This document discusses information system and IT outsourcing strategies. It defines outsourcing as hiring external firms to perform work that cannot be done in-house. There are various reasons managers get involved in outsourcing, such as reducing costs, focusing on core activities, and sharing risks. The document outlines different types of outsourcing like offshore outsourcing and benefits like cost savings. It emphasizes the importance of aligning IS/IT strategies with business strategies and considers outsourcing a competitive advantage in the 21st century knowledge-based economy.

1. EDITH COWAN UNIVERSITY
INFORNATION SYSTEM STRATEGY
BY
EYADEMA SIMPLISSE IYANOS
STUDENT ID: 10258454
SUBMITTED TO
DR. STEVE BENSON

2. CONTENTS
EXECUTIVE SUMMARY .......................................................................................................................... 3
INTRODUCTION ........................................................................................................................................ 3
INFORMATION SYSTEMS AND BUSINESS STRATEGIES ................................................................. 3
IMPORTANCE OF IS/IT STRATEGIES TO MANAGERS ...................................................................... 4
DIFFERENT TYPES OF IS/IT STRATEGIES USED BY MANAGERS .................................................. 5
REASON MANAGERS GET INVOLVED IN OUTSOURCING. ............................................................................. 6
ISSUES AND BENEFITS ASSOCIATED WITH OUTSOURCING ......................................................... 6
DIFFERENT TYPES OF OUTSOURCING AVAILABLE TO MANAGERS ........................................... 9
IMPORTANCE OF THIS STRATEGY IN THE 21ST CENTURY. .......................................................... 10
OUTSOURCING FACTORS STRATEGY IN ENVIRONMENT TECHNOLOGY ............................... 10
CONCLUSION ........................................................................................................................................... 11
BIBLIOGRAPHY ....................................................................................................................................... 12
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3. EXECUTIVE SUMMARY
This report is dedicated on IS/IT outsourcing strategy, I went into deep of it conceptual
framework in business alignment based on IS/IT strategies and outsourcing strategies, and
described reason of outsourcing, this paper expressed and demonstrated the relationship between
IS and IT further more going deep of outsourcing strategy and reason managers considering
outsourcing of IS/IT strategy as tools helping to achieve vision, mission and objectives. IT/IS
and Outsourcing strategies can be seen as competitive weapon in today’s market, technology
enabler and business function mapping as well as both green field and IT outsourcing strategies.
This paper analyzed the existing types of outsourcing and how top management using them in
different business strategies.
INTRODUCTION
Outsourcing can be defined as hiring external firm or expert service provider to perform work
which can’t be performed by in-house may be because of lack of knowledge or costs. In other
hand can be described as business process from any organization by which a task can be given to
external professional’s service provider or firm specialized any certain field to handle the
business which can’t be done in-house merely because the lack of knowledge or equipment
required for work done. Example they are 2 broad kinds of outsourcing “assets” and “services”
outsourcing.
Outsourcing strategy started 1989 when Kodak outsourced IBM for construction and
management, data centralized new data center, IBM provided Kodak IT equipment and
programmers and other technical specialists. Mr. Hudson president of Kodak said “IS services,
computer processing saved between 40% and 50%” through outsourcing. (Polilli, 1989).
INFORMATION SYSTEMS AND BUSINESS STRATEGIES
It is vital to have the Information system and business strategy knitted. Generally, IS involves the
interconnected components working as an integral system to development, build up and facilitate
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4. circulation of information. On the other hand, IT entails all hardware that is knitted to the IS.
This includes computer systems, computer networks, and the computer server.
It is pertinent to distinguish among these two terms IS and IT in a way to arrange and have a
momentous IS/IT strategy. It is therefore, crucial to note that information system existed in inter-
organizations functions previous to advent of IT and yet as at now there are some enter-
organizations that do not IT but have IS. (Ward, 2002)
Information System is “interrelated components working together for collecting, processing,
storing, and disseminating information to support decision making, coordination, control,
analysis, and visualisation in an organization”. Likewise, are omitting the users of the IS;
“people and organizations”. Thus are made different department functionalities in as whole.
(Ward, 2002)
IMPORTANCE OF IS/IT STRATEGIES TO MANAGERS
IS/IT strategies are crucial to managers because for the organisation to survive and grow need
the mentioned core business fundamental strategies as listed in this report.
Highlight four reasons managers must involved in an IS: “
1. The emergence and strengthening of the global economy,
2. The transformation of industrial economies and societies into knowledge- and information-
based service economies,
3. The transformation of the business enterprise
4. Emergence of the digital firm”.
1. Global Economy Emergence
Statistics has shown that in order for companies’ capability to function globally, they need to
move their core business functions to lower salaries, in order to success in this present day and in
the nearest future. (Schilling, 2005) Argument was made that today’s enter-companies should
have widen their functionalities to worldwide required in order to maintain their sustainability.
