Information Systems Acquisition

This article will compare In-sourcing, outsourcing and offshore.

What is Insourcing?

• To assign a job to someone employed within their own company
• Can be used in conjunction with Outsourcing

I.e. Company is not satisfied with the work that is being outsourced to a different company, so they could cancel that job and insource the work to someone in the company whom they believe could do a better job.

Pros:

• Can be tailored to the requirements of the business
• You control the quality of the final product
• Can increase synergy between different departments

Cons

• Can be extremely expensive
• Any faults lie with you and the business
• Choosing insourcing over outsourcing can require more money resources

Insourcing Example

Target, which began outsourcing their IT management in 2004, announced in September 2015 that after being hit with a very large data breach in 2013, that the retailer had decided to bring back home the management of IT with an in-house department and hiring up to over 1,000 new IT staff members. “Target Corp. plans to reduce technology outsourcing as it looks to hire 500 software engineers and others to focus on mobile and online using open source tools” 

Outsourcing

What is Outsourcing

- Transferring portions of work to an outside supplier instead of completing the

task internally.

- Can be outsourced to an individual or a company.

- When used correctly can be reduce costs to the company. 

Pros:

- Can gain access to high skilled people anywhere in the world

- Allows access to a knowledge base for better innovation

- Lower labour costs

Cons:

- Possible loss of control over the company's processes

- Sluggish responses times coupled with slow issue resolutions

Outsourcing Example

Telefonica (O2) outsourced their call centres to the control of Capita in 2013 and since then have experienced a more than 8 % increase in their revenues with this expected to double by the end of the partnership.

The deal, which builds on Capita's existing long-term partnership with O2, will see Capita run and manage O2's customer service centres and support O2 as it enhances and expands its digital service offering to customers. Final negotiations are now taking place, with the 10 year

contract expected to be worth approximately £1.2 billion and due to commence on 1 July 2013.” 

Insource vs. Outsource

Insource

• Long Term Investment
• High Risk
• Inexperienced and unaware developers, may neglect or be unaware
• of standards, requirements and future goals.
• Control Mechanisms
• Experience Required
• Inhouse Developers require technical capabilities
• Higher Cost
• Insourcing is generally more expensive to a company because new
• work processes must be developed to start the new division of the
• company
• Quality Control

Outsource

• Larger Talent Pool
• Select company with most expertise and experience
• Low Risk
• Outsourcing gives businesses flexibility in staffing, manpower
• management, helps you save costs and can also pick the best people
• to run your core functions
• No need to control
• Companies that outsource a manufacturing process or a service often
• have little to no managerial control
• No experience required
• Lower Cost

Outsourcing uses an outside company that already has a workflow.

Offshoring

What is offshoring?

• Having business functions done in another country
• Type of outsourcing

Pros:

• Reduces labour expenses
• Allows entering of new markets
• Can overcome regulations (

Cons:

• Loss of jobs in starting country 

Offshoring Example

Ketera Technologies- Ketera Technologies offshored their IT/customer support as well as software development for the core service and configuration management to India.

Outcome:

• Less productivity
• Chat sessions took between 2-3 hours
• High error rate
• No innovation