Assignment 8 (Due: August 28, 2009, 13:00hrs)

As a student, you were invited by the Dean of the Institute of Computing to attend a seminar-workshop on information systems planning with some of the faculty members. In one of the sessions, a discussion of outsourcing came up. You have been asked to present your evaluation about outsourcing the information systems functions of the school.

Required:

You are to take a position- outsource or in-source and justify your position. (3000words)

Before anything else let me differentiate Outsourcing to Insourcing. And I will site advantages and disadvantages of both type of sourcing.

First, according to Wikipedia.org the definition of outsourcing is defined below.

Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources. Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labor. Out sourcing in the information technology field has two meanings. One is to commission the development of an application to another organization, usually a company that specializes in the development of this type of application. The other is to hire the services of another company to manage all or parts of the services that otherwise would be rendered by an IT unit of the organization. The latter concept might not include development of new applications.

There are many reasons that companies outsource various jobs, but the most prominent advantage seems to be the fact that it often saves money. Many of the companies that provide outsourcing services are able to do the work for considerably less money, as they don't have to provide benefits to their workers and have fewer overhead expenses to worry about.

Outsourcing also allows companies to focus on other business issues while having the details taken care of by outside experts. This means that a large amount of resources and attention, which might fall on the shoulders of management professionals, can be used for more important, broader issues within the company. The specialized company that handles the outsourced work is often streamlined, and often has world-class capabilities and access to new technology that a company couldn't afford to buy on their own. Plus, if a company is looking to expand, outsourcing is a cost-effective way to start building foundations in other countries.

There are some disadvantages to outsourcing as well. One of these is that outsourcing often eliminates direct communication between a company and its clients. This prevents a company from building solid relationships with their customers, and often leads to dissatisfaction on one or both sides. There is also the danger of not being able to control some aspects of the company, as outsourcing may lead to delayed communications and project implementation. Any sensitive information is more vulnerable, and a company may become very dependent upon its outsource providers, which could lead to problems should the outsource provider back out on their contract suddenly.

While outsourcing may prove highly beneficial for many companies, it also has many drawbacks. It is important that each individual company accurately assess their needs to determine if outsourcing is a viable option.

Advantages of Outsourcing

1. Focus on Core Activities
In rapid growth periods, the back-office operations of a company will expand also. This expansion may start to consume resources (human and financial) at the expense of the core activities that have made your company successful. Outsourcing those activities will allow refocusing on those business activities that are important without sacrificing quality or service in the back-office.
Example: A company lands a large contract that will significantly increase the volume of purchasing in a very short period of time; Outsource purchasing.

2. Cost And Efficiency Savings
Back-office functions that are complicated in nature, but the size of your company is preventing you from performing it at a consistent and reasonable cost, is another advantage of outsourcing.
Example: A small doctor’s office that wants to accept a variety of insurance plans. One part-time person could not keep up with all the different providers and rules. Outsource to a firm specializing in medical billing.

Economies of scale save money when unit costs go down as volumes increase. External service providers can achieve economies of scale unavailable to individual firms when they combine the volumes of multiple companies.

In manufacturing, for example, an external vendor may have a shop that specializes in a certain type of machining. The machinery represents a significant capital investment. If larger machines are more efficient, and if they can be used to produce any sort of parts for any customer, then this vendor may very well produce parts at a lower cost than a firm could by setting up such a shop internally.

Economies of scale are not limited to physical processes. Other precious assets -- including money, relationships, and people -- may be shared.

The pharmaceuticals industry can be used to illustrate economies of scale in relationships. Clinical trials of experimental drugs require just the right patients -- healthy in most all respects but the one indication being treated, and willing to submit themselves to experimentation. It takes a significant investment of time and money to develop relationships with the hospitals and clinicians (and the triage nurses in their emergency rooms) that supply patients for the trials.

Clinical trials also require just the right medical investigators -- doctors and medical researchers who are well respected in their industries. Again, it takes size to attract the best investigators. The most sought-after investigators look for organizations that can supply them with interesting and publishable research projects and with support services (such as data collection and well-managed processes) that make their jobs easier and their results more reliable.

To be specific, there are three conditions that must be met before outsourcing saves money:

1. Economies of scale must exist. That is, there must be some economic advantage to larger size or greater numbers before outsourcing can pay off; for example, unit costs must drop as volumes increase.

2. The economies must be accessible across corporate boundaries. That is, savings only occur if outsourcers can combine the volumes of multiple clients.

For example, it's easy for many companies to share the huge fixed costs of a telecommunications infrastructure owned by long-distance carriers. Laying one's own fiber or leasing a private satellite channel is unlikely to be economic, so outsourcing is an obvious choice.

However, outsourcing an IT computer center may not work as well, since hardware may not offer significant economies of scale and many software licenses are corporation-specific.
There are many cases where inter-organizational sharing is possible, but each case must be examined carefully.

3. The savings must be sufficient to outweigh the additional cost of paying other shareholders a profit. Some executives have said that at least a 20% savings (after vendor profit margins) is necessary to compensate the firm for the legal costs and the risks of long-term dependence on people you can’t control.

3. Reduced Overhead
Overhead costs of performing a particular back-office function are extremely high. Consider outsourcing those functions which can be moved easily.
Example: Growth has resulted in an increased need for office space. The current location is very expensive and there is no room to expand. Outsource some simple operations in order to reduce the need for office space for example, outbound telemarketing or data entry.

4. Operational Control
Operations whose costs are running out of control must be considered for outsourcing. Departments that may have evolved over time into uncontrolled and poorly managed areas are prime motivators for outsourcing. In addition, an outsourcing company can bring better management skills to your company than what would otherwise be available.
Example: An information technology department that has too many projects, not enough people and a budget that far exceeds their contribution to the organization. A contracted outsourcing agreement will force management to prioritize their requests and bring control back to that area.

5. Staffing Flexibility
Outsourcing will allow operations that have seasonal or cyclical demands to bring in additional resources when you need them and release them when you’re done.
Example: An accounting department that is short-handed during tax season and auditing periods. Outsourcing these functions can provide the additional resources for a fixed period of time at a consistent cost.

6. Continuity & Risk Management
Periods of high employee turnover will add uncertainty and inconsistency to the operations. Outsourcing will provided a level of continuity to the company while reducing the risk that a substandard level of operation would bring to the company.
Example: The human resource manager is on an extended medical leave and the two administrative assistants leave for new jobs in a very short period of time. Outsourcing the human resource function would reduce the risk and allow the company to keep operating.

Another type of synergy that can cross corporate boundaries is the sharing of risk. In financial circles, this is called the "portfolio effect."

In investing, it's best to diversify your portfolio rather than put all your money in one stock. By spreading your risk, you reduce your total risk.

Why does diversification reduce risk? If the whole market goes down, you'll lose, no matter what you do. But if the market goes up while one company makes some serious mistakes, the rest of your portfolio may still do well, and you are not as vulnerable as you would have been had you put all your money into a single stock.

In business investments, the same is generally true. Outsourcing may permit multiple companies to share risk.

To continue with manufacturing as an example, if all your work is done in one plant, an outage or a labor dispute could put you out of business. If you spread your workload across a number of plants, a labor dispute in one country may not affect the operations of other plants. Thus, you reduce your risk.
In a very large operation, it may be that the company can afford multiple plants. But in smaller companies or in the production of small-run specialty parts -- it may be cheaper to spread the work across a number of existing vendor plants via outsourcing than it is to build a number of small plants yourself.

The biotechnology industry demonstrates the concept of risk-sharing. Investors are reluctant to fund small biotechnology companies to build manufacturing plants for drugs which haven’t yet been approved. But manufacturing is required to produce experimental drugs for clinical trials in order to gain approval.
Bio-tech firms often outsource manufacturing during the clinical-trials phase of development. This demonstrates both economies of scale and risk sharing: The vendor's large plant, shared across a dozen firms at a time, is more efficient than a dozen small plants. Secondly, the risk of building infrastructure that may not be used is shared across many small pharmaceutical firms.

7. Develop Internal Staff
A large project needs to be undertaken that requires skills that your staff does not possess. On-site outsourcing of the project will bring people with the skills you need into your company. Your people can work alongside of them to acquire the new skill set.

Example: A company needs to embark on a replacement/upgrade project on a variety of custom built equipment. Your engineers do not have the skills required to design new and upgraded equipment. Outsourcing this project and requiring the outsourced engineers to work on-site will allow your engineers to acquire a new skill set.

Well-managed outsourcing can enhance the development of employees. Two strategies can accomplish this:

1. Contractors can be used to off-load less interesting "commodity" or end-of-life work, or to handle peak loads. This leaves staff free to pursue new, developmental opportunities. On the other hand, contractors should never be used to perform new, growth-oriented activities while internal staff is left with obsolescent work. This would deny staff learning opportunities, while building dependence on the vendor. Perhaps worse, it sends a message to staff that the company is not willing to invest in their professional growth.

2. Consultants and vendors can be used to bring in new ideas and to train internal staff. It might be useful to distinguish two terms: External "consultants" transfer their skills and methods to improve employees' effectiveness; they teach staff, often while working together on real projects. Consultants may be used by anyone whenever justifiable, since the benefits are lasting.

By contrast, "contractors" simply do work in place of employees. This is sometimes called “staff augmentation.” They should be limited to the commodity work described in point 1.

There are many cases that meet these four criteria where outsourcing pays off. But each case must be examined carefully to make sure the fundamentals are there. Remember: Paying other shareholders a profit margin makes outsourcing inherently more expensive. It's only worthwhile if these other benefits compensate the firm for its added costs

Disadvantages of Outsourcing

• At times, it is more cost-effective to conduct a particular business process, rather than outsourcing it
• While outsourcing services such as payroll processing services and tax preparation services, your outsourcing provider will be able to see your company’s confidential information and hence there is a threat to security and confidentiality in outsourcing
• When you begin to outsource your business processes, you might find it difficult to manage the offshore provider when compared to managing processes within your organization
• outsourcing can create potential redundancies for your organization
• In case, your offshore service provider becomes bankrupt or goes out of business, your organization will have to immediately move your business processes in-house or find another outsourcing provider
• The employees in your organization might not like the idea of you outsourcing your processes and they might express lack of interest or lack of quality at work
• Your outsourcing provider might not be only providing services for your organization. Since your provider might be catering to the needs of several companies, there might be not be complete devotion to you and your company
• By outsourcing, you might forget to cater to the needs of your valuable customers as your focus will be on the business process that is outsourced
• In outsourcing, you may lose your control over the process that is outsourced
• Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred while signing a contract between companies. You might also have to spend a lot of time and effort in getting the contract signed
• With outsourcing, your organization might suffer from a lack of customer focus
• There can be several disadvantages in outsourcing, such as, renewing contracts, misunderstanding of the contract, lack of communication, poor quality and delayed services amongst others.

The disadvantages of outsourcing give organizations an opportunity to think about what they are stepping into. However the disadvantages of outsourcing are less than the advantages of offshore outsourcing. When outsourcing, you might not experience any of these disadvantages of outsourcing, if you find a reliable outsourcing partner. Before outsourcing take the interests of your customers and employees into consideration and then make an informed decision. If your organization is genuinely interested in outsourcing, let not the disadvantages of outsourcing stop you.

1. Loss of Managerial Control. Whether you sign a contract to have another company perform the function of an entire department or single task, you are turning the management and control of that function over to another company. True, you will have a contract, but the managerial control will belong to another company. Your outsourcing company will not be driven by the same standards and mission that drives your company. They will be driven to make a profit from the services that they are providing to you and other businesses like yours.

2. Hidden Costs
You will sign a contract with the outsourcing company that will cover the details of the service that they will be providing. Any thing not covered in the contract will be the basis for you to pay additional charges. Additionally, you will experience legal fees to retain a lawyer to review the contacts you will sign. Remember, this is the outsourcing company's business. They have done this before and they are the ones that write the contract. Therefore, you will be at a disadvantage when negotiations start.

3. Threat to Security and Confidentiality
The life-blood of any business is the information that keeps it running. If you have payroll, medical records or any other confidential information that will be transmitted to the outsourcing company, there is a risk that the confidentiality may be compromised. If the outsourced function involves sharing proprietary company data or knowledge (e.g. product drawings, formulas, etc.), this must be taken into account. Evaluate the outsourcing company carefully to make sure your data is protected and the contract has a penalty clause if an incident occurs.

4. Quality Problems
The outsourcing company will be motivated by profit. Since the contract will fix the price, the only way for them to increase profit will be to decrease expenses. As long as they meet the conditions of the contract, you will pay. In addition, you will lose the ability to rapidly respond to changes in the business environment. The contract will be very specific and you will pay extra for changes.

5. Tied to the financial well-Being of another Company
Since you will be turning over part of the operations of your business to another company, you will now be tied to the financial well-being of that company. It wouldn't be the first time that an outsourcing company could go bankrupt and leave you holding-the-bag.

