In this project study, an attempt has been made to cover a detailed analysis of various aspects of project implementation mode

Outsourcing or In-house development by IT department of an organisation. This chapter summarises the analytical details and concludes the study with following two sections summary and recommendations.

6.1

Summary

6.1.1 Outsourcing - Current Market Opinion

Outsourcing is here to stay and grow in a matured way. The phase between late 1990s and 2003 experienced a steep multi-fold growth in outsourcing market. The upward trend started with the Y2K issue and dot.com boom, but later suffered a slump due to 9/11 and unstable US/European/Asian market behaviour. Year 2006 till now, has experienced a positive growth in outsourcing by organisations to third-party vendors, but on the other side, a comparison with last year growth figure has shown a downward trend. The current outsourcing market is not very concerned about this phenomenon. According to them, the initial period was a boom for outsourcing in which big deals were signed, but now over time, the situation has matured. Now buyers are weighing all other alternate options and hence taking more time to thoroughly vet the agreements. This has resulted in a more flat growth. This rate is there to stay for long period and is acceptable by the market. Other reasons for more detailed evaluation process from buyers are - the relationship between buyer and vendor were established long back (5-10 years) and now may need a re-look on terms and conditions (force the vendor to become more aggressive in their offer). Also, many new vendors are now capable of providing similar or better support at more competitive prices. The growth in the outsourcing market is not evenly distributed among the outsourcing vendors. Few big entities like Accenture, ACS, EDS, IBM and HewlettPackard are enjoying their dominance in the market and are exploiting it to dictate terms and conditions to the buyers. They have hence managed to grab a bigger slice of opportunity. In 2006, this group itself received 52% of worldwide outsourcing revenue, up from 47% in the previous year.

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6.1.2 Outsourcing Analysis of data

In today's information driven business world, technology has become the key factor for their success and competitive advantage over its rivals. The challenge is to sustain this competitive edge in dynamic environment of emerging new Information Technologies. For non-IT organisations this challenge may deviate them from their main course of business objectives and areas of core competence. The solution for this issue is IT Outsourcing. The analysis based on core strategic resource areas (people, information, technology and finance) reveals that rationale for a buyer for outsourcing are variable capacity management of resources (scaling up and down of resource strength on need basis) and freeing up of critical internal resource for their core functions. Other points are access to a pool of world class skills letting experts manage complex functions with their best efficient practices and reduction in overhead cost and reallocation of resources. Major concern highlighted during analysis is level of customer satisfaction. Buyers are more comfortable with offsite mode rather than engaging with the team onsite. This is due to inadequate proficiency and experience, ineffective communication skill and high attrition rate with onsite team. Internally with in the buyer organisation, the other concerns are employee backlash and pressures from local unions and political group/lobbies. Challenges identified by both the parties (buyer and vendor) for each other are poor quality assurance & control processes, ensuring use of best practices and lack of professionalism. Risks that buyer foresee with an outsourcing agreement are reduced effectiveness of vendor team over time, communication protocols with multiple teams, sharing of information confidentiality and financial payback of the investments. Continuous advent of new technologies has made outsourcing model more feasible and convenient. New collaborative tools have made team (located distantly) work possible and effective. Also the emerging technologies are forcing buyers to upgrade and enhance their existing systems for more features and functionalities. This means more opportunities for vendors to support buyers needs. In summary, outsourcing is here to stay. Although, past few years have indicated a downward trend in growth, the future looks promising. Both buyers and vendors are maturing with time and are taking sensible decisions with respect to their interests.
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6.1.3 Strategic Decision Outsourcing or In-house development

The strategies and strategic model proposed in Chapter 5 will assist the organisation in auditing their internal strengths and weaknesses with respect to the requested new requirement. Based on the outcome, a decision can be taken for either outsourcing or in-house development. The objective of the model is more towards ensuring capturing complete details for analysis and providing a comparison between the "AsIs" and "To-Be" state. The model starts with analysis of environmental variables their affect and impact on competitive positioning. The next step is conducting internal appraisal gauging strength of internal resources. This appraisal goes hand-in-hand with analysis of strategic resource areas like people, information, technology and finance. Based on the development decision matrix, a decision can be arrived at. Outsourcing further has two modes onsite and offshore. Offshore mode is preferred in situations where reduction or control of cost is at the highest priority. It is more for a routine set of activities (like application support and maintenance) where special skills are barely required. The intention is to lower the overhead cost by shifting the facilities to a cheaper location. In contrast, the purpose for onsite is to provide world class skills, resource pool and efficient and best implementation practices and methodologies.

6.2

Recommendations

The decision for in-house development or outsourcing to a vendor should be based on two aspects analytical information of As-Is/To-be states and personal judgement of the stakeholders based on the analysis results, business context and their experience. Strategic model proposed in this project study (refer to Fig. 5.5), helps in evaluating the two states. It analyses the ground level data in the context of both external and internal influencing factors. It also covers analysis with respect to other strategic resource areas. The detailed outcome of the model mapped with the development decision matrix (refer to Fig. 5.7) provides the options. The stakeholders based on the details from the model and under purview of the business context should make the decision.

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The recommendation from this project study is to have a detailed analysis of the resources related to IT department using the prescribed model. The details should be captured and analysed in detail. The stakeholders should then collate this data and based on the business context should take the decision for either Outsourcing or Inhouse development.

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