Outsource or Not COMP 301 Information Systems Analysis

Outsource or Not COMP 301 Information Systems Analysis and Design 1

What is outsourcing? • A company requests the services of an outside party to fulfil a function or functions that involve computer systems – Application development – Maintenance of applications 2

Markets vs hierarchies • Large corporations lends to have hierarchical structures with their own data processing department – applications developed largely in-house • Advanced in IT breaks and flattening the structure (become a mixture of teams and sharing of responsibilities) 3

Markets vs hierarchies • Flatter organization and cross company relationships tends to employ outsourcing – A shit towards the market to get the job done 4

Markets vs hierarchies • Existing system not compatible • Resistance from MIS people 5

Why outsourcing? • Reduce risks (certain types of applications) • Get away from vertical integration (less problems if fails) • Get optimal talent • Replace services that are not doing well • Quicker solution (usually) • Using more advanced solutions 6

Pure outsourcing • Total project is developed outside – Require expertise not available in the company – End user driven (they prefer to go outside) – Isolated systems – Senior management driven (funding concern) 7

Pure outsourcing – Good co-coordinator in-house (who can shepherd (look after) the project well, and maintain smooth relationship with other groups and systems – Having little or no liability for the outside company (if the system fails, limited liability only) 8

Pure outsourcing • Short in duration (less than one year) • Small project teams (6 – 12) project team for one year • Already developed software outside, and only some customization, core programs already available 9

Pure outsourcing example • Sun workstation for financial information display and analysis – Investment company are • • Not familiar with the sun workstation Always have delays in projects Lack of commitment Strong negative response to new and unfamiliar technology – Consultant to assess what should be done, and how much would be the cost 10

Pure outsourcing example • Conduct a feasibility study – – – Technical aspects present Business effects discuss Project done in phases A short pilot phase for testing Four months to complete Project team with four experienced consultants 11

Pure outsourcing example • Approved by the investment company's president • Need co-operation among the staff in the company (especially data processing department) 12

Pure outsourcing example • Why this application is successful? – – – – Project is independent Requirements are well defined Liability is not a question Nature of project can permit development outside Prototype approach (with testing) Not available expertise in the company Cost of training existing people's skill sets is too high Organizational culture is too political (battles over priorities and responsibilities and resources) 13

Pure outsourcing example • • • Control over the costs Control over the time frame Control over the people Minimum disruption Experienced development Clear understanding of what will happen 14

Characteristics of pure outsourcing • LOW in technology – Expertise within the company – Effect on existing day-to-day business – Knowledge needed in existing hw/sw and business processes in the company 15

Characteristics of pure outsourcing • LOW in project management – – Size of proposed project team Length of proposed project Liability for outside developer Size of proposed project 16

Characteristics of pure outsourcing • LOW in business focus – Expertise within the company on business subject matters combined with new technology – Expertise on existing business and applications within the company 17

Characteristics of pure outsourcing • HIGH in Organization – End-user sponsorship – Senior Management Support – (not generated from EDP department) 18

Hybrid outsourcing • If the new systems affect current operations of the transaction sytems in the company • Large amount of liability 19

Hybrid outsourcing example • Billing system for a major domestic bank – Hire a new experienced staff to conduct an feasibility study – Recommendation is to develop a new system 20

Hybrid outsourcing example • A new operation system, a new machine, new skill sets • New hire become the project manager • A mixed of in-house and outsider's help 21

Hybrid outsourcing example • A combined team of in-house and outside people 22

Hybrid outsourcing example • LOW to HIGH in project management – – Size of proposed project team Length of proposed project Liability for outside developer Size of proposed project 23

In-house development • Confidential nature of the data • Work done directly involved with users • All skills and knowledge are available in house (training or promoting) • Data and procedures were guaranteed confidentially and all liability rested with the company • Fear of losing control 24

Who gets the outsourcing project? • Hiring the right people is critical to success • Locating the correct skill sets to the project – Experience and track record (successful development of similar projects before) 25

Extra services provided by the outsourcing company • Fully test the system • Installation, training and provide technical and administrative support • Provide technical, administrative and user documentation • Provide system maintenance and technical support at additional costs if needed 26