6. Bad Publicity and Ill-Will
The word "outsourcing" brings to mind different things to different people. If you live in a community that has an outsourcing company and they employ your friends and neighbors, outsourcing is good. If your friends and neighbors lost their jobs because they were shipped across the state, across the country or across the world, outsourcing will bring bad publicity. If you outsource part of your operations, morale may suffer in the remaining work force.

The next is Insourcing,

Insourcing is the opposite of outsourcing; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation. Insourcing is a business decision that is often made to maintain control of critical production or competencies. An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility.
Insourcing is widely used in an area such as production to reduce costs of taxes, labor (e.g., American labor is often cheaper than European labor), transportation, etc.
Insourcing is a business practice in which work that would otherwise have been contracted out is performed in house.
Insourcing often involves bringing in specialists to fill temporary needs or training existing personnel to perform tasks that would otherwise have been outsourced. An example is the use of in-house engineers to write technical manuals for equipment they have designed, rather than sending the work to an outside technical writing firm. In this example, the engineers might have to take technical writing courses at a local college, university, or trade school before being able to complete the task successfully. Other challenges of insourcing include the possible purchase of additional hardware and/or software that is scalable and energy-efficient enough to deliver an adequate return on investment (ROI).
Insourcing can be viewed as outsourcing as seen from the opposite side. For example, a company based in Japan might open a plant in the United States for the purpose of employing American workers to manufacture Japanese products. From the Japanese perspective this is outsourcing, but from the American perspective it is insourcing. Nissan, a Japanese automobile manufacturer, has in fact done this.

Advantages
• High degree of control.
• Ability to oversee the entire process.
• Economies of scale and/or scope.

Disadvantages
• Reduces strategic flexibility.
• Requires high investment.
• Potential suppliers may offer superior products and services.

The Verdict

For me it’s hard to say if we go for outsourcing or insourcing. But there are factors involve, what does the university really wanted in the issue. Do they want cheaper cost? Or do they want a high degree of control over its operations? These are only some questions that need to be considered. If the university wants cheaper cost then maybe they will go for outsourcing. Or if the university wants control over there operations then they will go for insourcing. But, regarding to the last issue when the last system that was used by the university was outsourced, the university protested because of the cost of the outsourced product. Now, the university changed to insourcing which is a good move on the part of the university. So maybe for me if we talked about insourcing or outsourcing the system of the university maybe for me I’ll stand with insourcing.

References:
wisegeek.com
en.wikipedia.org
sourcingmag.com
operationstech.about.com

visit my blog http://franzcie.blogspot.com

As a student, I am privileged to be invited by the Dean of the Institute of Computing to take my stand concerning on information systems planning specifically on outsourcing and in sourcing issues.

Basically I would start to make a distinction between outsourcing and in sourcing and specify the advantages and disadvantages it entails. Below are the necessary information’s that is essential for the better understanding of the two issues so that we can arrive to a better alternative.

WHAT IS OUTSOURCING?

Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources.


Outsourcing became part of the business lexicon during the 1980s. It began in the early eighties when organizations started delegating their non-core functions to an external organization that was specialized in providing a particular service, function or product. In outsourcing, the external organization would take on the management of the outsourced function.

The 2 sense of outsourcing

Moreover, it is essentially a division of labour. Out sourcing in the information technology field has two meanings: one is to commission the development of an application to another organization, usually a company that specializes in the development of this type of application.

The other is to hire the services of another company to manage all or parts of the services that otherwise would be rendered by an IT unit of the organization. The latter concept might not include development of new applications.

Its process. . .

Outsourcing involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider. The client organization and the supplier enter into a contractual agreement that defines the transferred services. Under the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client agrees to procure the services from the supplier for the term of the contract.

Business segments typically outsourced include information technology, human resources, facilities, real estate management, and accounting. Many companies also outsource customer support and call center functions like telemarketing, CAD drafting, customer service, market research, manufacturing, designing, web development, print-to-mail, content writing, ghost-writing and engineering. Offshoring is the type of outsourcing in which the buyer organization belongs to another country.


Peculiarity between Outsourcing and Offshoring

Outsourcing and offshoring are used interchangeably in public discourse despite important technical differences. Outsourcing involves contracting with a supplier, which may or may not involve some degree of offshoring. Offshoring is the transfer of an organizational function to another country, regardless of whether the work is outsourced or stays within the same corporation/company.

With increasing globalization of outsourcing companies, the distinction between outsourcing and offshoring will become less clear over time. This is evident in the increasing presence of Indian outsourcing companies in the United States and United Kingdom. The globalization of outsourcing operating models has resulted in new terms such as nearshoring, noshoring, and rightshoring that reflect the changing mix of locations. This is seen in the opening of offices and operations centers by Indian companies in the U.S. and UK. A major job that is being outsourced is accounting. They are able to complete tax returns across seas for people in America

The Benefits of Outsourcing

• Do you want to maximize your revenue and minimize your expenses?
• Do you want to get access to specialized skills and services?
• Do you want to concentrate more on your core business?
• Do you want to save on money, time and infrastructure?


If your answer is yes to any or all of the above questions, you might be interested in outsourcing.

Moreover, organizations who are interested in outsourcing are often curious to know more about advantages and disadvantages of offshoring. By gaining insight about both the good and bad of outsourcing, organizations can decide if outsourcing is right for them. Most organization jump headlong into outsourcing, without actually finding out if outsourcing is good for their business. Before outsourcing, ensure that you are aware about the pros and cons of outsourcing.

The advantages and disadvantages of outsourcing can help your organization decide if outsourcing is right for your business. The following is a list of the advantages and disadvantages of outsourcing:

The Edge of Outsourcing

• Outsourcing your non-core activities will give you more time to concentrate on your core business processes

• Offshoring can give you access to professional, expert and high-quality services

• With outsourcing your organization can experience increased efficiency and productivity in non-core business processes

• Outsourcing can help you streamline your business operations

• Offshore outsourcing can help you save on time, effort, manpower, operating costs and training costs amongst others

• Outsourcing can make your organization more flexible to change

• You can experience an increased control of your business with outsourcing

• Your organization can save on investing in the latest technology, software and infrastructure as your outsourcing partner would be investing in these

• Outsourcing can give you assurance that your business processes are being carried out efficiently, proficiently and within a fast turnaround time

• Offshoring can help your organization save on capital expenditures

• By outsourcing, your company can save on management problems as your offshore partner will be managing the team who does your work

• By outsourcing, you can cater to the new and challenging demands of your customers

• Outsourcing can help your organization to free up its cash flow

• Sharing your business risks is possible with outsourcing

• Outsourcing can give your business a competitive advantage as you will be able to increase productivity in all the areas of your business

• Outsourcing can help your organization to cut is operational costs to more than half
If you want your organization to stay ahead of competition, concentrate on core competencies and make use of the latest technologies, then outsourcing can help your organization achieve all this and more. In outsourcing, the advantages of outsourcing are more than the disadvantages of outsourcing. The pros of outsourcing have driven more organization to step into offshoring and experience the benefits that it has to offer.

The Drawback of Outsourcing

• At times, it is more cost-effective to conduct a particular business process, rather than outsourcing it

• While outsourcing services such as payroll processing services and tax preparation services, your outsourcing provider will be able to see your company’s confidential information and hence there is a threat to security and confidentiality in outsourcing

• When you begin to outsource your business processes, you might find it difficult to manage the offshore provider when compared to managing processes within your organization

• Offshoring can create potential redundancies for your organization

• In case, your offshore service provider becomes bankrupt or goes out of business, your organization will have to immediately move your business processes in-house or find another outsourcing provider

• The employees in your organization might not like the idea of you outsourcing your processes and they might express lack of interest or lack of quality at work

• Your outsourcing provider might not be only providing services for your organization. Since your provider might be catering to the needs of several companies, there might be not be complete devotion to you and your company

• By outsourcing, you might forget to cater to the needs of your valuable customers as your focus will be on the business process that is outsourced

• In outsourcing, you may lose your control over the process that is outsourced

• Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred while signing a contract between companies. You might also have to spend a lot of time and effort in getting the contract signed

• With outsourcing, your organization might suffer from a lack of customer focus

• There can be several disadvantages in outsourcing, such as, renewing contracts, misunderstanding of the contract, lack of communication, poor quality and delayed services amongst others.

The disadvantages of offshoring give organizations an opportunity to think about what they are stepping into. However the disadvantages of outsourcing are less than the advantages of offshore outsourcing. When outsourcing, you might not experience any of these disadvantages of offshoring, if you find a reliable outsourcing partner. Before outsourcing take the interests of your customers and employees into consideration and then make an informed decision. If your organization is genuinely interested in outsourcing, let not the disadvantages of outsourcing stop you.

Outsourcing: A public demand

Most organizations choose outsourcing because outsourcing offers a lot of advantages. When organizations outsource to countries like India, they benefit from lower costs and high-quality services. Moreover organizations can concentrate more on core functions once they outsource their non-core functions. Outsourcing can also help organizations make better use of their resources, time and infrastructure.

In outsourcing, the outsourcer and the outsourcing partner have a greater relationship when compared to the relationship between a buyer and a seller. In outsourcing, the outsourcer trusts the outsourcing partner with vital information. Outsourcing is no longer confined to the outsourcing of IT services. Outsourcers in the US and UK now outsource financial services, engineering services, creative services, data entry services and much more.

Most organizations are opting to outsource because outsourcing enables organizations to access intellectual capital, focus on core competencies, shorten the delivery cycle time and reduce costs significantly. Organizations feel outsourcing is an effective business strategy to help improve their business.

To meet the today's complex challenges, more enterprises choose to refocus on their core business activities. And one way to do this is by outsourcing non-core business functions to acknowledged experts. In simple terms, outsourcing is the transfer of delivery responsibility for certain functions to an external organization. The client still retains control over these functions, but would ask an outsourcing company to get the job done at the proper service levels and within cost and time budgets.

WHAT IS INSOURCING?

The opposite of outsourcing can be defined as insourcing. When an organization delegates its work to another entity, which is internal yet not a part of the organization, it is termed as insourcing. Insourcing is a business practice in which work that would otherwise have been contracted out is performed in house. The internal entity will usually have a specialized team who will be proficient in the providing the required services.

Insourcing is a business decision that is often made to maintain control of critical production or competencies. An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility.Insourcing is widely used in an area such as production to reduce costs of taxes, labor (e.g., American labor is often cheaper than European labor), transportation, etc.

Insourcing often involves bringing in specialists to fill temporary needs or training existing personnel to perform tasks that would otherwise have been outsourced.

An example is the use of in-house engineers to write technical manuals for equipment they have designed, rather than sending the work to an outside technical writing firm.

In this example, the engineers might have to take technical writing courses at a local college, university, or trade school before being able to complete the task successfully. Other challenges of insourcing include the possible purchase of additional hardware and/or software that is scalable and energy-efficient enough to deliver an adequate return on investment.

Organizations sometimes opt for insourcing because it enables them to maintain a better control of what they outsource. Insourcing has also come to be defined as transferring work from one organization to another organization which is located within the same country. Insourcing can also mean an organization building a new business centre or facility which would specialize in a particular service or product.
Insourcing as Outsourcing

Insourcing can be viewed as outsourcing as seen from the opposite side. For example, a company based in Japan might open a plant in the United States for the purpose of employing American workers to manufacture Japanese products. From the Japanese perspective this is outsourcing, but from the American perspective it is insourcing. Nissan, a Japanese automobile manufacturer, has in fact done this.


Insourcing: A response to diminish finances

Organizations involved in production usually opt for insourcing in order to cut down the cost of labor and taxes amongst others. The trend towards insourcing has increased since the year 2006. Organizations who have been dissatisfied with outsourcing have moved towards insourcing. Some organizations feel that they can have better customer support and better control over the work outsourced by insourcing their work rather than outsourcing it.

According to recent studies, there is more wok insourced than outsourced in the U.S and U.K. These countries are currently the largest outsourcers in the world. The U.S and U.K outsource and insource work equally.

Insourcing: Exercised by modern countries

According to PR Web, insourcing was becoming more common by 2006 as businesses had less than satisfactory experiences with outsourcing (including customer support). Many outsourcing proponents responded to a negative consumer opinion backlash resulting from outsourcing their communications management to vendors who rely on overseas operations.

To those who are concerned that nations may be losing a net amount of jobs due to outsourcing, some point out that insourcing also occurs.

According to a study by Mary Amiti and Shang-Jin Wei, in the United States, the United Kingdom, and many other industrialized countries more jobs are insourced than outsourced. They found that out of all the countries in the world they studied, the U.S. and the U.K. actually have the largest net trade surpluses in business services. Countries with a net deficit in business services include Indonesia, Germany and Ireland.

Insourcing is loosely referred in call centres that are doing the work of the outsourcing companies. Companies that outsource include Dell, Hewlett Packard, Symantec, and Linksys.

The call centres and technicians that are contracted to handle the outsourced work are usually over-seas. Customers may refer to these countries as "India" technical support if they are hard to understand over telecommunications.

