Outsourcing IT Services
Some History
The information technology outsourcing industry was established in 1962 by H. Ross Perot, who left IBM to launch Electronic Data Systems (EDS) in Dallas, Texas. EDS gets proper respect for developing most of the practices that are essential to the performance of the industry today: the management and integration of complex systems, client/server transaction processing, and private networks transmitting data, video and voice in digital format. The company's first long-term commercial facilities management contract was signed with Frito-Lay in 1963. But, it was President Lyndon Johnson's (a fellow Texan) Social Security Act of 1965, creating Medicare and Medicaid, which really put EDS in business. EDS was the first to develop a complete insurance claims processing system for Texas's Medicare/Medicaid program. Next on the horizon, in 1969, was California Blue Cross which was horribly backlogged in its Medicare data processing system. EDS' proprietary claims processing programs were widely admired and resulted in a rapid increase in the company's revenues, which topped $16 million by the end of the decade. In May 2008, Hewlett-Packard Co. acquired Electronic Data Systems for $14 billion. As of the date of acquisition, EDS operated in 64 countries and provided jobs for nearly 140,000 people. As a stand-alone entity, EDS was one of the largest service companies in America, serving about 2,000 clients. Today, HP Enterprise Services has continued to grow the business and currently has one of the industry's most extensive product offerings of outsourcing applications, and business process services. (HP, 2009)
The term EDS used to describe its service was "facilities management," but it was the early precursor for the "IT outsourcing" terminology. While many IT functions are hired out to domestic service providers, Ryan Frank from Suite 101 points out that many large corporations have transferred their customer service programs overseas to countries such as Asia, Mexico and India to take advantage of lower labor costs; hence the term "offshoring" -- a specific kind of outsourcing which gets most of the public awareness. The argument goes that, while the costs are lower, the quality of service remains the same, which allows the company to focus on its core functions and to build up its financial strength. Many services other than IT have been successfully outsourced; including help desks, payroll systems,...
Outsourcing Alternatives There are three alternatives in this situation. There is a re-org that has been proposed for the IT department. There is the view of the CIO, which is that no re-org is necessary, so essentially the status quo option. The third option is to outsource the IT department. Compare Outsourcing with Internal Solutions There are advantages and disadvantages to outsourcing the IT department to a third party vendor. The biggest advantage is
Outsourcing has made great controversy within a number of industries lately. Essentially, outsourcing is "the act of one company contracting with another company to provide services that might otherwise be performed by in-house employees" (Conjecture Corporation, 2012). Yet, this movement is not as easy or pain free as it sounds. Yes, outsourcing can help keep costs down and allow a company to remain globally competitive; however, outsourcing can also cost
Outsourcing Shipping Management Outsourcing is a process by which an organization takes the services of an external party to perform some of its operations or functions. Outsourcing is also done by shipping firms all over the Globe (Outsource Freight, 2012). Ship owners generally outsource their operations and management functions to the external parties against for a particular period of time and against a specific sum of money (Lorange, 2009). Outsourcing of
Contracting officers today must have the skills or competencies required to become the business leaders of the future (Steele 2000)." An article found in the ABA Banking Journal asserts that Chief Information Officers are interested in it outsourcing because companies are able to acquire it skill sets that may not be present at the internal level. In this article Siemers (1995), explains that One of the reasons CIOs believe that
Outsourcing' -- What is it? 'Outsourcing' in a hospitality context means hiring outside contractors to do the work ordinarily done by departments in your own hotel. According to Vitasek, 'Early outsourcing helped companies realize balance sheet improvements, access lower-cost labor and often improve productivity'. Because of these advantages, outsourcing continues to be practiced in hotels today, and newer and better models for outsourcing have been introduced as well. Clearly, outsourcing
Outsourcing is an appropriation of particular business operations to a professional foreign service provider. (Haugen, Musser, & Lovelace, 2009, p. 34) Most often then not, businesses and organizations have trouble handling all aspects of a business process privately or in this case, domestically, and need to seek professional assistance elsewhere. Additionally, some processes do not need permanent in-house professionals, allowing for outsourcing to be the cheaper alternative. Once a job
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