Outsourcing

Outsourcing

MIS 5973

Rui Huang, Sujun, Lamont Allison, Allen Burcham

What is Outsourcing?Outsourcing - the strategic use of outside resources to perform activities traditionally handled by internal staff and resources Dave Griffiths

Why Outsource?Provide services that are scalable, secure, and efficient, while improving overall service and reducing costs

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

A practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally.

IBM manages IT services for a company like Xerox to the practice of hiring contractors and temporary office workers on an individual basis.Meaning

An example of a manufacturing company outsourcing would be Dell buying some of its computer components from another manufacturer in order to save on production costs. Alternatively, businesses may decide to outsource book-keeping duties to independent accounting firms, as it may be cheaper than retaining an in-house accountant.

example

Any person or entity that maintains, processes, or otherwise is permitted access to perform services for a company, but is not directly employed by the company.What is an Outsourced Service Provider?

Outsourcing Management Services

specializes in the management and administration of third-party outsourcing agreements.

Managing outsourcing agreements is a business process that has evolved extensively as outsourcing models have become more complex. Offshore contracts introduce new dimensions of outsourcing management complexity.Managing outsourcing contracts is our specialty. If you have outsourcing contracts you are responsible for managing, review our management processes and services. Even if you are not interested in our services, this information may give you some ideas on how to improve your outsourced vendor performance using proven outsource management techniques.Below are the categories of services we provide that describe our methodology for managing an outsourcing agreement:

Why do Companies Outsource?

Reasons for OutsourcingTraditional role - reaction to problemReduction and control of costsAvoid large capital investment costs Insufficient resources available Modern role business strategyAllows company to focus on their core competenciesKeeping up with cutting-edge technologyCreating value for the organization and its customers Building partnerships

What Can be Outsourced?

system integration data network mainframe data center voice network, internet/intranet maintenance/repair applications development e-commerce end-user support system

When to OutsourcePricewaterhouseCoopers Model

How to Implement OutsourcingProgram initiation Opinions and ideas shared to form draft contract

Program implementationTransferring staff Service Level Agreement (SLA) Establish communications between partners Actual transfer of the service Establish management procedures

Contract agreement

Contract fulfillment

Problems With OutsourcingLoss of ControlIncreased cash outflowConfidentiality and security Selection of supplier Too dependent on service provider Loss of staff or moral problemsTime consuming Provider may not understand business environmentProvider slow to react to changes in strategy

Problems With Outsourcing

E-Commerce Hosting SolutionWAN bandwidth

IT professionals

Hardware/Software

Security issues

24/7 support

E-Commerce Hosting SolutionIn-HouseActivity costs, inclusive of labor and overheadRaw materials, inclusive of shipping, storage, handling and overheadCost of invested capital + Estimated impact of outsourcing on costs and revenue----------------------------------------------------------------------Total cost of performing activity in-house

OutsourceProposal for outsourcingAnticipated future pricing adjustmentsAdditional one time costs of outsourcing + Additional on-going costs of outsourcing-------------------------------------------------------------------- Total cost of outsourcing activity

Database OutsourcingAreasClinicPreventive CareOn-going support Enhancement Care

BenefitsSavings of 25% - 40%Pay-per-gig pricing Off-site data storage Automated Free up server space

Email OutsourcingEmail HostingEmail@yourdomainPOP3 access IMAP4 access Outbound SMTPVirus ScanningExternal POP Access

24x7 Web-based Support Spell CheckEmail Forwarding Unlimited Attachment Size Unlimited Storage Folders Multiple attachments

The total cost of ownership for an in-house email system is likely to be in the range of $200 to $400 per user per month. Outsourcing should reduce TCO by 10% to 30%. Ferris Research, June 2001Typical Services

Typical ServicesCustom WebmailCustomizable, private-label WebMail interface Wireless WAP Access Automated User Signups Integrated Ad Server Customizable to any language in the world Programming API's for front and back end system integration

Costs Web Based Email Services with POP 3 access up to 6 Mailboxes Per Month0-5,000 Mailboxes$0.99 each5,001-7,000$0.90 each7,001-10,000$0.75 each10,001 and up$0.55 eachMinimum Monthly Fee Per Domain is $79.00 Large Install - Setup Fee $199.00 at launchOther Options Wireless Access - $0.30 per mailbox per month Outgoing SMTP - $0.20 per mailbox per month purchased in blocks of 50. Design Services - $100 flat charge for color scheme consulting. $70 per hour for custom design consulting. Additional Storage - Units of 2mb $0.99 per mailbox per month.

Acadea has customizable email solutions for schools, universities, government agencies and businesses.

http://www.acadea.com/WebmailPrice.htm

CostsExample 4: 100 User Multi Server, Multi Location Network In-House Cost

Salary For Sr Level Network Engineer$65,000.00Salary For Software / Hardware Support Technician$40,000.00Medical Benefits and Payroll Expense (assume 1 married 1 single)$ 18,100.00Office Space and Expenses$ 10,000.00Continuing Education$ 5,000.00Hardware Repair Parts$ 10,500.00=========$148,100.00Sullivan Data will provide on-sight technician during regular business hours for between $90,000.00 and $100,000.00 annually depending on equipment chosenhttp://www.sullivandata.com