These insourcing companies were a great way to save money for the outsourcing of work, but quality varies, and poor performance has sometimes harmed the reputations of companies who provide 24/7 customer/technical support.


RECOMMENDATIONS:

What is best for your organization?

Outsourcing and Insourcing may be beneficial and would be useless depending on the situation that we are now facing. Primarily, we must know what our university needs before arriving in a conclusion and implement necessary actions for the improvement and benefit of our academe.

If the organization has a number of non-core processes which are taking plenty of time, effort and resources to perform in-house, it would be wise to outsource these non-core functions. Outsourcing in this case, would help you save on time, effort, manpower and would also aid you in making quicker deliveries to your customers.

If it requires expertise services in areas which do not fall under your core competency, then outsourcing will be a good option as you can get access to expertise services. For reducing costs and making faster deliverables, outsourcing is again a good option.

If the work involves production, then it would be more ideal for your organization to opt for insourcing, as you can save on transportation costs and exercise a better control over your project.

It is not necessary to choose outsourcing over insourcing or vice versa. Your organization can outsource and insource at the same time. By outsourcing and insourcing simultaneously, you can have the best of what both offers and your business can get a competitive advantage!

Furthermore, the university must take into the considerations on the things that would be useful for the institution. There are some reasons to outsource and insource depending on the needs of the organization. Moreover, I have found some points to ponder in the virtual library pertaining to the reasons on why we should outsource, and these are:

Reasons for outsourcing

Organizations that outsource are seeking to realize benefits or address the following issues:

• Cost savings. The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.

• Focus on Core Business. Resources (for example investment, people, and infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specilaised IT services companies.

• Cost restructuring. Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.

• Improve quality. Achieve a step change in quality through contracting out the service with a new service level agreement.

• Knowledge. Access to intellectual property and wider experience and knowledge.

• Contract. Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.

• Operational expertise. Access to operational best practice that would be too difficult or time consuming to develop in-house.

• Access to talent. Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.

• Capacity management. An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.

• Catalyst for change. An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a Change agent in the process.

• Enhance capacity for innovation. Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.

• Reduce time to market. The acceleration of the development or production of a product through the additional capability brought by the supplier.

• Commodification. The trend of standardizing business processes, IT Services and application services enabling businesses to intelligently buy at the right price. Allows a wide range of businesses access to services previously only available to large corporations.

• Risk management. An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.

• Venture Capital. Some countries match government funds venture capital with private venture capital for startups that start businesses in their country.

• Tax Benefit. Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.

That would be all for my part as a student of the university. The final verdict must still be on the administration. It’s up to them to apply outsourcing and insourcing.

References:

www.businessweek.com/magazine/content/06_05/b3969401.htm



http://whatis.techtarget.com/definition/0,,sid9_gci1185946,00.htmlhttp://www.outsource2india.com/why_india/articles/outsourcing-versus-insourcing.asp


http://www.businessweek.com/globalbiz/blog/eyeonasia/archives/2009/05/philippines_it.html

http://en.wikipedia.org/wiki/Outsourcing
http://www.outsourceit2philippines.com/
http://en.wikipedia.org/wiki/Insourcing
http://whatis.techtarget.com/definition/0,,sid9_gci1185946,00.html

add your comments to www.florenzie-palma.blogspot.com

Why?

It’s because as far as I observe, I don’t know think that the school was more adoptive on the productivity in terms of insourcing the IT/IS.
So before we go beyond to the climax of the discussion, let’s take this factual views and analysis about the insource and the oiutsource of the IS/IT functions.

INSOURCE
The opposite of outsource; meaning this is one job you can't find someone else foolish enough to do, or you can't find someone competent enough to do it with the kind of money and credibility you have available so you're just going to have to do it yourself. Revenues were down, investors were jittery, so the dotcom startup had to insource its janitorial services.

The profligate wife had gained a few pounds and so was compelled to insource her ways and means of satisfaction.

OUTSOURCE
An easy method for corporations to maximize their profits and avoid the unions at the same time. Basically, it involves moving one's business to another part of the world where people will willingly under slave like conditions and for 1/10 the pay of a Poverty-Class American worker.

See outsource and globalization for more definitions.
Outsourcing is creating a major economic boom, but piss-poor levels of domestic job growth because the Third World has all the employees the corporations need.


Pertaining to the views stated, let now discuss the insourcing of the IT/IS functions:

INSOURCING is the advantageous use of resources, functions and capabilities in conjunction with Managed Services to offer a complete solution to clients' every IT need. Unlike traditional information technology outsourcing.
Insourcing requires intimate knowledge of the client's business, the clients' clients and the vendors' businesses as well as how they all interact together..

Insourcing is a highly recommended resource for small and regionally based companies and other infrastructures. In the past, resources and infrastructures now available through insourcing were uneconomical for small and regionally based companies. Now, these companies as well as the schools can dramatically increase their efficiency, seeming larger and lowering barriers to success with access to the latest technology and the skill set to successfully implement it.

Conversely, due to improvements in efficiencies, insourcing also enables large companies to seem small through increasing responsiveness and flexibility.

Why Insource IT Services?

Insourcing is more than staff augmentation or third party managed services. This direct extension acts on the client's behalf with vendors, customers and shareholders. By insourcing, clients can gain expanded and higher quality services at lower cost than hiring internal, dedicated IT staff.

Advantages to Insourcing IT Services

Insourcing gives clients access to the best resources available, but only when they need them. It levels the playing field with larger competitors by removing or lowering efficiency barriers gleaned by those that can afford to implement necessary business IT systems. Additionally, insourcing IT services means that our clients' information systems are "firm dependent" rather than "person dependent" and that makes our clients less vulnerable and more secure.

Why IT insourcing appears to be on the upswing

Insourcing has been attractive in the past for businesses in the throes of change, but market conditions are ripe these days as well. The economic recession and the scandal at IT outsourcing firm Satyam Computer Services Ltd. have led some companies to renegotiate lower prices in exchange for more flexibility in how outsourcers complete the work.

These same factors are also causing companies to look in-house to see if internal staff could do the work for even less money or greater benefits than a renegotiated outsourcing contract could provide. A company's decisions should largely depend on whether the right labor is located in its geographic marketplace. "If the labor's not there, you could get into a pretty high-cost game," Trowbridge said. "The question is, is it more efficient?"

Rice said that good candidates for insourcing are smaller, auxiliary services that affect the external perception of the business. Whenever renewing an outsourcing contract, "it's certainly worth a conversation" whether to bring the work in-house, Rice said.

Trowbridge advises companies to benchmark prices in the market before making any decisions.

"Look at what you would spend to do it yourself, and make a good, measured decision based on this," Trowbridge said.

The benefits of IT insourcing

IT insourcing, or bringing previously outsourced IT functions back in-house, is on the rise, experts say. Insourcing benefits include job generation and cost savings.

OUTSOURCING:
Outsourcing is contracting with another company or person to do a particular function. Almost every organization outsources in some way. Typically, the function being outsourced is considered non-core to the business. An insurance company, for example, might outsource its janitorial and landscaping operations to firms that specialize in those types of work since they are not related to insurance or strategic to the business. The outside firms that are providing the outsourcing services are third-party providers, or as they are more commonly called, service providers.

• Cost savings. The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.

• Focus on Core Business. Resources (for example investment, people, infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specialized IT services companies.

• Cost restructuring. Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.

• Improve quality. Achieve a step change in quality through contracting out the service with a new service level agreement.

• Knowledge. Access to intellectual property and wider experience and knowledge.

• Contract. Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.

• Operational expertise. Access to operational best practice that would be too difficult or time consuming to develop in-house.

• Access to talent. Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.

• Capacity management. An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.

• Catalyst for change. An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a Change agent in the process.

• Enhance capacity for innovation. Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.

• Reduce time to market. The acceleration of the development or production of a product through the additional capability brought by the supplier.

• Commodification. The trend of standardizing business processes, IT Services and application services enabling businesses to intelligently buy at the right price. Allows a wide range of businesses access to services previously only available to large corporations.

• Risk management. An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.

• Venture Capital. Some countries match government funds venture capital with private venture capital for startups that start businesses in their country.

• Tax Benefit. Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.

Do we need outsourcing in our school? Department?


Maybe we can say that we need outsourcing because of lacking facilities and technology. But outsourcing causes much money. Much money in the sense of we need to hire and pay companies that will work for the technological improvement.
We must get rid of outsourcing for now because we must conserve the facilities and workers that we have. Let’s just first look at our usable facilities here in the school.

INSOURCING:


In sourcing often involves bringing in specialists to fill temporary needs or training existing personnel to perform tasks that would otherwise have been outsourced. An example is the use of in-house engineers to write technical manuals for equipment they have designed, rather than sending the work to an outside technical writing firm. In this example, the engineers might have to take technical writing courses at a local college, university, or trade school before being able to complete the task successfully. Other challenges of insourcing include the possible purchase of additional hardware and/or software that is scalable and energy-efficient enough to deliver an adequate return on investment (ROI).
We must hire a capable personnel in order for us to lessen our expenses. By hiring, we will get rid of outsourcing and that is one way of lowering the cost of hiring outsiders to the job in the school.
If I am going to choose between the two, I will choose In sourcing because it will lessen the cost of hiring another people.

What is Insourcing?
http://www.outsource2india.com

Pros
• Scalable
• Company retains control
• Company owns technology and data
• Direct knowledge transfer of best practices to your company
• Allows 2nd Level Support to focus on more difficult technical problems
Cons
• Will require significant staff changes
• Must invest time in management of insourcing company
• Investment in technology and process
• Facility and technology must be provided and managed by your company
http://search.yahoo.com/web

What is Outsourcing?


The Advantages and Disadvantages of Outsourcing

The Advantages of Outsourcing
• Outsourcing your non-core activities will give you more time to concentrate on your core business processes
• Offshoring can give you access to professional, expert and high-quality services
• With outsourcing your organization can experience increased efficiency and productivity in non-core business processes
• Outsourcing can help you streamline your business operations
• Offshore outsourcing can help you save on time, effort, manpower, operating costs and training costs amongst others
• Outsourcing can make your organization more flexible to change
• You can experience an increased control of your business with outsourcing
• Your organization can save on investing in the latest technology, software and infrastructure as your outsourcing partner would be investing in these
• Outsourcing can give you assurance that your business processes are being carried out efficiently, proficiently and within a fast turnaround time
• Offshoring can help your organization save on capital expenditures
• By outsourcing, your company can save on management problems as your offshore partner will be managing the team who does your work
• By outsourcing, you can cater to the new and challenging demands of your customers
• Outsourcing can help your organization to free up its cash flow
• Sharing your business risks is possible with outsourcing
• Outsourcing can give your business a competitive advantage as you will be able to increase productivity in all the areas of your business
• Outsourcing can help your organization to cut is operational costs to more than half
If you want your organization to stay ahead of competition, concentrate on core competencies and make use of the latest technologies, then outsourcing can help your organization achieve all this and more. In outsourcing, the advantages of outsourcing are more than the disadvantages of outsourcing. The pros of outsourcing have driven more organization to step into offshoring and experience the benefits that it has to offer. http://www.outsource2india.com


The Disadvantages of Outsourcing
• At times, it is more cost-effective to conduct a particular business process, rather than outsourcing it
• While outsourcing services such as payroll processing services and tax preparation services, your outsourcing provider will be able to see your company’s confidential information and hence there is a threat to security and confidentiality in outsourcing
• When you begin to outsource your business processes, you might find it difficult to manage the offshore provider when compared to managing processes within your organization
• Offshoring can create potential redundancies for your organization
• In case, your offshore service provider becomes bankrupt or goes out of business, your organization will have to immediately move your business processes in-house or find another outsourcing provider
• The employees in your organization might not like the idea of you outsourcing your processes and they might express lack of interest or lack of quality at work
• Your outsourcing provider might not be only providing services for your organization. Since your provider might be catering to the needs of several companies, there might be not be complete devotion to you and your company
• By outsourcing, you might forget to cater to the needs of your valuable customers as your focus will be on the business process that is outsourced
• In outsourcing, you may lose your control over the process that is outsourced
• Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred while signing a contract between companies. You might also have to spend a lot of time and effort in getting the contract signed
• With outsourcing, your organization might suffer from a lack of customer focus
• There can be several disadvantages in outsourcing, such as, renewing contracts, misunderstanding of the contract, lack of communication, poor quality and delayed services amongst others.

The disadvantages of offshoring give organizations an opportunity to think about what they are stepping into. However the disadvantages of outsourcing are less than the advantages of offshore outsourcing. When outsourcing, you might not experience any of these disadvantages of offshoring, if you find a reliable outsourcing partner. Before outsourcing take the interests of your customers and employees into consideration and then make an informed decision. If your organization is genuinely interested in outsourcing, let not the disadvantages of outsourcing stop you. http://www.outsource2india.com


The Benefits of Outsourcing

1. Take advantage of the cost-advantages: Outsourcing to countries such as India can give you access to cost-effective services. The same services with the same level of quality are offered in India for a much lower cost! This cost-advantage has increased the number of services that are being offered to India. Services such as call center services, teleradiology, medical billing, etc can help you save up to 60% of your total costs when outsourced! Getting access to high-quality services at a cost-effective price is the biggest benefit that you can get while outsourcing. Outsource and reap the benefits of outsourcing.

