Week 4 Discussion
Information Systems Development
Introduction
Outsourcing is “the process of turning over part or all of an organization’s IS functions to external service provider(s)” (Lee, 2004, p. 323). Organizations historically outsourced information technology (IT) to reduce the cost of labor and cycle time for development of systems (Haag and Cummings, 2008). Reasons for the increased use of outsourcing IT development include evolving global markets, access to the Internet, workforce availability, the rate of technological development, and deregulation (Haag and Cummings, 2008).
Outsourcing Functions
Haag and Cummings note projects with well-defined requirements and the need for minimal end-user interaction are best suited for offshore outsourcing (Haag and Cummings, 2008). Stable applications and remote maintenance is an example of a service firms may consider outsourcing offshore (Haag and Cummings, 2008). Firms should not consider outsourcing core competencies (Gottshcalk and Solli-Saether, 2005). Outsourcing low level or commodity functions exposes the firm to less risk than outsourcing core competencies.
Outsourcing Critical Success Factors
Gottschalk and Solli-Saether (2005) identified 11 critical success factors for consideration in IT outsourcing. Firms should minimize transaction and production costs when outsourcing (2005). Integrated vendor relationships will promote and enable social and economic outcomes, which are not obtainable in alternative relationships (2005). The firm should develop clear and strict guidelines for the division of labor (2005). Effective and efficient communication and measurable objectives should make it easy to determine what the outsourced vendor is accomplishing (2005). The final critical success factor is a complete contract, which should promote a collaborative environment (2005).
Outsourcing Risks
Nakatsu and Iacovou (2009) identified 11 categories of...