iFour ConsultancyIT Outsourcing
Its’ advantages vs disadvantages
TERMINOLOGY IN OUTSOURCING
OUTSOURCING
 Outsourcing can be defined as turning over all or part of an organizational activ...
TERMINOLOGY IN OUTSOURCING
CLIENT
 The buyer (client, customer) is a firm that desires the technology. This
firm is somet...
Theories of Outsourcing
Theory of Core Competencies
 Organizations focus only on internalizing those components critical ...
Theories of Outsourcing contd.
Resource-based Theory
 Outsourcing is a strategic decision which can be used to fill gaps ...
Theories of Outsourcing contd.
Transaction Cost Theory
 Organizing an organization’s economic activities is to balance pr...
BENEFITS
 Lower costs
 Improved productivity
 Improved technology and services
 Higher quality
 Higher customer satis...
IT Outsourcing Risks
 Unexpected transition and management costs
 Switching costs (including lock-in, and repatriation a...
IT Outsourcing Risks
 Cost of delayed delivery/non-delivery
 Poor quality and reliability
 Damages due to security brea...
Challenges
 Vendor selection
 Vendor management
 What to outsource
 Commitment
 Cultural barriers
 Set up governance...
Best practices
 Empowerment/escalation
 Strategic issues review
 Peer relationships
 Informal communications
 Establi...
Thank You
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Outsourcing theories and models, benefits and challenges for outsourcing companies india

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This presentation outlines popular outsourcing models, outsourcing benefits and challenges and critical analysis.

www.ifour-consultancy.com

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  • www.ifour-consultancy.com – custom software development company India, outsourcing company India
  • www.ifour-consultancy.com – custom software development company India, outsourcing company India
  • www.ifour-consultancy.com – custom software development company India, outsourcing company India
  • www.ifour-consultancy.com – custom software development company India, outsourcing company India
  • www.ifour-consultancy.com – custom software development company India, outsourcing company India
  • www.ifour-consultancy.com – custom software development company India, outsourcing company India
  • www.ifour-consultancy.com – custom software development company India, outsourcing company India
  • www.ifour-consultancy.com – custom software development company India, outsourcing company India
  • www.ifour-consultancy.com – custom software development company India, outsourcing company India
  • www.ifour-consultancy.com – custom software development company India, outsourcing company India
  • www.ifour-consultancy.com – custom software development company India, outsourcing company India
  • Outsourcing theories and models, benefits and challenges for outsourcing companies india

    1. 1. iFour ConsultancyIT Outsourcing Its’ advantages vs disadvantages
    2. 2. TERMINOLOGY IN OUTSOURCING OUTSOURCING  Outsourcing can be defined as turning over all or part of an organizational activity to an outside vendor. OR  IT outsourcing describes a process whereas an organization decides to contract- out or sell the firm’s IT assets, people and/or activities to a third party vendor, who in exchange provides and manages these assets and services for an agreed fee and over an agreed time period. www.ifour-consultancy.com
    3. 3. TERMINOLOGY IN OUTSOURCING CLIENT  The buyer (client, customer) is a firm that desires the technology. This firm is sometimes called the sourcing firm. VENDOR  The seller (vendor, supplier) is a firm that has the technology. This firm is sometimes called the source firm or the outsourcer. www.ifour-consultancy.com
    4. 4. Theories of Outsourcing Theory of Core Competencies  Organizations focus only on internalizing those components critical to the product or service in which the organization has distinctive competency, and outsourcing components that are peripheral to the organization. Outsourcing is then used to reap cost savings from suppliers with clear comparative advantages. Such savings can then be redeployed towards competence more central to the core skills and abilities of the organization. www.ifour-consultancy.com
    5. 5. Theories of Outsourcing contd. Resource-based Theory  Outsourcing is a strategic decision which can be used to fill gaps in the firm’s resources and capabilities. Strategic resources are valuable, rare, non-substitutable, inimitable and manageable. All organizations find themselves dependent on some elements in their external environment. www.ifour-consultancy.com
    6. 6. Theories of Outsourcing contd. Transaction Cost Theory  Organizing an organization’s economic activities is to balance production cost advantages with costs involved in negotiations and market exchange. Transaction costs refer to effort, time, and costs incurred in searching, creating, negotiating, monitoring, and enforcing a service contract between buyers and suppliers. www.ifour-consultancy.com
    7. 7. BENEFITS  Lower costs  Improved productivity  Improved technology and services  Higher quality  Higher customer satisfaction  Time to market  Ability to focus on core areas  Downsizing and rightsizing  Access to knowledge www.ifour-consultancy.com
    8. 8. IT Outsourcing Risks  Unexpected transition and management costs  Switching costs (including lock-in, and repatriation and transfer to another supplier)  Disputes and litigation  Service debasement  Loss of organizational competencies www.ifour-consultancy.com
    9. 9. IT Outsourcing Risks  Cost of delayed delivery/non-delivery  Poor quality and reliability  Damages due to security breach  Loss due to vendor’s opportunism, including loss in future revenue  Vendor lock-in  Lack of trust  Business uncertainties www.ifour-consultancy.com
    10. 10. Challenges  Vendor selection  Vendor management  What to outsource  Commitment  Cultural barriers  Set up governance  Contract design www.ifour-consultancy.com
    11. 11. Best practices  Empowerment/escalation  Strategic issues review  Peer relationships  Informal communications  Establish a special entity  Prioritize action items  Steering committees  Stakeholder buy-in  Corporate communications  Additional managers www.ifour-consultancy.com
    12. 12. Thank You

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