2. See an increase in your business: Another benefit of outsourcing is seeing a big increase in your profits, productivity, level of quality, business value, business performance and much more. Outsourcing can help you see an increase in almost every aspect of your business. Outsource and see your organization experience an increase in every aspect with these benefits of outsourcing.

3. Save Big! : One of the benefits of outsourcing is that you can save on every aspect of your business and increase your profits. When you outsource, you can save on time, effort, infrastructure and manpower. Since you don't have to invest in infrastructure, you can also save on making unnecessary fixed investments. Outsourcing removes the burden of changing or maintaining infrastructure. You can also save on capital expenditure. Outsourcing can also help you save on training costs, because you do not have to invest in manpower. These savings will help bring about an increase in your revenue. Your organization can also save on investing in expensive software and technologies.

4. Get access to specialized services: By outsourcing you can get expert and skilled services. This benefit of outsourcing has been the key reason why several outsourcers opt for outsourcing. The function that you outsource may not be your core competency but you can find an outsourcing partner who is specialized in that particular business process. Your outsourcing partner will be able to provide more proficient services. This is yet another benefit of outsourcing, because if you perform all your business processes in-house, you will not be able to provide specialized and skilled services. Outsourcing can give you this advantage.

5. Concentrate more on your core business: One of the benefits of outsourcing is that your organization will be free to concentrate on your core business. By outsourcing all your non-core functions, your employees can be put to better use and you will be able to see a huge growth in your core business.

6. Make faster deliveries to customers: Another benefit of outsourcing is that you can make quicker deliveries to customers. Your outsourcing partner will be able to provide faster deliverables and you in turn will be able to make quick deliveries to your customer. Faster deliveries can also help you save on time.

7. Improved customer satisfaction: With timely deliveries and high-quality services you can impress your customers. Outsourcing can help you benefit from increased customer satisfaction and your customers will remain loyal to your organization.

8. Benefit from time zone advantages: Outsourcing to countries such as India has a time zone advantage. Your night will be India's day. With this advantage, your outsourcing partner can complete critical work and send it to you the next day. Thus, your work is continued by your outsourcing partner even after your employees go home. This enables the work to be completed much faster and gives your business a competitive advantage. This is one of the benefits of offshore outsourcing.

9. Increased efficiency: Another benefit of outsourcing is increased efficiency. Your non-core business functions will be performed efficiently by your outsourcing partner, while your core functions can be efficiently carried out in-house. Thereby you can achieve overall efficiency and see an increase in your profits.

10. Give your business a competitive edge! : Outsourcing can help your organization gain a competitive edge in the market. You can also get access to specialized services for different business processes and thereby provide your customers with best-of breed services. Such strategic outsourcing can give your business a competitive edge among your peers. The benefits of outsourcing can give your organization a cutting-edge in the worldwide market. Outsource and take advantage of the benefits of outsourcing.

11. Outsourcing countries also benefit from outsourcing: Countries such as U.S, U.K, Norway and Australia amongst others can benefit by outsourcing. The economy of these countries has increased tremendously after outsourcing. In the U.S, after the outsourcing boom, the economy has increased, jobs have increased and the wages of American workers have increased.
http://www.outsource2india.com

Why Outsourcing Instead of Insourcing?

Why Outsourcing?

- It is Cheaper
- It is Better
- You can Work with More Competent People
- You can make sure you get what you are looking for
- The Quality is Better in Most Cases
- Marketing time needed to look for people is drastically reduced
- Less Risks
http://enzinearticles.com

Risk


Conclusion:

All I can say is outsourcing or insourcing depends on the company or organization to meet their specific goals.
Every organization has a unique culture like families and these cultures carry on how they do things. When we talk about cultural bias other companies will prefer to outsource as many functions as possible and others will take it as case-by-case basis. Sometimes there are odds in choosing an outsource for the reason of the function of the outsourcing company finds it difficult to hire or to contract the right outsourcing agency, maybe because issues of confidentiality will be compromised. Outsourcing is the best option if the organization is sure of the issues raised before contacting an agency to develop a system of their choice. According to the enzinearticles above outsourcing offers these benefits: cheap, better, you can work with more competent people, You can make sure you get what you are looking for, The Quality is Better in Most Cases, Marketing time needed to look for people is drastically reduced, Less Risks.

I can also say that outsourcing is better why because these outside programmers (outsourced) will do everything you need; they are more competent and more updated with the new technology and languages of today than having an internal programmer that requires yearly training for them to upgrade- we cannot say that we hired the best internal programmers in the whole world unless they are given trainings and seminar for the new trends and new languages of the outside world and that’s another issue of cost -“training cost”. While outsourced programmers are more updated because developing software, systems, and etc… is their expertise and all you need to do is to make a perfect choice among them for your company.






[i]

I absolutely GO iNsOuRcE!!!!!

Outsourcing in general can be defined as passing of service provision or production to another internal or external party. The chief reason of outsourcing is to reduce capital expenditure over a business process. Also management gets more time to concentrate over core competencies. This also reduces the dependency upon internal resources and increases the flexibility to meet the changing business and commercial conditions.
Even though several other reasons can be listed up in favor of outsourcing, one must not overlook the disadvantages of it.
By outsourcing a business process, we tend to loose the managerial control. This happens because it is harder to manage the outsourcing service provider as compare to managing one's own employees. Also because we generally tend to skip (or miss to calculate) the
potential hidden costs of outsourcing which includes legal costs of putting together a contract between companies and time spent on coordinating the contracts, we feel that outsourcing reduces the overall expenditure of a business process, one of the major reasons why a company goes for outsourcing. This hidden and missed out costs of outsourcing is hard to predict causing overall costs to be underestimated.
Another disadvantage is that outsourcing can also prove to be a threat to the security and confidentiality of issues of a company. If your company is outsourcing business process such as payroll, confidential information such as salary will be known to the outsourcing service provider. Therefore one must be very careful in choosing which business process to outsource and which one not.
Outsourcing may also result into the possible loss of flexibility in reacting to changing business conditions, lack of internal and external customer focus and sharing cost savings. Loss of internally generated talent is yet another problem associated with the outsourcing as it may hamper the growth of an employee by depriving him from the experience he would have gained by handling the business issue himself then by passing it over to some other external party.
Thus before a company decides to outsource its business process, it must examine all the factors carefully. It may not happen that outsourcing becomes a reason for company to regret later.

There is a strong public opinion regarding outsourcing (especially when combined with offshoring) that outsourcing damages a local labor market. Outsourcing is the transfer of the delivery of services which affects both jobs and individuals. It is difficult to dispute that outsourcing has a detrimental effect on individuals who face job disruption and employment insecurity; however, its supporters believe that outsourcing should bring down prices, providing greater economic benefit to all. There are legal protections in the European Union regulations called the Transfer of Undertakings (Protection of Employment). Labor laws in the United States are not as protective as those in the European Union. On June 26 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce commenting that the U.S. has outsourced too much and can no longer rely on consumer spending to drive demand.

Quality Risk is the propensity for a product or service to be defective, due to operations-related issues. Quality risk in outsourcing is driven by a list of factors. One such factor is opportunism by suppliers due to misaligned incentives between buyer and supplier, information asymmetry, high asset specificity, or high supplier switching costs. Other factors contributing to quality risk in outsourcing are poor buyer-supplier communication, lack of supplier capabilities/resources/capacity, or buyer-supplier contract enforceability. Two main concepts must be considered when considering observability as it related to quality risks in outsourcing: the concepts of testability and criticality.
Quality fade is the deliberate and secretive reduction in the quality of labor in order to widen profit margins. The downward changes in human capital are subtle but progressive, and usually unnoticeable by the out sourcer/customer. The initial interview meets requirements, however, with subsequent support, more and more of the support team are replaced with novice or less experienced workers. India IT shops will continue to reduce the quality of human capital under the pressure of drying up labor supply and upward trend of salary, pushing the quality limits. Such practices are hard to detect, as customers may just simply give up seeking help from the help desk. However, the overall customer satisfaction will be reduced greatly over time. Unless the company constantly conducts customer satisfaction surveys, they may eventually be caught in a surprise of customer churn, and when they find out the root cause, it could be too late. In such cases, it can be hard to dispute the legal contract with the India outsourcing company, as their staff are now trained in the process and the original staff made redundant. In the end, the company that outsources is worse off than before it outsourced its workforce to India
Disadvantages of Outsource
Although there are several reasons in favor of outsourcing, a company must also consider the disadvantages of outsourcing. There are risks that need to be analyzed whenever a company embarks on a new business venture. Even though outsourcing is often the right solution for companies, one should not outsource simply for the sake of outsourcing. Several benefits and value addition have to be realized in order for companies justify outsourcing. It is a hot trend nowadays and seems an attractive option for many, but if the risks are not considered in detail, the disadvantages of outsourcing may dominate the advantages.

Lately however, the concept of outsourcing has been criticized. The negative attitudes toward offshore outsourcing have been mostly discussed by parties in the US and UK, due to job losses in the mentioned countries. Some people in countries like the US, feel that outsourcing is threat to their economy. Outsourcing jobs to offshore destinations, is causing unemployment in the minds of some people. It cannot be denied that the immediate effects of outsourcing such as lay-offs as well as the shifting of production and jobs to foreign locations causes problems many employees. Both high and low-end jobs are moving out of the US causing people to loose jobs. The needs of companies, national economies and those of individual people often clash.

The disadvantages of outsourcing may include the following:

· Loss of managerial control, because it is more difficult to manage outside service providers than managing one’s own employees working possibly in the same building.
· Often the hidden costs are difficult to calculate or prepare for. These include legal costs related to putting together a contract between two companies and the time spent to coordinating the contract.
· Another disadvantage of outsourcing can be a threat to security and confidentiality. If your company is outsourcing processes like payroll, medical transcriptions or other confidential information, a company must be very careful in choosing which process it wants to outsource and to which provider.
· A possible loss of flexibility in reacting to changing business conditions, lack of internal and external customer focus and sharing cost savings may also be a disadvantage of outsourcing.
· Other disadvantages of outsourcing may include unfavorable contract lengths, loss of competitive edge, problems in contract renewal, and contractual misunderstandings.



When the IT department is taken over by an outsourcer you will see some changes. Some of these changes can be good for you and your organization -- but not all will be. The outsourcer will make a great deal of noise about its ability to leverage its support organization and your contribution to that organization. This makes it sound like a good thing for your organization in that you get a wider range of skills and you don't have to employ any additional staff to achieve it. Also, it suggests a good prospect for you because it gives you a career path outside your current employers' structure without actually changing jobs. As Ira Gershwin wrote; "It ain't necessarily so."

The tight integration with the outsourcer's help desk and systems management solutions, which I addressed in my last article, is a double-edged sword.
Here are some reasons to be wary:
 Longer resolution time. Typically, any problem with a server that you control will take significantly longer to resolve when you're relying on an outside company to solve it. Before being outsourced, you would have been able to go to the server room or at least access it using Remote Desktop and act quickly and directly using your knowledge and experience. Now that your are outsourcing the support for the server, you may find yourself constrained and possibly unable to control the server in the manner that is most appropriate to the problem at hand. Remember that if performance is merely degraded, you may not be given permission to do anything about the application until a time that is convenient for the outsourcer but inconvenient for you and your staff.
Server and Active Directory permissions are almost always changed. Settings pertaining to the operating system are set in a way that only personnel in the data center or remote support center are able to control such things as drive configuration, Registry settings or patch levels. If you have an application problem, rest assured that the problem will come straight back to your lap, but you will have one hand tied behind your back while you are troubleshooting and resolving the problem.
 Patch management is becoming more complicated. Patch management is always an area of heated debate. Traditionally, IT structures have the ability to control which patches are applied to their servers and, more importantly, when those patches are to be applied. Support teams from outsourced providers are often constrained by a contract that is written by the customer to keep operating systems and applications patched to a degree that sometimes may not sit well with third-party application vendors.
These vendors may often be focused on their product's functionality rather than on certifying it with a given service pack or patch. For example, there are many applications out there that are still only certified to run on Windows 2000 Server, with no prospect of them being approved for use on Windows Server 2003 in the future. Major releases aside, there is always a time lag between minor releases such as service packs and patches that application vendors take a long time to approve from a supportability perspective. You will receive a great deal of pressure from the centralized operating system support teams within the outsourcing organization to take patches that might not be even remotely relevant to your server(s) but are deemed essential by the centralized teams to allow them to conform with their schedule of the contract. Be prepared for some difficult conversations with the outsourcers'centralized teams, the Service Management organization and almost certainly with the software vendor or its support people.
 Stifled innovation. Innovation will also be a challenge for you personally. No matter what the marketing hype says, innovations and new technologies and ideas will present a challenge. Your contract may not contain a provision to develop the infrastructure using existing technology in a manner that will enable you to be part of the future within the organization. The kind of research & development activity that would have been done during an internal undertaking at no visible cost to the project is not always possible within an IT outsourcing arrangement. Projects under an outsourced arrangement typically are done to a tight cost model. While it might appear to you to be expensive, it takes into account the project management and other governance activities that may have been missing in your organization previously.
 Career advancement may be stifled. An outsourcer will always bring an external team in to look at two things that affect you -- architecture and business process. Architecture is the primary affecting point here. The team will view the entire infrastructure and work closely with the business process re-engineering teams. Future designs may be implemented with only a cursory reference to what technologies are in place -- save for how to migrate away from them. Whereas before your career progression may have gone from Windows administrator to technical architecture or to an IT management role, you will find that both of those functions are now imported from the outsourcer's pool of resources, who already have the requisite experience.
This is a newsletter from inquirer:
How gov't projects (like NBN and Cyber Ed) get overpriced
By Manuel A. Alcuaz Jr.
Philippine Daily Inquirer
First Posted 18:01:00 03/09/2008

