works with whom
• SNA provides a clear picture of how employees and divisions work together and can help identify key experts 

Social Networking

Content Management

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

- CMS marketplace includes:

• Document management system (DMS)
• Digital asset management system (DAM)
• Web content management system (WCM)

Document management system (DMS)

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

Digital asset management system (DAM)

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

Web content management system (WCM)

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

Content Management

Content management system vendor overview

WORKING WIKIS

• Wikis - Web-based tools that make it easy for users to add, remove, and change online content
• Business wikis - collaborative Web pages that allow users to edit documents, share ideas, or monitor the status of a project

Workflow Management Systems

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

• Workflow – defines all the steps or business rules, from beginning to end, required for a business process
• Workflow management system – facilitates the automation and management of business processes and controls the movement of work through the business process
• Messaging-based workflow system – sends work assignments through an e-mail system
• Database-based workflow system – stores documents in a central location and automatically asks the team members to access the document when it is their turn to edit the document

Groupware Systems

- Groupware technologies

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

VIDEOCONFERENCING

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

WEB CONFERENCING

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

INSTANT MESSAGING

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

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

- Instant messaging application