Information Systems Sourcing
Sourcing Decision Cycle Framework
Sourcing involves many decisions (Figure 1).
The first step is the make or buy decision.
If buy is selected then the company must decide where.
If the company decides to go offshore it must decide if the offshore company is near or far.
Periodic evaluation must take place.
Continual evaluation is needed to determine if the arrangement is satisfactory or not (either for outsourcing or insourcing).
Insourcing
A firm provides IS services or develops IS in its own in-house IS organization.
This is the “make” decision.
Drivers that favor this decision:
Keep core competencies in-house.
IS service or product that requires considerable security or confidentiality.
Time available in-house to complete IS projects.
In-house IT personnel.
Challenges to insourcing (Figure 7.2):
Getting needed IT resources from management.
Finding a reliable competent outsource provider.
OUTSOURCING
Definition: The purchase of a good or service that was previously provided internally, or that could be provided internally.
Drivers include (see Figure 7.3):
Cost reduction achieved through economies of scale (outsourcer may be able to negotiate lower prices on hardware and software)
Help a company transition to new technologies through access to larger IT talent pools.
Bringing in outside expertise can help management focus more attention on core activities rather than on IT issues.
Outsourcing companies know how to hire, manage, and retain IT staff.
Greater capacity on demand.
Overcome inertia to consolidate data centers