Information technology (IT) outsourcing refers to the process of a company looking out for all or parts of IT functions from an external party. Information technology outsourcing is a subset of business process outsourcing (BPO). The reasons for IT outsourcing include lack of resources and cost reduction. IT outsourcing is sometimes called IT enabled services (ITES) outsourcing.
However, in some cases, the entire information management of a company is outsourced, including planning, procurement and business analysis as well as the installation, management, and servicing of the network and workstations. Outsourcing can range from the large contract in which a company manages IT services for another company to the practice of hiring contractors and temporary office workers on an individual basis.
Presently, outsourcing has even extended to the level of a company being responsible for the hiring, maintenance and procurement of office equipment spanning from stationeries to printers, scanners copiers etc.
In IT outsourcing contracts, it’s very important that both parties involved in such kind of business reach an agreement. The contractual management activities are much more complex than typical commodity or short-term service agreements. The contract must be continually updated and interpreted to incorporate new business dynamics, technology and business process changes, and the location and provision of services.
Organizations need to keep this focus and integrate the contractual requirements with the performance, financial, and relationship management capabilities being developed. The questions then become how best to integrate these capabilities and how much of a role modern contract management software tools should play in the process.
An outsourcing management system is a system that manages the contract between an outsourcing company and the receiving company.
Field and Subject Area of Study
The field of study is in Information Technology whereas the subject area is in “Outsourcing Management System”.
The Study Objectives
To develop a web-based application system that would manage the business transactions (bids and offers) between an outsourcing company and the receiving company.
To develop a system that will establish communication and manage transaction between companies
To develop a system that will monitor staff activities between companies
To develop a system that will keep record of transactions made for reference purpose to ensure reliability of services.
To integrate a mechanism to the system, this will automatically match the bids and offers and strike a deal with the best match.
To develop a system that will take orders from the outsourcing companies
The Problem Statement
Companies are faced with many challenges because of the lack of an outsourcing management system which would help to enhance their and making it easier to achieve their goals. The following are some of the challenges faced:
Companies suffer from internally distractive jobs that could be delegated to external agencies so as to gain concentration unto achieving their major goals.
Poor Mutual Understanding of the Contract which is caused due to the lack of an outsourcing management system.
Lack of adequate communication between companies
Difficulty of performance measurement
Limitation to only the internally available resources, thus leads to a company being stranded on a particular job.
Poor market access and skill
In this study Agile SDLC modelwould be employed in the development of the proposed web-based outsourcing application.
Agile SDLC model is a combination of iterative and incremental process models with focus on process adaptability and customer satisfaction by rapid delivery of working software product. Agile Methods break the product into small incremental builds.These builds are provided in iterations. Each iteration typically lasts from about one to three weeks. Every iteration involves cross functional teams working simultaneously on various areas like planning, requirements analysis, design, coding, unit testing, and acceptance testing. At the end of the iteration a working product is displayed to the customer and important stakeholders.
Background of Study
The history of outsourcing is deeply embedded in the history of the growth of the Modern Business Enterprise, which sprang up in the latter half of the 19th Century(Gonzales, Dorwin, &Schimler, n.d.).For the first time in history, the late 1800s saw some countries become nations of abundance, instead of scarcity. Goods of all kinds were provided at a lower price in vast quantities.
This was made possible by a series of technological improvements. One of themajor innovations was in the field of communications: the telegraph providednear instant ability to keep in contact with other district offices of a company.Communication was also far more reliable; businessmen could be sure theirmessages were arriving at their desired location.
In the history of industrialization and the modernization of developing nations, it has long been a tradition to seek foreign help when possible. In fact, one of the greatest success stories in this tradition has been the Japanese tale. After its revolution in 1868, Japan was on the quick path to modernization. They realized that they needed the assistance of experts, so they hired foreign technicians and engineers to set up their factory system and taught native Japanese how to operate the high-tech equipment according to (Currie &Seltsikas, 2001).
After World War II, certain developments made business more “global”. The first use of outsourcing in recent history was in the 1950s with time sharing. It lasted for 25 years, but as technology continued to advance, so did new outsourcing ideas. In the 1980s, major consulting firms, such as Arthur Andersen, invented remote management services.
As Alexander Factor writes, “A customer’s systems, networks, and applications were monitored and managed remotely from a Network Operations Center (NOC), and the customer was assured high service guarantees through the implementation of so-called Service Level Agreements (SLAs)(Lee, Miranda, & Kim, 2004).
Customers liked these services and bought them mostly to ensure availability for their systems and networks.” New models of outsourcing came about in the late 1980s and 1990s with the profound leap in Internet technology and software. IT outsourcing was a result: companies wanted to divest from their own facilities, operations, and personnel to focus on other business interests. Companies could put their resources in other important areas, while leaving outsourced areas to specialize in the area that they found less important; this was sort of a modern “division of labor.”
trade occurs due to differences in (production) technology
trade is advantageous to both parties
even a technologically inferior country can benefit from free trade
Conversely, a developed country can compete against some low foreign wage countries.
