Outsourcing Information System

Made By: Neha Dhingra 079 MBA 3(B)

Outsourcing Information System

If an organization does not want to develop & create its own IS, it can hire an external agency that specializes in these services to do work. The process of turning over the organizations computer centre operations, telecommunications networks & application development to external vendors is known as outsourcing.

When To Outsources???
The organization must define the type of role that the information system are expected to play in organisational functioning. Based on this there can be no. of circumstances under which outsourcing is useful: Criticality of IS Interruptions in IS Capabilities of existing IS

Criticality Of IS
Some IS may be critical or some may not. Criticality can be defined as system which provide competitive advantage to organization. Those system which do not have competitive advantage to organization should be outsourced.

Interruption In IS
When interruptions in IS are not critical to the organization, these can be outsourced. Eg: insurance claim processing are not critical to the organization & it can work for few days. But when some critical operation like computerised banking they req. in house development.

Capabilities Of Existing IS
When organization existing IS are ineffective or technically inferior then outsourcing is better option. Eg: organization may use outsourcing to make the transition from traditional mainframe computing to client server computing

Managing Outsourcing
After deciding what is to be outsourced, the organization must choose the vendor from whom to out source. While choosing vendor quality, reliability , regularity should be taken care. A good working relationship b/w the both should be there so that both the parties should understand the position of each other. Contract should be made explicitly so that terms should be clear b/w both the parties. organization should constantly re-evalute its vendor.

Advantages Of Outsourcing
Economy- It should be economical as compared to in house development. The economical factor arises at the vendor side because of: specialized service economies of scale Flexibility- An organization business growth & consequently more information. Needs can be accommodated through outsourcing without making changes in IS infrastructure

Cost predictability- In outsourcing cost of information & its related services can be predicted in advance as the cost are settled before the supply commences.

Making fixed cost variable- In outsourcing the cost remain variable as cost is determined in terms of per unit of services. The organization pays only for that part for which services has been used.

Disadvantages Of Outsourcing
Loss of control- organization looses its control over IS, where client organization has to accept whatever the vendor does. Vulnerability of strategic information- trade secrets & other information of strategic use may be leaked to organization competitors by vendor. Dependency- organization became more dependent on vendors for their work.