Chapter extension 20 - Chapter extension 20 What is...

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Chapter extension 20 What is outsourcing? Outsourcing is the hiring of another organization to perform a service Any business activity in the value chain can be outsourced (marketing, sales, logistics, manufacturing, customer service) Support functions (ie. Accounting and HR) The outsourced vendor can be domestic or international Peter drucker is the father of modern management theory He said “your back room is someone else’s front room” Cafeteria is back room, not essential service Pharmacy doesn’t want to be known for its cafeteria The cafeteria company that the pharmacy hires DOES want to be known for its food Why do Organizations outsource IS and IT? Reasons: cap on financial exposure, reduction of management time and attention, freedom from many management and staffing problems are all possible Management advantages Obtain expertise Org wants to upgrade its computers The org needs to develop expertise in automated software installation Developing this expertise is expensive, not in company’s strategic direction Efficient installation of software is not in the “front room” Org should hire a company to do it for them Avoid management problems Org will hire an outside firm to develop and maintain the support on its website
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Free management time Emerson does business over the Web and needs a large Web farm to process the workload Doesn’t want to waste time getting computers and installing shit Outsourcing saves both direct and indirect management time
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Chapter extension 20 - Chapter extension 20 What is...

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