___Assignment 8___

Information systems are what the companies, organizations and even schools need to understand deeply for it is very needed and important in order to have an organize and well managed business. And in that matter, to make a certain system be effective, efficient and especially friendly user, the system should be well define and proven to be trusted to avoid leakage.

Let’s first define the two, outsourcing and in-source. Says from wiki that outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. 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. Meaning, a certain company or organization is purchasing a software usually a package one with services free like maintenance depending on their services. But some software companies are providing a 24 hour services so that everytime there's something wrong with the software, they can contact and ask for an advice what to do.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 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 particularbusiness , or to make more efficient use of land, labor, capital, (information) technology and resources.

As you evaluate your choices and decisions in outsourcing different components of your operations, you will need to consider the advantages of outsourcing. When done for the right reasons, outsourcing will actually help your company grow and save money. There are other advantages of outsourcing that go beyond money. Here are the top seven 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.
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.
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.

Ref: http://operationstech.about.com/od/officestaffingandmanagem/a/OutSrcAdvantg.htm

Why outsourcing?
There are many reasons why a company may choose to outsource a particular function of their business. Most managers have the end-result-in-mind that they are going to save time and/or money. Other reasons include:
Resource Shortages Relieved by Outsourcing
A particularly strong reason to outsource involves a shortage of a critical resource. This can be available employees that possess knowledge in a certain area (e.g. engineers), availability of material (e.g. petroleum or minerals) and a labor force at a level and price that will offset the cost of higher prices alternatives.
Outsourcing Provides the Ability to Concentrate On the Core Business
Some necessary, but peripheral operations are outsourced most frequently. This gives the managers the ability to concentrate on the core business issues instead of getting distracted by required, yet minor matters. A good example is a major hospital in our area that outsources its security operations to a third party company specializing in security.
Outsourcing Yields Cost Savings
The prices of labor and/or materials keep increasing and competition keeps forcing prices lower. If there is an outsourcing solution that can save your company money and overcomes the disadvantages of outsourcing, these areas should be investigated.
Outsourcing Provides Flexibility
Seasonal or cyclical demands that ebb-and-flow put varying demands on the resources of the company. An outsourcing contract could provide the flexibility needed to stabilize these varying demands. Example: A business brings in extra accountants during tax season and when being audited by the holding company that owns the business.
Reduce Overhead Costs Through Outsourcing
Some functions require a large outlay of money just to get started. This expenditure could be avoided by contracting with a third party. For example, expanding your call center’s capacity to the point where it exceeds the capabilities of your telephone system.
Common Outsourced Areas
Although many areas and functions are outsourced, here are some of the frequently outsourced areas:
Information Technology Functions
Network and Telecommunications
Human Resources and Insurance Administration
Accounting
Marketing
Security
As you evaluate your outsourcing choices, keep in mind that there are advantages to outsourcing and disadvantages of outsourcing. Look at each one of the outsourcing disadvantages listed below and decide what impact that item would have on your business. If the outsourcing disadvantages outweigh the advantages of outsourcing, then you should avoid outsourcing those operations.

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.

Ref: http://operationstech.about.com/od/outsourcing/tp/OutSrcDisadv.htm
Ref: http://en.wikipedia.org/wiki/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 is loosely referred in call centers who are doing the work of the outsourcing companies.
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. 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.

Ref: http://www.outsource2india.com/why_india/articles/outsourcing-versus-insourcing.asp

What is best for an organization?
If an 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 save on time, effort, manpower and would also aid you in making quicker deliveries to the customers.
If an organization require expertise services in areas which do not fall under core competency, then outsourcing will be a good option as it can get access to expertise services. For reducing costs and making faster deliverables, outsourcing is again a good option.
If work involves production, then it would be more ideal for organization to opt for insourcing, as it 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. A certain organization can outsource and insource at the same time. By outsourcing and insourcing simultaneously, you can have the best of what both offers and business can get a competitive advantage!