(Laudon, 2005)
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5. 2. Business Enterprise Transformation
Business enterprise traditional style is central point, through professionals which depended on a
fastened model of functioning procedural to categorize and process a lots production (Laudon,
2005) The new perspective of management, similarly, deals with unofficial a set of people and
networks to come up a given goals and objectives. (Ward, 2002)
3. The Emerging Digital Firm
Today entirely firms are digitalized and automated exist due to enhance computer users since the
1990’s. (Laudon, 2005) A completely digital firm “is one where nearly all of the organization’s
significant business relationships with customers, suppliers and employees are digitally enabled
and mediated” IS/IT.” For examples Dell, Cisco and Toyota going toward digital firm (Laudon,
2005)
DIFFERENT TYPES OF IS/IT STRATEGIES USED BY
MANAGERS
An information systems strategy brings together the business aims of the company, an
understanding of the information needed to support those aims, and the implementation of
computer systems to provide that information. It is a plan for the development of systems
towards some future vision of the role of information systems in the organization”. (Ward,
2002)
There are four basic fundamentals IS Strategy includes:
1. The Information Strategy: defined information required to achieve expectation of
required, include vision, mission, and objective as primary tasks.
2. The IT Strategy: defines technological platform that is needed for support infrastructure
that must be in position for Information Strategy to meet working conditions.
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6. 3. The Information Management Strategy: determines information services and how is
organized for example; centralised and de-centralized or in a way to share systems.
4. The Implementation Strategy: It takes into account and look at what is necessary
change needed within for the IS/IT strategies to be successful in order to achieve
expectations if is being implemented. (Ward, 2002)
REASON MANAGERS GET INVOLVED IN OUTSOURCING
Managers involved in outsourcing because wants optimize the corporate returns throughout
business and add value customer by achieving competitive advantages, core competence and
competitive position of the firms.
ISSUES AND BENEFITS ASSOCIATED WITH OUTSOURCING
1. Lose of managerial control
The time the companies enter into a contracts with outsourcing company then vendors is one
which is performing and running these tasks therefore control activities from companies handle
to the outsourcing vendors, practical the managerial control will belong to outsourcing.
2. Hidden Costs
Outsourcing cover the details of what services will provide to client’s company therefore the
clients companies if happen pay the extra charges. Or even if didn’t pay in such manner can hire
the lawyer who stand up in the court to finalize the case on lawful solution.
3. Threat to Security and Confidentiality
The confidentiality is most important for company to run business therefore to hire and give
responsibility to outsourcing a company’s business is no longer secured business such situation
like working on payroll systems, bank transaction design, a networking data base design and
customize other programs related core fundamentals business then company must be careful to
protect data.
4. Quality Problems
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7. The outsourcing company is critical to say that is motivated to do business because of profit.
Therefore the quality of product can’t be adequate standards on the market since the contract is
fixed then the outsourcing company will like to increase benefit by decreasing expenses and
quality of products/services to do the tasks. (Bucki)
BENEFITS OF OUTSOURCING
Outsourcing offer several benefits both side but from consumer perspective are lower costs,
increasing economy, create an opportunities of new jobs, in such way that increasing demand for
services, ability for focusing on core issues and minimizing costs due financial restructuring, and
business innovation as well as core competence.
ADVANTAGES OF OUTSOURCING
1. Costs and efficient saving
The jobs done by outsourcing in reality are inexpensive and time to deliver on the market is
faster to be deliver on the market therefore is good for company to use outsourcing company
rather than in-house because of reasonable price
2. Reduced costs overhead
When running business sometimes requires the extra-money to pay while business is underway
therefore back office operations are extremely high cost thus outsourcing extra-cost can easily
removed.
3. Focus On Core Activities
Outsourcing is focusing in the core business fundamental which will help company to increase of
assets and expand business functionality. Since the back office functions will expand too, thus
outsources activities will refocus on these activities.
4. Develop Internal Staff
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8. If a company has a large project to run which required outsourcing skills and can’t be posses in
house then outsourcing can work together with alongside the internal employees therefore in-
house can gain knowledge and acquire new skills from outsourcing.
PLANNING AN EFFECTIVE OUTSOURCING PROCESS
The effective outsourcing planning can be defined as successful ongoing business process in
order to get profit, gain core competence using multi-process of evaluation successful
outsourcing organizations need to look forward, focusing on vision, mission and objectives
strategies to achieve these goals. Company must identify the risks and plan how to mitigate these
risks, decide the outsourcing required and select the process of outsourcing and duration,
evaluation and control the different criteria.
THE REASON MANAGERS GET INVOLVED IN OUTSOURCING
There are many reasons managers get involved in outsourcing, in early past few years ago in 20th
century, the managers were involved in outsourcing because cost reduction, but nowadays the
managers are emphasizing;
a. Expanding strategic focus
It allows the business grow to meet the objectives business fundamental, strategy focus and
core competencies, competitive advantages and core products this enabling managers to improve
an essential component of strategy planning, to be able to success. The outsourcing helps
managers to locate highly skilled employees, reduce unnecessary staff and handle a task to
specialists to become “best practice” and business strategy “fit” of dimension outsourcing
strategy.