Filed Under: Government Contracts, Graft & Corruption, NBN deal
I have been studying the Cyber Ed project for the past few weeks. All of a sudden one night last week it dawned on me--proponents of overpriced government mega-projects use the same strategy as ERP (enterprise resource planning) vendors.
They sell the idea that having a single vendor guarantees that everything will work together and this best for the customer (or government).
Seven years ago the Manila Polo Club bought a Club ERP from Micros-Fidelio at P12 million because they thought if they bought everything from a single vendor they would have an integrated system.
The Club did not get an integrated system now seven years after the club's management says that the various subsystems--POS, receivables, F & B management, and accounting do not work well together.
It is a pity because if the club had bid the various subsystems independently the cost could have been only about P6 million instead of P12 million.
Many vendors could have offered IBM based POS Systems at about half the price of the Micros-Fidelio POS.
My company had offered a Windows based F&B System for P250,000 instead of the DOS based Micros Fidelio F&B system at P1,415,000.
The advantages to the customer of breaking down bids into loosely coupled subsystems can be very significant.
Deeper analysis shows that the ERP single vendor integrated systems strategy is not for the good of the customer or the government.
It is a vendor strategy to
1. Eliminate competitors who cannot offer everything in the mega RFP (request for proposal)
2. Get all the business.
3. Be able to get very high margins.
The ERP selling strategy includes:
Sell high (to top management)
Make single vendor and integrated mandatory
Offer total solution (hardware, training, implementation, project management)
Sow FUD (fear, uncertainty, and doubt) about smaller specialized vendors.
In the NBN-ZTE and Cyber Ed projects, we see that the project proponents advocate the ERP single vendor integrated system concept (religion!) as well as the strategy of selling high. How much higher can you get? It's not everyday that you get the President of a country flying to another country to witness the signing of a commercial contract (which subsequently gets lost!).
In both projects a single vendor provides everything (hardware, software, training, project management, etc.).
If one studies both the NBN-ZTE and Cyber Ed projects it becomes obvious that the Arroyo administration is not focused on good governance nor does it follow good procurement practices:
1. Both projects looked like they were being rushed.
2. Both projects avoided any semblance of competitive bidding.
3. Both projects do not show evidence of any effort to save money for the government.
4. In fact there seems to be an effort to borrow and spend as much as possible.
5. Both projects are designed to award everything to a single vendor.
Advantages of INSOUCE:
ุ No struggling with the trends of increasing costs.
ุ No support fees.
ุ Increase of staff knowledge and skill.
ุ Gives a high rate in employment of IT personnel.
ุ No vendor-lock in.
ุ Reduce costs.
ุ No managerial control.
ุ No loss of flexibility in reacting to changing business conditions.
ุ No hidden costs.
ุ No unfavorable contract lengths, loss of competitive edge, problems in contract renewal, and contractual misunderstandings.
ุ Not tied to the financial interests of vendor
This is my projected cost plan of my adopted company which I conducted a assessment of their Information System.
Projected Cost Plan

TABLE 1.1
………….Costs…........….................…………. In-sourcing……………………… Outsourcing
………………………..........................….. Monthly…….. Yearly………… Monthly…........….. Yearly
Personnel costs…..…….......……82,500 php…………990,000 php …..45,000 php…....540,000 php
Database Administrator…….....19,400 php ………232,800 php …..19,400 php …...232,800 php
MIS Manager…………...........……25,600 php ………307,200 php ….25,600 php …...307,200 php
Network Manager….......…………11,000 php ………132,000 php …..///////////////.///////////////////
Systems Analyst……......………..10,500 php ………136,000 php …..///////////// ….../////////////////
Programmer………........……….…10,000 php ………120,000 php ….////////////////////….//////////////////
Technician…………….........……..6,000 php …………72,000 php ……..////////////////……..//////////////////
Maintenance costs ….......……///////////////………//////////////……..11,792 php …....141,500 php
Renewal costs ……….......…..///////////////………/////////////………..47,167 php …….566,000 php
Telecommunications..........….2,000 php …………250,000 php ……..2,000 php …….24,000 php
Information System costs..../////////////………… 250,000 php …….. /////////////….1,415,000 php
Total ………………….................…..84,500 php ………1,250,000 php…….105,959 php…2,686,500 php

Shows in the table 1.1 the estimated cost in outsourcing and in sourcing. It also shows that in sourcing is cheaper than outsourcing. It also increases staff knowledge and skills to ensure a productive and satisfying work environment. As seen in the table it is much cheaper to switch to in source from outsource. Even though the company will have to spend more in personnel cost that is 82,500 php compared to outsource that is 45,000 php. It is an advantage also in our IT industry because in- sourcing gives a high rate in employment of IT personnel.
YEARS COST SAVE TOTAL
1 year 1,436,500 1,436,500
2 years 257,500 1,694,000
3 years 257,500 1,951,500
Table 1.2

Table 1.2 shows that shifting to in-source from outsource it can save 1,436,500 php. And in 3 years time the company will save 1,951,500 php.

I recommend hiring additional programmers, designer, researcher, and create a system development team to make a program system application so that the company doesn’t have to buy license system anymore. I recommend going in-source, to avoid too much expense in the company. Building a system development team is more easier for the IT personnel in the company to customized a certain program, and can also put the company information and ideas to the software, rather than buying a license where in if the company need assistance, the company will call their customer care specialist then every question cost time and money. I recommend going in-source so that the company will not be dependent anymore to the source of their Information System. Lastly, I recommend going in-source with the intention that the company will not be requires to sign an agreement that mandates that support fees will continue to be paid even if use of that product is discontinued within the contract period.

REFERENCES:
http://www.cyfuture.com/disadvantages-of-outsourcing.htm
http://www.softwareprojects.org/disadvantages-outsourcing.htm
http://business.inquirer.net/money/columns/view/20080309-123726/How-govt-projects-like-NBN-and-Cyber-Ed-get-overpriced
http://searchwinit.techtarget.com/news/article/0,289142,sid1_gci1212417,00.html
http://en.wikipedia.org/wiki/Wikipedia:Citation_needed

Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources. Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labour. Outsourcing in the information technology field has two meanings. One is to commission the development of an application to another organization, usually a company that specializes in the development of this type of application. The other is to hire the services of another company to manage all or parts of the services that otherwise would be rendered by an IT unit of the organization. The latter concept might not include development of new applications.

Outsourcing involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider. The client organization and the supplier enter into a contractual agreement that defines the transferred services. Under the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client agrees to procure the services from the supplier for the term of the contract. Business segments typically outsourced include information technology, human resources, facilities, real estate management, and accounting. Many companies also outsource customer support and call center functions like telemarketing, CAD drafting, customer service, market research, manufacturing, designing, web development, print-to-mail, content writing, ghostwriting and engineering. Offshoring is the type of outsourcing in which the buyer organization belongs to another country.
Outsourcing and offshoring are used interchangeably in public discourse despite important technical differences. Outsourcing involves contracting with a supplier, which may or may not involve some degree of offshoring. Offshoring is the transfer of an organizational function to another country, regardless of whether the work is outsourced or stays within the same corporation/company.

With increasing globalization of outsourcing companies, the distinction between outsourcing and offshoring will become less clear over time. This is evident in the increasing presence of Indian outsourcing companies in the United States and United Kingdom. The globalization of outsourcing operating models has resulted in new terms such as nearshoring, noshoring, and rightshoring that reflect the changing mix of locations. This is seen in the opening of offices and operations centers by Indian companies in the U.S. and UK. A major job that is being outsourced is accounting. They are able to complete tax returns across seas for people in America.
Multisourcing refers to large outsourcing agreements (predominantly IT). Multisourcing is a framework to enable different parts of the client business to be sourced from different suppliers. This requires a governance model that communicates strategy, clearly defines responsibility and has end-to-end integration.
Strategic outsourcing is the organizing arrangement that emerges when firms rely on intermediate markets to provide specialized capabilities that supplement existing capabilities deployed along a firm’s value chain (see Holcomb & Hitt, 2007). Such an arrangement produces value within firms’ supply chains beyond those benefits achieved through cost economies. Intermediate markets that provide specialized capabilities emerge as different industry conditions intensify the partitioning of production. As a result of greater information standardization and simplified coordination, clear administrative demarcations emerge along a value chain. Partitioning of intermediate markets occurs as the coordination of production across a value chain is simplified and as information becomes standardized, making it easier to transfer activities across boundaries.

Due to the complexity of work definition, codifying requirements, pricing, and legal terms and conditions, clients often utilize the advisory services of outsourcing consultants (see sourcing advisory) or outsourcing intermediaries to assist in scoping, decision making, and vendor evaluation.
Reasons for outsourcing

Organizations that outsource are seeking to realize benefits or address the following issues:
• Cost savings. The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.
• Focus on Core Business. Resources (for example investment, people, infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specilaised IT services companies.
• Cost restructuring. Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.
• Improve quality. Achieve a step change in quality through contracting out the service with a new service level agreement.
• Knowledge. Access to intellectual property and wider experience and knowledge.
• Contract. Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.
• Operational expertise. Access to operational best practice that would be too difficult or time consuming to develop in-house.
• Access to talent. Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.
• Capacity management. An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.
• Catalyst for change. An organization can use an outsourcing agreement as a catalyst for major step change that cannot be achieved alone. The outsourcer becomes a Change agent in the process.
• Enhance capacity for innovation. Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.
• Reduce time to market. The acceleration of the development or production of a product through the additional capability brought by the supplier.
• Commodification. The trend of standardizing business processes, IT Services and application services enabling businesses to intelligently buy at the right price. Allows a wide range of businesses access to services previously only available to large corporations.
• Risk management. An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.
• Venture Capital. Some countries match government funds venture capital with private venture capital for startups that start businesses in their country.
• Tax Benefit. Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.

Criticisms of outsourcing
Quality Risks
Quality Risk is the propensity for a product or service to be defective, due to operations-related issues. Quality risk in outsourcing is driven by a list of factors. One such factor is opportunism by suppliers due to misaligned incentives between buyer and supplier, information asymmetry, high asset specificity, or high supplier switching costs. Other factors contributing to quality risk in outsourcing are poor buyer-supplier communication, lack of supplier capabilities/resources/capacity, or buyer-supplier contract enforceability. Two main concepts must be considered when considering observability as it related to quality risks in outsourcing: the concepts of testability and criticality.
Quality fade is the deliberate and secretive reduction in the quality of labor in order to widen profit margins. The downward changes in human capital are subtle but progressive, and usually unnoticeable by the out sourcer/customer. The initial interview meets requirements, however, with subsequent support, more and more of the support team are replaced with novice or less experienced workers. India IT shops will continue to reduce the quality of human capital under the pressure of drying up labor supply and upward trend of salary, pushing the quality limits. Such practices are hard to detect, as customers may just simply give up seeking help from the help desk. However, the overall customer satisfaction will be reduced greatly over time. Unless the company constantly conducts customer satisfaction surveys, they may eventually be caught in a surprise of customer churn, and when they find out the root cause, it could be too late. In such cases, it can be hard to dispute the legal contract with the India outsourcing company, as their staff are now trained in the process and the original staff made redundant. In the end, the company that outsources is worse off than before it outsourced its workforce to India.

Public opinion

There is a strong public opinion regarding outsourcing (especially when combined with offshoring) that outsourcing damages a local labor market. Outsourcing is the transfer of the delivery of services which affects both jobs and individuals. It is difficult to dispute that outsourcing has a detrimental effect on individuals who face job disruption and employment insecurity; however, its supporters believe that outsourcing should bring down prices, providing greater economic benefit to all. There are legal protections in the European Union regulations called the Transfer of Undertakings (Protection of Employment). Labor laws in the United States are not as protective as those in the European Union. On June 26 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce commenting that the U.S. has outsourced too much and can no longer rely on consumer spending to drive demand.
Language skills

In the area of call centers end-user-experience is deemed to be of lower quality when a service is outsourced. This is exacerbated when outsourcing is combined with off-shoring to regions where the first language and culture are different. The questionable quality is particularly evident when call centers that service the public are outsourced and offshored.

