Topics: Costs, Cost-benefit analysis, Cost Pages: 9 (2398 words) Published: October 8, 1999


1 Abstract
2 Introduction
3 Fundamentals
4 The Main Strategy
5 Successful Outsourcing
6 Conclusion

Outsourcing and how it can help IT Managers enhance their projects.


With computer systems / projects and there implementations getting more complex with every day that passes , the tendering of IT responsibilities to external parties is becoming more and more attractive to the IT Managers of large organisations. The common name for this type of operation is "Outsourcing". It is the attempt of this paper to explain outsourcing , it's pro's and con's and how it can help our friendly IT Manager enhance developments or implementations.


Outsourcing can be defined as a contract service agreement in which an organisation hires out all or part of its IT responsibilities to an external company.

More and more companies are leaning towards outsourcing it could be said that this may be caused by the growing complexity of IT and the changing business needs of an organisation. As a result, an organisation may find that it is not possible to have all its IT services supplied from within its own company. Given this, an IT manager may decide to choose to seek assistance from an external contractor/company to supply their services the organisation lacks. In addition, the business competition has set the pace for an organisation to continue to strive for internal efficiency. It also needs to look for a way to transfer non- core activities or "in house" services and support activities to external specialist organisations who can deliver quality services at a lower cost.


In deciding whether to use outsourcing or not, the main objective of outsourcing is based on the price of delivery of services by an external contractor/company. Although price of delivery is a primary factor for outsourcing, other issues should be considered e.g. price should be measured against the overall package offered by the external contractor/company. Briefly if it's a good competitive price in relation to the services rendered by the company and in respect to their skills/competency and experience, and timely delivery. The organisation also needs to consider outsourcing in light of its long term strategic directions and its information needs.

Competition is a another area to be carefully considered. Competition opens up opportunity for all potential suppliers to conduct business with the organisation. Through the competitive process, it allows organisations/IT managers to derive the best outcome. From the open and effective competition, the organisation is then able to judge soundly in determining the best strategy after it has taken into account of the competition and value for money principle.

IT managers can go through lengthy procedures to minimise problems with outsourcing, but still things can go wrong and intended objectives may not get achieved. To overcome such mistakes, it may be prudent to look at other companies that have undertaken outsourcing and learn from their successes and mistakes

Listed below are some of the major issues to be considered when using outsourcing:

- An IT manager that undertakes outsourcing must be able to clearly identify its long term IT strategic directions and long term information needs.

- Organisation must be able to clearly define its business objectives.

- To avoid unnecessary friction between the organisation and the external service provider, it would be prudent to incorporate an "extraordinary events" clause into any contract entered into. This clause should cover any extraordinary changes in circumstance that should occur . This also allows a lot of flexibility between the two parties.

- The IT manager should identify all the external and internal stakeholders and the impact that the outsourcing may have on stakeholders.

- Learn from other companies, use their...

References: Although many different books references and web sites were researched the
following Instsitute yielded a most comphrehesive supply of information. That
ultimately became the basis of this report. The author would strongly recommend
any party investigating Outsourcing to contact the below institute.
The Outsourcing Institute 45 Rockefeller Plaza, Suite 2000, New York, NY 10111
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