b. To improve business processes
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9. Process improvement is other reason manager involved an outsourcing a specialists hired to
perform functions better and cost companies less funds if you compare with in-house for
example managers can chose to hire call center because the outsourcing provider have trained
staff and highly Information Technology equipment since these organization may have many
huge number of customers thus service can be done 24/7 days a week. This improvement will be
based on competitive position to access the best practice technology.
c. Cost reduction
The managers dramatically based on their experience find it easier and less expansive to
outsource the specialists from outside to perform the task instead to use the employees from in-
house. Outsourcing is reducing the costs of the company based on quantitative and qualitative of
quality of products and services produced by the outsourcing. The outsourcing provides the
abilities to increase the economies of scale.
d. The Risk sharing
The managers involved in outsourcing normally because is easier for them to share the risk with
third party, in this case the fixed costs are belongs to service provider, who takes all
responsibilities related to equipment, staff and others and hoe services are being performed . For
examples the call center outsourcing all technology costs belongs to outsourcing, transportation
and maintenance fees, lost productivity and function but this managers must include them during
signing a contract. (Bucki)
DIFFERENT TYPES OF OUTSOURCING AVAILABLE TO
MANAGERS
Strategically the outsourcing available to top management are many but for quickly understand it
can be divided into 2 parties. One is Assets outsourcing for example; different types of
equipment such as removable assets and non-removable assets. Second is outsourcing services
for example; staff, project consultants. There different types such as offshore which described as
Business Process Outsourcing (BPO) and Knowledge Process Outsourcing (KPO) this
outsourcing involved an Information Technology outsourcing (ITO) also related to two entities
such as assets outsourcing and services outsourcing. Global Delivery Model also managers used
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10. as strategy like to manage different core business process such as onsite and onshore
outsourcing, and nearshore. (George, 2010)
IMPORTANCE OF THIS STRATEGY IN THE 21ST CENTURY.
Usually today important of outsourcing are based on costs reduction and increase quality of
production and services as well as efficiency are considered as drivers of outsourcing strategy to
gain competitive on the markets, strategic decision, and focus on core competencies main
important have been identified such as economic of scale, competitive pressure, improving
company focus on core products and value add, function mapping, and alignment of business
strategies gaining access to the world class capabilities., improving business strategy and greater
potential alignment strategy across organization.
OUTSOURCING FACTORS STRATEGY IN ENVIRONMENT
TECHNOLOGY
IT outsourcing strategy is increasing on daily basis due to internet and digital technology and IT
infrastructure development.
a. Designing IT architecture, and Innovation is one of the most factor IT strategy thus can
be seen as core competence of the firms
b. Business strategy and IT vision; supporting information exchange among the firms
c. Deliver IS services and corporate network for maintaining competitive advantages.
All these are interconnected to each other the core IS capability as helping the firms as whole to
have one relationships network to overcome transaction cost economy. The lack of analysis the
environment, deciding which occupations to outsource and managing relationship among both
parties are the hinder factors delay the IT outsourcing strategy. (Marianne Kinnula, 2005)
Outcome learning
This was very interested topic to me using the ECU material and online available journals and
various articles, books, cases studies helped a lots go inside deeper understanding outsourcing
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11. strategy as inevitable in organization, because of it benefits, advantages, facilities bring into
organization. As apprentice I benefited lots about IS/IT strategies and outsourcing strategies in
different way such as case studies of DHL, UPS, DELL Infosys, and Kodak versus IBM
successful stories of IT/IS outsourcing strategies
CONCLUSION
Today the organizations to meet the expectations need IS/IT to support their business strategy
environment and since IT is increasing speed and innovation is inevitable thus the outsourcing
strategies in different forms are needed to transform the organization’s business in order to meet
technology enabling, products innovation, efficient and responsiveness as well as effectiveness
to meet the customers expectations, core competence, competitive advantages, cutting cost while
increasing economy of scale through internet technology enabler IT automation are strategy
conjunction of today’s business. IT outsourcing is inevitable in the multi-national companies
seems to be competitive “weapon” today’s markets and is “adaptable” by many organizations.
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12. BIBLIOGRAPHY
Bucki, J. (n.d.). Top 7 Outsourcing Advantages: Outsourcing Advantages: A Back-Office Operations
Illustration. Retrieved September 9, 2011, from About.com Operations/Technology:
http://operationstech.about.com/od/officestaffingandmanagem/a/OutSrcAdvantg.htm
George, R. (2010). Information Technology for Managers. Boston, USA: Course Technology.
Laudon, K. L. (2005). Management Information Systems: Managing the Digital Firm (2nd ed.). USA:
Prentice Hall.
Marianne Kinnula, S. J. (2005). A case study of success factors in outsourcing partnership formation and
Management. Proceedings of the 21st Industrial Marketing .
Polilli, S. (1989 , October). The "outsource" strategy; Kodak gambles that IS is better left to others -
Field Report. (Wiesner Publications, Inc.) Retrieved September 9, 2011, from Bnet:
http://findarticles.com/p/articles/mi_m0SMG/is_n12_v9/ai_7810332/
Schilling, M. A. (2005). Strategic management of technological innovation. New York: McGraw-Hill
Irwin.
Ward, J. &. (2002). Strategic planning for information systems (3rd ed.). New York: Wiley.
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