The public generally find linguistic features such as accents, word use and phraseology different which may make call center agents difficult to understand. The visual clues that are present in face-to-face encounters are missing from the call center interactions and this also may lead to misunderstandings and difficulties.

In addition to language and accent differences, a lack of local social and geographic knowledge is often present, leading to misunderstandings or mis-communications.
Social responsibility

Outsourcing sends jobs to the lower-income areas where work is being outsourced to, which provides jobs in these areas and has a net equalizing effect on the overall distribution of wealth. Some argue that the outsourcing of jobs (particularly off-shore) exploits the lower paid workers. A contrary view is that more people are employed and benefit from paid work. Despite this argument, domestic workers displaced by such equalization are proportionately unable to outsource their own costs of housing, food and transportation.

On the issue of high-skilled labor, such as computer programming, some argue that it is unfair to both the local and off-shore programmers to outsource the work simply because the foreign pay rate is lower. On the other hand, one can argue that paying the higher-rate for local programmers is wasteful, or charity, or simply overpayment. If the end goal of buyers is to pay less for what they buy, and for sellers it is to get a higher price for what they sell, there is nothing automatically unethical about choosing the cheaper of two products, services, or employees.

Social responsibility is also reflected in the costs of benefits provided to workers. Companies outsourcing jobs effectively transfer the cost of retirement and medical benefits to the countries where the services are outsourced. This represents a significant reduction in total cost of labor for the outsourcing company. A side effect of this trend is the reduction in salaries and benefits at home in the occupations most directly impacted by outsourcing.

Insourcing is the opposite of outsourcing; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation. Insourcing is a business decision that is often made to maintain control of critical production or competencies. An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility.
Insourcing is widely used in an area such as production to reduce costs of taxes, labor (e.g., American labor is often cheaper than European labor), transportation, etc.
Insourcing at United Parcel Service (UPS) was described in the bestselling book The World Is Flat, by Thomas Friedman.
According to PR Web, insourcing was becoming more common by 2006 as businesses had less than satisfactory experiences with outsourcing (including customer support). Many outsourcing proponents responded to a negative consumer opinion backlash resulting from outsourcing their communications management to vendors who rely on overseas operations.
To those who are concerned that nations may be losing a net amount of jobs due to outsourcing, some point out that insourcing also occurs. According to a study by Mary Amiti and Shang-Jin Wei, in the United States, the United Kingdom, and many other industrialized countries more jobs are insourced than outsourced. They found that out of all the countries in the world they studied, the U.S. and the U.K. actually have the largest net trade surpluses in business services. Countries with a net deficit in business services include Indonesia, Germany and Ireland.
Insourcing is loosely referred in call centers who are doing the work of the outsourcing companies. Companies that outsource include Dell, Hewlett Packard, Symantec, and Linksys. The callcenters and technicians that are contracted to handle the outsourced work are usually over-seas. Customers may refer to these countries as "India" technical support if they are hard to understand over telecommunications. These insourcing companies were a great way to save money for the outsourcing of work, but quality varies, and poor performance has sometimes harmed the reputations of companies who provide 24/7 customer/technical support.
The Organization for International Investment, a Washington D.C. trade association, uses the term to describe the creation of jobs through foreign direct investment within the United States.


Outsourcing began in the early eighties when organizations started delegating their non-core functions to an external organization that was specialized in providing a particular service, function or product. In outsourcing, the external organization would take on the management of the outsourced function.
Most organizations choose outsourcing because outsourcing offers a lot of advantages. When organizations outsource to countries like India, they benefit from lower costs and high-quality services. Moreover organizations can concentrate more on core functions once they outsource their non-core functions. Outsourcing can also help organizations make better use of their resources, time and infrastructure.
In outsourcing, the outsourcer and the outsourcing partner have a greater relationship when compared to the relationship between a buyer and a seller. In outsourcing, the outsourcer trusts the outsourcing partner with vital information. Outsourcing is no longer confined to the outsourcing of IT services. Outsourcers in the US and UK now outsource financial services, engineering services, creative services, data entry services and much more.
Most organizations are opting to outsource because outsourcing enables organizations to access intellectual capital, focus on core competencies, shorten the delivery cycle time and reduce costs significantly. Organizations feel outsourcing is an effective business strategy to help improve their business.


The opposite of outsourcing can be defined as insourcing. When an organization delegates its work to another entity, which is internal yet not a part of the organization, it is termed as insourcing. The internal entity will usually have a specialized team who will be proficient in the providing the required services. Organizations sometimes opt for insourcing because it enables them to maintain a better control of what they outsource. Insourcing has also come to be defined as transferring work from one organization to another organization which is located within the same country. Insourcing can also mean an organization building a new business centre or facility which would specialize in a particular service or product.
Organizations involved in production usually opt for insourcing in order to cut down the cost of labor and taxes amongst others. The trend towards insourcing has increased since the year 2006. Organizations who have been dissatisfied with outsourcing have moved towards insourcing. Some organizations feel that they can have better customer support and better control over the work outsourced by insourcing their work rather than outsourcing it. According to recent studies, there is more wok insourced than outsourced in the U.S and U.K. These countries are currently the largest outsourcers in the world. The U.S and U.K outsource and insource work equally.

What is best for your organization?
If your organization has a number of non-core processes which are taking plenty of time, effort and resources to perform in-house, it would be wise to outsource these non-core functions. Outsourcing in this case, would help you save on time, effort, manpower and would also aid you in making quicker deliveries to your customers.
If you require expertise services in areas which do not fall under your core competency, then outsourcing will be a good option as you can get access to expertise services. For reducing costs and making faster deliverables, outsourcing is again a good option.
If your work involves production, then it would be more ideal for your organization to opt for insourcing, as you can save on transportation costs and exercise a better control over your project.
It is not necessary to choose outsourcing over insourcing or vice versa. Your organization can outsource and insource at the same time. By outsourcing and insourcing simultaneously, you can have the best of what both offers and your business can get a competitive advantage!
My stand:
Outsourcing is no longer the permanent cure for an expensive IT or business process ailment.
Having spent the past few years handing over control of troublesome processes to service providers, increasing number of technology leaders are choosing to bring control of problematic systems back in-house.
Analyst Gartner predicts the outsourcing market will grow by just five per cent per annum over the next few years, a figure far lower than the double-digit highs of a few years ago.
What's more, the analyst says four in every five outsourcing relationships will be renegotiated over the duration of a contract.
And some 64 per cent of firms have already brought an outsourced service back in-house, according to consultant Deloitte.
So what's gone wrong? Why are companies reconsidering big external service contracts for in-house provision?
Over a sustained period of time, Computing has investigated the issues and spoken to the companies involved in an attempt to understand whether UK plc is swinging towards outsourcing or insourcing.
Insourcing is a business practice in which work that would otherwise have been contracted out is performed in house.
Insourcing often involves bringing in specialists to fill temporary needs or training existing personnel to perform tasks that would otherwise have been outsourced. An example is the use of in-house engineers to write technical manuals for equipment they have designed, rather than sending the work to an outside technical writing firm. In this example, the engineers might have to take technical writing courses at a local college, university, or trade school before being able to complete the task successfully. Other challenges of insourcing include the possible purchase of additional hardware and/or software that is scalable and energy-efficient enough to deliver an adequate return on investment (ROI).

Insourcing can be viewed as outsourcing as seen from the opposite side. For example, a company based in Japan might open a plant in the United States for the purpose of employing American workers to manufacture Japanese products. From the Japanese perspective this is outsourcing, but from the American perspective it is insourcing. Nissan, a Japanese automobile manufacturer, has in fact done this.

In short, I suggest INSOURCING because I think its benefits and long term advantages outweighs those in outsourcing.. ^_^

http://en.wikipedia.org/wiki/Insourcing
http://en.wikipedia.org/wiki/Outsourcing

Since outsourcing and insourcing were already defined by my classmates I will not include their definition anymore.
As for me, I would prefer insource. Because our school cannot provide such budget for the said project, its better to check our resources and allocate solutions that would suit our financial capabilities.

Insource, aside from being cheaper, is more secured than outsource. Though outsourcing can provide better competition that makes it a little cheaper, it would not outweigh the advantages given by insourcing.

Making use of our resources is better since we can communicate with the programmers easily if something went wrong in the system. As IT soon to be professionals, we know that the top priority of a system is security. Also, being concerned with the security doesn’t mean being careless with the quality.

Finally, the university has skilled faculty and students. I’m not bragging but it’s the reality that of all universities in Mindanao, our school offers high standards of learning when it comes to Information Technology. So why settle for the better if we can have the best?

here are some facts about insourcing and outsourcing to be fair:

Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources.

Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labour. Outsourcing in the information technology field has two meanings. One is to commission the development of an application to another organization, usually a company that specializes in the development of this type of application. The other is to hire the services of another company to manage all or parts of the services that otherwise would be rendered by an IT unit of the organization. The latter concept might not include development of new applications.

Outsourcing involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider. The client organization and the supplier enter into a contractual agreement that defines the transferred services. Under the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client.

The client agrees to procure the services from the supplier for the term of the contract. Business segments typically outsourced include information technology, human resources, facilities, real estate management, and accounting. Many companies also outsource customer support and call center functions like telemarketing, CAD drafting, customer service, market research, manufacturing, designing, web development, print-to-mail, content writing, ghostwriting and engineering. Offshoring is the type of outsourcing in which the buyer organization belongs to another country.

Outsourcing and offshoring are used interchangeably in public discourse despite important technical differences. Outsourcing involves contracting with a supplier, which may or may not involve some degree of offshoring. Offshoring is the transfer of an organizational function to another country, regardless of whether the work is outsourced or stays within the same corporation/company.

With increasing globalization of outsourcing companies, the distinction between outsourcing and offshoring will become less clear over time. This is evident in the increasing presence of Indian outsourcing companies in the United States and United Kingdom. The globalization of outsourcing operating models has resulted in new terms such as nearshoring, noshoring, and rightshoring that reflect the changing mix of locations. This is seen in the opening of offices and operations centers by Indian companies in the U.S. and UK. A major job that is being outsourced is accounting. They are able to complete tax returns across seas for people in America.

Multisourcing refers to large outsourcing agreements (predominantly IT). Multisourcing is a framework to enable different parts of the client business to be sourced from different suppliers. This requires a governance model that communicates strategy, clearly defines responsibility and has end-to-end integration.

Strategic outsourcing is the organizing arrangement that emerges when firms rely on intermediate markets to provide specialized capabilities that supplement existing capabilities deployed along a firm’s value chain (see Holcomb & Hitt, 2007). Such an arrangement produces value within firms’ supply chains beyond those benefits achieved through cost economies. Intermediate markets that provide specialized capabilities emerge as different industry conditions intensify the partitioning of production. As a result of greater information standardization and simplified coordination, clear administrative demarcations emerge along a value chain. Partitioning of intermediate markets occurs as the coordination of production across a value chain is simplified and as information becomes standardized, making it easier to transfer activities across boundaries.

Due to the complexity of work definition, codifying requirements, pricing, and legal terms and conditions, clients often utilize the advisory services of outsourcing consultants (see sourcing advisory) or outsourcing intermediaries to assist in scoping, decision making, and vendor evaluation.

Insourcing is the opposite of outsourcing; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation. Insourcing is a business decision that is often made to maintain control of critical production or competencies. An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility.

Insourcing is widely used in an area such as production to reduce costs of taxes, labor (e.g., American labor is often cheaper than European labor), transportation, etc.

Insourcing at United Parcel Service (UPS) was described in the bestselling book The World Is Flat, by Thomas Friedman.

According to PR Web, insourcing was becoming more common by 2006 as businesses had less than satisfactory experiences with outsourcing (including customer support). Many outsourcing proponents responded to a negative consumer opinion backlash resulting from outsourcing their communications management to vendors who rely on overseas operations.

To those who are concerned that nations may be losing a net amount of jobs due to outsourcing, some point out that insourcing also occurs. According to a study by Mary Amiti and Shang-Jin Wei, in the United States, the United Kingdom, and many other industrialized countries more jobs are insourced than outsourced. They found that out of all the countries in the world they studied, the U.S. and the U.K. actually have the largest net trade surpluses in business services. Countries with a net deficit in business services include Indonesia, Germany and Ireland.

Insourcing is loosely referred in call centers who are doing the work of the outsourcing companies. Companies that outsource include Dell, Hewlett Packard, Symantec, and Linksys. The callcenters and technicians that are contracted to handle the outsourced work are usually over-seas. Customers may refer to these countries as "India" technical support if they are hard to understand over telecommunications. These insourcing companies were a great way to save money for the outsourcing of work, but quality varies, and poor performance has sometimes harmed the reputations of companies who provide 24/7 customer/technical support.

