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IT Sourcing - Coggle Diagram
IT Sourcing
Phenomenon
Core competence logic which is led to wholesale outsourcing
Now trifecta had made IT inseparable from firms’ offerings
IT increasingly defines the following firms such as Medtronic pacemakers, Progressive insurance,Taco Bell tacos, or Netflix streaming
Perpetual challenges in outsourcing IT
Integration problems
Receiving the wrong system
Decisions about whether, how, and where to outsource what IT
Reasons to outsource can create vicious problems
To access IT skills absent inhouse
Vendor cheaper than doing it inhouse
Unstrategic IT Sourcing Decisions
1) Business process outsourcing enabled by IT
customer support, call centers, remote workers, crowdsourcing
consequences of IT use
2) Commodity IT infrastructure and services
3) Commodity software
Negotiating price, service, and contracts is IT unit’s job
Non-IT managers’ involvement needed in IT sourcing of :-
1) Software embedded in your firm’s products or services
2) Custom-built apps into which your business processes are baked
3) One-off, non-recurring IT tasks
Insourcing versus Outsourcing
Insourcing
Identical interests
Retains inhouse expertise
Thwarts imitation
Lack of inhouse skills
Potentially costlier
Outsourcing
Access skills absent inhouse
Cheaper for intermittent IT work
Not your employees, ever
Disconnect from business needs
Challenges in Outsourcing IT
Integration problems
Must play well with your other IT assets
Patchwork of inhouse systems, spanning generations
Often uses or sends data to them
Actual costs can wipe out obvious savings
Receiving the wrong system
Latent needs create volatile requirements
Outsourcing adds extra translator layer between users and vendor
Double whammy: Business-IT chasm + cultural barrier
Might get what your IT unit asked for but not what you needed
Strategeis
Lowering Integration Costs
1) Concurrent sourcing: Simultaneously insourcing and outsourcing the same sort of IT work
2) Verify-then-trust approach
Avoiding the wrong system
1) Tapered Outstanding
2) Match Requirements Ambiguity with Contract Choice
Chain of Responsibility in IT Outsourcing
1) . Formal controls used by IT unit on vendors
Output metrics reward/ penalize vendor for meeting predefined, targets
Process controls dictate methods a vendor should follow
2) CMM ratings
Considerations of Where to Outsource
Time zone
Skill sets in region
Country profile
Cultural and language differences
Legal sophistication : IP protection & legal track record