Elsevier UK Jobcode:RTF Chapter:CH17-H8304 22-3-2007 5:13p.m. Page:323 Trimsize:165×234MM
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Being in charge of IT costs 323
*
**
STRATEGIES IN OUTSOURCING IN SEARCH
FOR COST-EFFECTIVENESS
LONE WOLF JOINT VENTURE
BUSINESS
SERVICE
PROVIDER (BSP)
BUSINESS
PROCESS
OPERATIONS (BPO)
APPLICATION
SERVICE
PROVIDER (ASP)
INTERNAL
UTILITY
EXTERNAL
UTILITY
PROVISION OF
TECHNOLOGY
AND
INFRASTRUCTURE
TAKING OVER
TECHNOLOGY
AND STAFF
INDEPENDENT
PARTY
CROSS-DIVISIONAL
CROSS-BORDER
PEER LEVEL
COMMON
INFRASTRUCTURE*
OR ALLIANCE
USUALLY BY
ANOTHER
FINANCIAL
INSTITUTION**
THIRD PARTY
OPERATING
CLIENT-
DEDICATED SITE
THAT MAY
MIGRATE TO
FIFTH SOLUTION
VENDOR OF
BUSINESS
PROCESSES
MANAGING FROM
OWN DATA
CENTRE
COMPETITORS AT FRONT DESK BUT PARTNERS AT BACK OFFICE
EXAMPLE: CUSTODIAN
Figure 17.3 Alternative paths to an outsourcing and insourcing solution
Cost savings,
Lack of internal skills,
Capitalization on a mass effect, and
Doing away with non-core business.
There is no a priori ‘yes’ or ‘no’ answer about achieving these goals. A great deal
depends on how well the outsourced functions have been defined, how the impact
was negotiated, as well as on how the insourcer/outsourcer relationship is managed
over its lifetime. Inherently, outsourcing is neither ‘good’ nor ‘bad’, and it is always
necessary. But do we really know what we outsource in IT?
17.5 Know what you want in outsourcing
Know yourself, know your products and know your business partner is a golden rule
in industry, commerce and finance. Do we really know what we want to obtain in
outsourcing, and which responsibilities we assume, before entering into an SLA?
Take as an example procurement, which is a classical outsourcing activity. Lack
of raw materials, along with the need for specialized components, has been an age-
old reason for outsourcing agreements. In hardware we buy platforms, switching
gear and other equipment. In software, we buy operating systems (OS) and database
management systems (DBMS); we don’t reinvent the wheel.
We also buy, or at least should buy, more than 50 per cent of our applications
software. This is not, however, the sense of ‘outsourcing IT’ in its present form.
What this term has come to mean is outsourcing systems functions, often with the
excuse that they are not ‘core’ to our business. That’s a fake, because IT is core to
all businesses in practically all its forms. This does not mean that IT should never be
outsourced, but the fact that it is core poses:

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