I suggest our school should go for insourcing in favor of the reasons and benefits stated above.

Before I will choose between insourcing and outsourcing, let’s take a look first what these words are.

Insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation, in contrast to Outsourcing which is s subcontracting a process to a third-party company. Insourcing is a business decision that is often made to maintain control of critical production or competencies.n According to PR Web, insourcing was becoming more common by 2006 as businesses had less than satisfactory experiences with outsourcing (including customer support). Many outsourcing proponents responded to a negative consumer opinion backlash resulting from outsourcing their communications management to vendors who rely on overseas operations.
Outsourcing began in the early eighties when organizations started delegating their non-core functions to an external organization that was specialized in providing a particular service, function or product. In outsourcing, the external organization would take on the management of the outsourced function.
Most organizations choose outsourcing because outsourcing offers a lot of advantages. When organizations outsource to countries like India, they benefit from lower costs and high-quality services. Moreover organizations can concentrate more on core functions once they outsource their non-core functions. Outsourcing can also help organizations make better use of their resources, time and infrastructure.
In outsourcing, the outsourcer and the outsourcing partner have a greater relationship when compared to the relationship between a buyer and a seller. In outsourcing, the outsourcer trusts the outsourcing partner with vital information. Outsourcing is no longer confined to the outsourcing of IT services. Outsourcers in the US and UK now outsource financial services, engineering services, creative services, data entry services and much more.
Most organizations are opting to outsource because outsourcing enables organizations to access intellectual capital, focus on core competencies, shorten the delivery cycle time and reduce costs significantly. Organizations feel outsourcing is an effective business strategy to help improve their business.
The Advantages of Outsourcing
• Outsourcing your non-core activities will give you more time to concentrate on your core business processes
• Offshoring can give you access to professional, expert and high-quality services
• With outsourcing your organization can experience increased efficiency and productivity in non-core business processes
• Outsourcing can help you streamline your business operations
• Offshore outsourcing can help you save on time, effort, manpower, operating costs and training costs amongst others
• Outsourcing can make your organization more flexible to change
• You can experience an increased control of your business with outsourcing
• Your organization can save on investing in the latest technology, software and infrastructure as your outsourcing partner would be investing in these
• Outsourcing can give you assurance that your business processes are being carried out efficiently, proficiently and within a fast turnaround time
• Offshoring can help your organization save on capital expenditures
• By outsourcing, your company can save on management problems as your offshore partner will be managing the team who does your work
• By outsourcing, you can cater to the new and challenging demands of your customers
• Outsourcing can help your organization to free up its cash flow
• Sharing your business risks is possible with outsourcing
• Outsourcing can give your business a competitive advantage as you will be able to increase productivity in all the areas of your business
• Outsourcing can help your organization to cut is operational costs to more than half
The Disadvantages of Outsourcing
• At times, it is more cost-effective to conduct a particular business process, rather than outsourcing it
• While outsourcing services such as payroll processing services and tax preparation services, your outsourcing provider will be able to see your company’s confidential information and hence there is a threat to security and confidentiality in outsourcing
• When you begin to outsource your business processes, you might find it difficult to manage the offshore provider when compared to managing processes within your organization
• Offshoring can create potential redundancies for your organization
• In case, your offshore service provider becomes bankrupt or goes out of business, your organization will have to immediately move your business processes in-house or find another outsourcing provider
• The employees in your organization might not like the idea of you outsourcing your processes and they might express lack of interest or lack of quality at work
• Your outsourcing provider might not be only providing services for your organization. Since your provider might be catering to the needs of several companies, there might be not be complete devotion to you and your company
• By outsourcing, you might forget to cater to the needs of your valuable customers as your focus will be on the business process that is outsourced
• In outsourcing, you may lose your control over the process that is outsourced
• Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred while signing a contract between companies. You might also have to spend a lot of time and effort in getting the contract signed
• With outsourcing, your organization might suffer from a lack of customer focus
• There can be several disadvantages in outsourcing, such as, renewing contracts, misunderstanding of the contract, lack of communication, poor quality and delayed services amongst others.

The opposite of outsourcing can be defined as insourcing. When an organization delegates its work to another entity, which is internal yet not a part of the organization, it is termed as insourcing. The internal entity will usually have a specialized team who will be proficient in the providing the required services. Organizations sometimes opt for insourcing because it enables them to maintain a better control of what they outsource. Insourcing has also come to be defined as transferring work from one organization to another organization which is located within the same country. Insourcing can also mean an organization building a new business centre or facility which would specialize in a particular service or product.
Organizations involved in production usually opt for insourcing in order to cut down the cost of labor and taxes amongst others. The trend towards insourcing has increased since the year 2006. Organizations who have been dissatisfied with outsourcing have moved towards insourcing. Some organizations feel that they can have better customer support and better control over the work outsourced by insourcing their work rather than outsourcing it. According to recent studies, there is more wok insourced than outsourced in the U.S and U.K. These countries are currently the largest outsourcers in the world. The U.S and U.K outsource and insource work equally.
Advantages of Insourcing
• High degree of control
• Ability to oversee the entire program
• Economies of scale and/or scope
Disadvantages of Insourcing
• Required strategic flexibility
• Required high investment
• Loss of access to superior products and services offered by potential suppliers

If I were to choose between the two, I would select insourcing instead of outsourcing.

But why insourcing? As you have read a while ago, you outsource non-core functions of organization. But this is Information System. It is a core function of the school because all the information of the students and the teachers can be seen here. I am talking here about security. I know that in some company, they really outsource the IT department. But for me, the school must do insourcing. We have many programmers in the school that can make the Information System especially the faculty of the Institute of Computing.


http://www.outsource2india.com/why_india/articles/outsourcing-versus-insourcing.asp
http://en.wikipedia.org/wiki/Outsourcing
http://ezinearticles.com/?Why-Outsourcing-Instead-of-Insourcing?&id=2622522
http://en.wikipedia.org/wiki/Insourcing

Tsk3.. My file is on a MS2007 format...I forgot to convert it to MS2003 word doc..
I cannot open it in our lab, so I cannot post it now..


:-(

I Will Go For The Outsource

I will first state the brief history of Information Systems of USEP. Few years ago, the University through the Institute of Computing (IC) was able to develop an Information Systems Strategic Plan (ISSP) which was approved by the National Computer Center. The approved ISSP of the University Management Information Systems (UMIS) and is now an integral part of the long leap project of the Institute of Computing. Part of the plan was to develop an information system that will handle the student records, registration and enrolment. Other components of the ISSP include financial management information system, supplies and resources management information system, human resources management information system, research and extension management information system and general administrative information system.

Sometime in 2008, the Office of the University President commissioned the IC to develop an enrolment system of the University. This was brought about by the looming prices of outsourced computer systems which the University has been using for three years. The primary objective in developing an enrolment system of the University is to come up with internally developed system for enrolment which is less costly, efficient and flexible. With this, two programmers, Dr. Tamara Cher R. Mercado and Engr. Michael Angelo Cagape were tasked to develop the enrolment system with the guidance of the Dean of the Institute of Computing, Engr. Val A. Quimno.

Summer of SY 2008-2009, the IC has just implemented the newly developed Student Records Management Information System (SRMIS). The SRMIS as a pilot project of IC is eyed as an efficient and effective management information system with minimal cost of development. Also, the SRMIS has a potential of becoming a marketable product that can later be translated as an income generating project (IGP) of the university.

As proposed, the following are the expected outputs of the SRMIS project:

Output 1: Student Records & Registration Module – This module aims to develop an automated system for the registration and record keeping of the student’s records to be handled by the Office of the Admission and Student Records and the Registrar’s Office. All colleges and affected offices are expected to use this module for the loading and retrieval of student records

Output 2: Student Assessment Module – This module will handle assessment of fees per student depending on the number of units taken. Also, additional fees such as laboratory, internet, library, insurance and other fees will automatically be computed and reflected in the student’s certificate of registration. This module is an integral part of the Student Records & Registration Module and Cashiering and Collections module.

Output 3: Cashiering and Collections Module – This module provides a comprehensive range of functions in relation to cashiering and collection. This module will handle all transactions related to cashiering and collection of students fess and other fees. This module will be designed for its future integration in the New Government Accounting System (NGAS) which the Finance/Accounting Department is currently using.

Outsourcing and insourcing can both be described generally as, the acquisition of internally required resources obtained from an external source.  With respect to freight transportation management, the following outsourced services are fairly common and some were even available at the beginning:  Freight Bill Auditing -- both pre and post, management reports; Loss and Damage claim handling; and Transportation purchasing.  Outsourcing firms perform these services, as well as others, at their locations; whereas the insourcing firm would deliver the functional programs over the Internet or intranets for use by the client.  Outsourcing tends to be exclusive, that is, client interaction is typically limited to processing and rules questions raised by the vendor.  On the other hand, insourcing is inclusive and these firms interact with their clients in order to lead the market through innovation and continuous program improvement.  Like the Microsoft business practice of maintaining a high level of program and system operating performance through heuristic client interaction and automated Internet downloads, insourcing firms seem to be mimicking this model. The primary differentiators between insourcing and outsourcing are concept, business model, and delivery methodologies.

Outsourcing has recently become a new hot topic in microfinance, at least among those of us following technology trends. The general idea is that by allowing someone else to manage some or all of your technology, your time is freed up to focus on what you know best, working with clients. Outsourcing would allow small Microfinance Industries (MFIs) to focus their limited human resources on their core business rather than on technology. And just like Salesforce.com and other Software as a Service (SaaS) products have improved the lot of small and medium businesses in the US, outsourcing could change the playing field for microfinance by providing small MFIs with access to more secure and robust systems.

Outsourcing provided a beneficial alternative to the in-house traffic department.  With the advent of inexpensive computers and computerization, clever audit firms capitalized on those advantages.  Through the economies of scale, the audit firm could afford to channel its intelligence and financial resources to develop and improve the associated practices and services necessary to create transportation management service advantages that individual companies could not or chose not to do.  With appropriate customer mass, and because of standardized tariffs outsourcing was a reasonably profitable business for both the provider and the customer. Outsourcing remains a viable business alternative for some in-house tasks and services.

If have to choose between in-source or outsource. I will go for outsourcing the information systems of USEP. As I know, any organization that has an in-sourced information systems must have an IS/IT Department. USEP has no IS/IT Department. Institute of Computing (IC) is not an IS/IT Department. It is a college. There is no team of programmers who will maintain the information systems of the school, the SRMIS. Information systems must go to updating, repairing, modifying, and expanding from time to time in order to accommodate the needs of the clients of the school, e.g. students. In my knowledge, only Engr. Cagape owns the positions of application programmer and systems programmer of the school. Application programmers write programs to handle a specific job, such as a program to track inventory within an organization. He also may revise existing packaged software or customize generic applications which are frequently purchased from independent software vendors. Systems programmers, in contrast, write programs to maintain and control computer systems software, such as operating systems and database management systems. In other organizations, these two information system specialist positions must have a separate individual, handling their duties and responsibilities. At this time, Engr. Cagape in on leave and the question is what happens to the maintenance of the SRMIS of the school.

In my opinion, outsourced information systems are much better than in-source. I believe that outsourced information systems can resolve the problems of in-sourced information systems of USEP through developing new applications, updating outdated custom software, replacing developers/programmers who are no longer available, solving software compatibility difficulties, completing unfinished software development projects, providing support for new IT services personnel, automating organizational processes, fixing problems with proprietary applications, addressing unique business requirements, porting software to web, desktop, and PDA applications, creating custom device drivers for specialized applications.

I also believe that outsourced information systems save time and money. Outsource takes forward thinking, expertise, and innovation to develop high-quality information systems functions and applications that work for any organizations, schools, and universities like information systems should, that are created cost efficiently and timely, and that will serve your needs into the future. Those attributes resulted in a fundamentally different approach to information systems development. I am also convinced that outsourced information systems can offer a more robust and secure core information systems application, increased functionality, such as full integration between portfolio, accounting, and client information modules, ability to network with other university offices and eventually payments systems allowing colleges to offer better services to students, improved reporting capacity, both for internal management purposes as well as reporting to stockholders of the school, and ease of mind from not managing costly and complicated servers in-house.

I have faith in company who offers outsourced information systems in software development which is flexible, which accommodates specific software requirements, and which provides detailed, thorough, clearly-spelled-out estimates you can rely on. The university will work with a software developer who provides documentation that's clear, concise, and error-free. And the school will discover what it's like to work with an experienced programmer who understands the business requirements. Outsourcing remains a viable, but transitioning business alternative to many in-house transportation management tasks and services.

That is my position of the status of information systems of the university. I will go for the outsource.

Why outsource or in-source?

Let's define first the meaning of outsourcing and insourcing...

Outsourcing is subcontracting a service such as product design or manufacturing, to a third-party company.The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources. Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labor.

Outsourcing in the information technology field has two meanings. One is to commission the development of an application to another organization, usually a company that specializes in the development of this type of application. The other is to hire the services of another company to manage all or parts of the services that otherwise would be rendered by an IT unit of the organization.

