OutsourcingMIS 5973

Rui Huang, Sujun, Lamont Allison, Allen Burcham

What is Outsourcing?

Outsourcing - – “the strategic use of outside resources to perform

activities traditionally handled by internal staff and resources” Dave Griffiths

Why Outsource?– Provide services that are scalable, secure, and

efficient, while improving overall service and reducing costs

Why do Companies Outsource?

Reasons for Outsourcing

Traditional role - reaction to problem– Reduction and control of costs– Avoid large capital investment costs – Insufficient resources available

Modern role – business strategy– Allows company to focus on their core

competencies– Keeping up with cutting-edge technology– Creating value for the organization and its

customers – Building partnerships

What Can be Outsourced?

system integration data network mainframe data center voice network, internet/intranet maintenance/repair applications development e-commerce end-user support system

When to Outsource

GreyArea

Not Outsourced

In House if Possible Outsource

Competitive

Strategic Non-Strategic

Non-Competitive

PricewaterhouseCoopers Model

How to Implement Outsourcing

Program initiation – Opinions and ideas shared to form draft

contract

Program implementation– Transferring staff – Service Level Agreement (SLA) – Establish communications between partners – Actual transfer of the service – Establish management procedures

Contract agreement

Contract fulfillment

Problems With Outsourcing

Loss of Control Increased cash outflow Confidentiality and security Selection of supplier Too dependent on service provider Loss of staff or moral problems Time consuming Provider may not understand

business environment Provider slow to react to changes

in strategy

Problems With Outsourcing

E-Commerce Hosting Solution

WAN bandwidth

IT professionals

Hardware/Software

Security issues

24/7 support

E-Commerce Hosting Solution

In-HouseActivity costs, inclusive of labor and overheadRaw materials, inclusive of shipping, storage, handling and overheadCost of invested capital

+ Estimated impact of outsourcing on costs and revenue----------------------------------------------------------------------

Total cost of performing activity in-house

OutsourceProposal for outsourcingAnticipated future pricing adjustmentsAdditional one time costs of outsourcing

+ Additional on-going costs of outsourcing-------------------------------------------------------------------- Total cost of outsourcing activity

Database Outsourcing

Areas– Clinic– Preventive Care– On-going support – Enhancement Care

Benefits– Savings of 25% - 40%– Pay-per-gig pricing – Off-site data storage – Automated – Free up server space

Email Outsourcing

Email Hosting– Email@yourdomain– POP3 access  – IMAP4 access  – Outbound SMTP– Virus Scanning– External POP Access

– 24x7 Web-based Support  – Spell Check– Email Forwarding  – Unlimited Attachment Size   – Unlimited Storage Folders  – Multiple attachments

“The total cost of ownership for an in-house email system is likely to be in the range of $200 to $400 per user per month……. Outsourcing should reduce TCO by 10% to 30%.” Ferris Research, June 2001

Typical Services

Typical Services

Custom Webmail– Customizable, private-label WebMail interface   – Wireless WAP Access  – Automated User Signups   – Integrated Ad Server   – Customizable to any language in the world  – Programming API's for front and back end

system integration

Costs

• Web Based Email Services with POP 3 access up to 6 Mailboxes Per Month

•0-5,000 Mailboxes $0.99 each•5,001-7,000 $0.90 each•7,001-10,000 $0.75 each•10,001 and up $0.55 each

•Minimum Monthly Fee Per Domain is $79.00• Large Install - Setup Fee $199.00 at launchOther Options • Wireless Access - $0.30 per mailbox per month• Outgoing SMTP - $0.20 per mailbox per month purchased in blocks of 50.• Design Services - $100 flat charge for color scheme consulting. $70 per hour for custom design consulting.• Additional Storage - Units of 2mb $0.99 per mailbox per month.

Acadea has customizable email solutions for schools, universities, government agencies and businesses.

http://www.acadea.com/WebmailPrice.htm

Costs

Example 4: 100 User Multi Server, Multi Location Network In-House Cost

Salary For Sr Level Network Engineer $65,000.00

Salary For Software / Hardware Support Technician $40,000.00

Medical Benefits and Payroll Expense    (assume 1 married 1 single) $ 18,100.00

Office Space and Expenses $ 10,000.00

Continuing Education $ 5,000.00

Hardware Repair Parts $ 10,500.00

  =========

  $148,100.00

Sullivan Data will provide on-sight technician during regular business hours for between $90,000.00 and $100,000.00 annually depending on equipment chosen

http://www.sullivandata.com