The Chief Information Officer's Body of Knowledge: People, Process, and Technology

Chapter 23

Outsourcing and Offshoring

Jeff Richards

In today's highly competitive global environment, many companies are asking the question: “Is outsourcing right for me?” The short answer is probably a qualified yes. Some part of almost every organization could undoubtedly benefit from an outsourcing assessment, but “which part” and “why” are the hard questions.

What exactly is outsourcing? First, outsourcing is always a service. Second, outsourcing differs from the purchase of normal services in three material ways:

1. The service is performed to a service level that is managed by the service provider.

2. Some kind of time commitment exists (e.g., fixed term or continues until terminated).

3. The buyer usually has some personnel offset.

Some examples may help clarify the idea. Some things that are not outsourcing are: purchasing and implementing an enterprise resource planning system (it is a product with installation services), FedEx delivery services (no time commitment), and staff augmentation (you manage the resource, not the provider).

Some things that are clearly outsourcing include HP/EDS operating the IT infrastructure, using Laidlaw to operate the school district's buses, or ADP handling payroll processing.

Services that can be defined either way include tax preparation and application maintenance. Each is outsourcing if the work is ongoing (has a fixed term) and the provider manages the personnel resources.

Reasons to Outsource

There are hundreds of reasons why ...