Outsourcing involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider.The client organization and the supplier enter into a contractual agreement that defines the transferred services. Under the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client agrees to procure the services from the supplier for the term of the contract.

Outsourcing and offshoring are used interchangeably in public discourse despite important technical differences. Outsourcing involves contracting with a supplier, which may or may not involve some degree of offshoring. Offshoring is the transfer of an organizational function to another country, regardless of whether the work is outsourced or stays within the same corporation/company.


Reasons for outsourcing

Organizations that outsource are seeking to realize benefits or address the following issues:

Cost savings
The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.

Focus on Core Business
Resources (for example investment, people, infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specilaised IT services companies.

Cost restructuring
Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.

Improve quality
Achieve a step change in quality through contracting out the service with a new service level agreement.

Knowledge
Access to intellectual property and wider experience and knowledge.

Contract
Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.

Operational expertise.
Access to operational best practice that would be too difficult or time consuming to develop in-house.

Access to talent
Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.

Capacity management
An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier.

Catalyst for change
An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a Change agent in the process.

Enhance capacity for innovation
Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.

Reduce time to market
The acceleration of the development or production of a product through the additional capability brought by the supplier.

Commodification
The trend of standardizing business processes, IT Services and application services enabling businesses to intelligently buy at the right price. Allows a wide range of businesses access to services previously only available to large corporations.

Risk management
An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.

Venture Capital
Some countries match government funds venture capital with private venture capital for startups that start businesses in their country.

Tax Benefit
Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.

To a layman, outsourcing would seem like a waste of time and money, as well as an unneeded complication. After all, why send business abroad when the work can probably be done better right at home? To a politician, the issue of outsourcing serves as a fortified objection to taking jobs away from ‘our own countrymen’. Sympathy towards this issue may elicit a few votes, but nothing more.

But to a businessman, outsourcing is a modern day boon. Outsourcing grants businesses the freedom to dump non – core, yet important sectors of its administration on companies specializing in those very individual aspects. Thus, leaving the businessman free to wholly concentrate on those areas of the company that bring in the real moolah.

The most enticing advantage of outsourcing is the cost effective factor. Human resource and IT services in the United States or Europe are not exactly inexpensive. Let’s avoid complicated business jargon and say that outsourcing is basically an option that offers these services at a much, much lower rate i.e., a cheap but highly productive mass work force. Let us take India as an exemplary illustration.

Thousands of highly intelligent people graduate in a variety of fields each year. Almost all of them speak English better than the English, and have dreams of making big money in a short period of time. The boom of BPO’s in the last 10 years has given them a chance to realize those dreams. It provides them with the opportunity to stay close to home and earn almost as much as they would if they took up a job abroad. On an average, an individual would earn $ 300 to $ 500 per month. A small sum to an American, but an Indian would be quite happy with that salary considering the conversion rate. It’s a win – win situation for your business as well as the company you’re outsourcing to.

There is no dearth of candidates willing to suffer incessant night shifts. Due to a constant effort of having to prove themselves, you can be assured of enhanced quality and productivity at all times. The company you outsource to will always be sure to reach your targets, deliver on time, ensure stringent security and maintain a level of productivity which won’t tempt you into taking your business elsewhere. Employees are regularly evaluated and terminated if found wanting in any aspect. The entire process of recruitment and the hassles involved with finding (and sustaining) the right person for the job is taken off your shoulders.

By 2006, in addition to human resources and IT services, companies that take on offshore contracts will also offer tax preparation and back office services. Hundreds of commerce students graduate in India each year and go on to become chartered accountants in a country where there is no dearth of them. Offering these services to countries abroad would be lucrative for both parties. The most advanced security procedures will be employed in this regard.

It all comes down to the money. Let’s face it; we live in a material world. And the technical term for material is moolah. So until the day the cons of outsourcing outweigh the monetary factors (read pros), outsourcing; as a legitimate and lucrative way to do business, is here to stay.


Advantages

* High strategic flexibility

* Low investment risk.

* Improved cash flow.

* Access to state-of-the-art


Disadvantages

* Possibility of choosing a bad supplier

* Loss of control over the process

* core technologies

* "Hollowing out" of the corporation products and services.



Insourcing is the opposite of outsourcing; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation. Insourcing is a business decision that is often made to maintain control of critical production or competencies. An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility.
Insourcing is widely used in an area such as production to reduce costs of taxes, labor.
Insourcing is loosely referred in call centers who are doing the work of the outsourcing companies. Companies that outsource include Dell, Hewlett Packard, Symantec, and Linksys. The callcenters and technicians that are contracted to handle the outsourced work are usually over-seas. Customers may refer to these countries as "India" technical support if they are hard to understand over telecommunications. These insourcing companies were a great way to save money for the outsourcing of work, but quality varies, and poor performance has sometimes harmed the reputations of companies who provide 24/7 customer/technical support.

Insourcing gives a company a high degree of control over its operations, which is particularly desirable if the company owns proprietary designs or processes. Insourcing can also lower manufacturing costs, but only if a company enjoys the business volume necessary to achieve economies of scale. Unlike many smaller pharmaceutical firms, for instance, Merck is large enough to afford a sales force dedicated exclusively to selling only Merck products. Finally, insourcing encourages the development of core competencies.A major part of any business strategy development effort is identifying and building core competencies—organizational strengths or abilities, developed over a long period, that customers find valuable and competitors find difficult or even impossible to copy. Products or processes that could evolve into core competencies are prime candidates for insourcing.


Advantages

* High degree of control.
* Ability to oversee the entire process
* Economies of scale and/or scope.


Disadvantages

* Reduces strategic flexibility
* Requires high investment
* Potential suppliers may offer superior
products and services.


For me, I would suggest Outsource because it is tested and proven and it offers a lot of advantages.outsourcing allows your organization to contract with the other organization which is expert on the outsourced processes..

references:

http://en.wikipedia.org/wiki/Insourcing
http://en.wikipedia.org/wiki/Outsourcing
http://ezinearticles.com/?Advantages-of-Outsourcing&id=110032

OUTSOURCING

It is subcontracting a service such as product design or manufacturing, to a third-party company.[1] The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources[citation needed]. Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labour. Outsourcing in the information technology field has two meanings.[2] One is to commission the development of an application to another organization, usually a company that specializes in the development of this type of application. The other is to hire the services of another company to manage all or parts of the services that otherwise would be rendered by an IT unit of the organization. The latter concept might not include development of new applications.

REASON TO OUTSOURCE
Although the mix of factors raising the possibility of outsourcing varies widely from one company to another, there are a series of themes that explain most of the pressures to outsource. First of all, general managers’ concerns about cost and quality drive outsourcing. The same issues such as getting existing services for a reduced price at acceptable quality standard came up repeatedly. Second, failure to meet service standards can force management to find other ways of achieving reliability. It is not atypical to find a company in which cumulative IT management neglect eventually culminated in an out-of-control situation the current IT department could not recover from. Management can see outsourcing as a way to fix a broken department. Third, a firm under intense cost or competitive pressures, which does not see IT as its core competence, may find outsourcing a way to delegate time-consuming, messy problems so it can focus scarce management time and energy on other differentiators. Next, several financial issues can make outsourcing appealing. One is the opportunity to liquidate the firm’s intangible IT asset, thus strengthening the balance sheet and avoiding a stream of sporadic capital investments in the future. Also, outsourcing can turn a largely fixed-cost business into one with variable costs. This is particularly important for firms whose activities vary widely in volume from one year to another or which face significant downsizing.

THE BENEFITS FROM OUTSOURCING
Outsourcing has identified numerous potential benefits. Financial benefits from outsourcing included rapid funding of new systems development and economies of scale and scope. As consolidate infrastructure through IT outsourcing, a firm can experience cost reductions in hardware and software licensing, facilities, and support headcount. Outsourcing, also, can capitalize on an outside vendor’s extensive IT problem solving knowledge. An outside vendor had the ability to get more of the technology that came out. They could spend money on investments that a company couldn’t afford internally. That opens up a lot more avenues to future technologies. An outside vendor would manage the IT function more efficiently. A vendor’s main competency is managing computer systems. Through their skills, leverage, and economies of scale, they could provide a level of efficiency that could not be achieved at the outsourcer. Finally, Perhaps most important, outsourcing allow internal IT managers to focus on the development of a new IT infrastructure. Underlying the outsourcing effort is a fundamental strategy to offload legacy applications and operations so a firm could focus on developing new strategic application to support the global business processes, which were being reengineered.

THE PROCESS OF OUTSOURCING
There are many ways to manage IT outsourcing since every company has different culture, strategy, structure, people, and process. Also, many important issues such as structure, Information management operating processes, management processes, human resources management should be clarified. However, I’m here going to use Xerox’s outsourcing process. A company may go through 5 phases to reach a successful outsourcing; Fact Gathering, Request for Proposal and Data Gathering, Feasibility and management Approval, Baseline Building and Evaluation, Due Diligence and Contract Awarded. At first, information management (IM) collects the facts the company faces and design team recommendation. Then IM request for information to numerous vendors. After compare their response with evaluation checklist which includes technical, HR, financial, contractual factors, IM conclude the feasibility of outsourcing and make recommendation for management. Then, with the Management’s approval, IM start to build best-case model and contract terms while evaluate the vendors’ proposal using evaluation checklist again. Then, the final negotiation and selection for contract development will be made and, finally, terms are finalized and contract is drafted.

THE PROBLEMS IN OUTSOURCING
Many outsourcing contracts are structured for very long periods in a world of fast-moving technical and business change. Eight to ten years is the normal length of a contract in an environment in which computer chip performance is shifting by 20 to 30 percent per year. Consequently, a deal that made sense at the beginning may take less economic sense three years later and require adjustments to function effectively. Exacerbating the situation is the timing of benefits. The first-year benefits are clear to customer, who often receives a one-time capital payment. The customer then feels relieved to shift problems and issues to another organization. The situation from the outsourcer’s perspective is just the reverse. The first year may require a heavy capital payment followed by the extraordinary costs for switching responsibility to them and executing the appropriate cost-reduction initiatives. All this is done in anticipation of a back-loaded profit flow. At precisely the time the outsourcer is finally moving into its earnings stream, the customer, perhaps feeling the need for new services, is chafing under monthly charges and anxious to move to new IT architectures. If the customer has not had experience in partnering activities before, the relationship can develop profound tensions. The evolution of technologies often changes the strategic relevance of IT service to a firm. From the customer’s viewpoint, assigning a commodity service to an outsider is very attractive if the price is right. Delegating a firm’s service differentiator is another matter. The customer that made the original decision on efficiency will judge it differently if using effectiveness criteria later.


CONCLUSION
IT outsourcing has so many positive effects for a company even though it still contains various problem needed to be solved. In the Internet age, any company may want to focus its internal staff on moving it to the environment that will support them tomorrow and outsourcing could be one of the best solutions. Also, outsourcing is really more of an integration of two separate businesses to be successful. Both want to take the best parts of each culture and put them together. In addition, critical success factors including existence of a multi-years, corporate commitment to the IM strategy and outsourcing, and quality culture and attitude should be considered in outsourcing.

IN SOURCING
Insourcing is the opposite of outsourcing; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation. Insourcing is a business decision that is often made to maintain control of critical production or competencies. An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility.
Insourcing is widely used in an area such as production to reduce costs of taxes, labor (e.g., American labor is often cheaper than European labor), transportation, etc.
Insourcing at United Parcel Service (UPS) was described in the bestselling book The World Is Flat, by Thomas Friedman.
According to PR Web, insourcing was becoming more common by 2006 as businesses had less than satisfactory experiences with outsourcing (including customer support). Many outsourcing proponents responded to a negative consumer opinion backlash resulting from outsourcing their communications management to vendors who rely on overseas operations.
To those who are concerned that nations may be losing a net amount of jobs due to outsourcing, some point out that insourcing also occurs. According to a study by Mary Amiti and Shang-Jin Wei, in the United States, the United Kingdom, and many other industrialized countries more jobs are insourced than outsourced. They found that out of all the countries in the world they studied, the U.S. and the U.K. actually have the largest net trade surpluses in business services. Countries with a net deficit in business services include Indonesia, Germany and Ireland.[1]
Insourcing is loosely referred in call centers who are doing the work of the outsourcing companies. Companies that outsource include Dell, Hewlett Packard, Symantec, and Linksys. The callcenters and technicians that are contracted to handle the outsourced work are usually over-seas. Customers may refer to these countries as "India" technical support if they are hard to understand over telecommunications. These insourcing companies were a great way to save money for the outsourcing of work, but quality varies, and poor performance has sometimes harmed the reputations of companies who provide 24/7 customer/technical support.
The Organization for International Investment, a Washington D.C. trade association, uses the term to describe the creation of jobs through foreign direct investment within the United States.



Reference:
http://en.wikipedia.org/wiki/Outsourcing
http://www.echeat.com/essay.php?t=25717
http://en.wikipedia.org/wiki/Insourcing


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