The growth of outsourcing in the IT industry as evolution through various stages:
Extending functionality Halfway through the century, IBM and other companies were building huge computing machines, giant mammoths occupying whole floors of buildings. While a lot of people would have loved to use these monsters, few could afford them. This resulted in the development of remote terminals and time sharing that allowed remote sites to use these facilities. In this case, the customers outsourced extended functionality to the provider.
Physical outsourcing Through the 1960s and 1970s, it became clear to everyone that computers are going to play a central role in cutting down costs across a breadth of industries, simply because computers help automate and mechanize tasks that are strictly regular and rule based – like accounting for instance. As a result, several large industries, such as banking and airlines, started investing in more and more IT hardware and software according to .
However, these companies did not specialize in IT, and very soon their systems had become far too complicated for them to handle. Very often the original manufacturer (companies such as IBM and EDS) promised end-to-end maintenance of these systems, thus outsourcing hardware and operations from their customers.
Offshore and Process outsourcing as the industries embraced the new technologies, a lot of the tasks became fairly standardized and mundane – for example credit card processing, or customer support.
Further, as organizations fought to cope with globalization and the free trade economies of the 20th century, they became increasingly complex and difficult to manage. The obvious solution was to outsource support and maintenance tasks of units to local suppliers – this helped cut down costs, as well as allowed companies to make better use of their local domain knowledge.
Two particularly popular models here were BPO (business process outsourcing) and off shoring. Off shoring involves handing over the development, maintenance and support of a product/system/service to a supplier doing business in a foreign country. In BPO, an entire business function is provided by a third party – including process expertise, technology, operations and support.
One peculiar thing about the Outsourcing of the generations mentioned above is that transactions and delivery were done physically with the associated risk following. But in my case I propose to develop a virtual platform where these transactions can be done.
Justification of Study
After critical study on the background of this study, I have decided to develop a web-based application for the purpose of Information technology outsourcing. Research shows that the availability of cost-effective hosting solutions has taken many businesses from traditional software application to web-based applications.
This has transformed the way businesses are run and could lead to a far more stable infrastructure that is easily scaled, backed up and updated regardless of a business’ location.
Generally, web-based application development will allow businesses to:
Produce a truly customized solution
A web-based application can be customized to suit any business. This allows for processes to follow the strict requirements of your business. There is also a very little cost involved with adding features as most web-applications conform to the utmost modularity standards.
Access a System from Anywhere
Irrespective of location, users or customers are able to access the application. This allows business to grow without the need to re-implement systems or deal with networking hassles. It also allows a business to grow without being tied to a central location where all pertinent data is stored.
Reduce traditional development costs
With web-based applications, there is less worry about operating system updates or having to develop software that works on a variety of different operating systems. Instead, servers can be customized to ensure that they always contain the required operating system. Also, irrespective of the user’s operating system, web-based application can be utilized.
Reduce Maintenance and Installation costs
For maintenance purposes, web-based applications simply need to have the main central servers updated and the changes are easily deployed on subsequent systems if needed(Aubert, Rivard, &Patry, 2004).
This support reduces risk of major data loss and eliminates the worry of ever having to have your business come to a halt because of a crashed server or local issue. Web-based application can be hosted using collocation servers; hence all data could be synchronized and stored all over the world.
Therefore, considering the above flexibilities of a web-based application, I have decided to develop an IT outsourcing web-based application for the following reasons:
Lower operational and labour cost, this could have a defining impact on a company’s revenue recognition and can deliver significant savings.
Attention to core company’s responsibilities while delegating mundane time consuming processes to external agencies.
Access to the world class capabilities and new skills
Freeing up internal resources that could be put into effective use for other purposes.
Mitigation of possible risks associated with a particular task.
Expected Outcome and Possible Usage of The Project
At the end of this study, I hope to develop an IT outsourcing web-based application with the following:
A System that would establish communication and manage transaction between companies
The system would be developed to monitor staff activities between companies
The system will keep record of transactions made for reference purpose to ensure reliability of services.
The system will have a mechanism that will automatically match the bids and offers and strike a deal with the best match.
A system that will take orders from the outsourcing companies.
Safety, Environmental and Economic Aspects
In safety, the proposed system would deploy an authentication platform which offers unified management of security policies, different levels of assurance and which supports access from different end-point, organizations could implement unified access policies and single sign-on (SSO) for this web-based application and other corporate resources.
Environmentally, this system would be friendly because ideally, it will not make any negative impact on the society, but requires internet access for patronage all the time from anywhere in the world.
The cost of implementation would be very low as compared to desktop applications. However, in terms of maintenance, it could be hosted and maintained using collocation server so that in cases of unforeseen events like crashes etc. All data synchronized and stored all over the world can be easily retrieved, thus, making system highly cost effective and affordable.
Layout of Thesis
Chapter 1: This comprise of the initiative and initial research of the Project which is the Project Proposal.
Chapter 2: Literature Review which will focus on existing systems, their Overall functionality and history, and future prospects of such systems
Chapter 3: The chapter will focus on development methodologies, Calculations for specification, diagrams, and flowcharts to illustrate the Implementation and functionality of the application.
Chapter 4: This chapter will place much emphasis on system analysis, Design and results of system.
Chapter 5: This chapter will place emphasis on discussion of findings and conclusion of project. Here the findings from the project will be discussed to find its relevance and relationship to the objectives,