Information technology outsourcing

De Jongh, Henk (2003-03)

Thesis (MBA)--Stellenbosch University, 2003.

Thesis

ENGLISH ABSTRACT: The study project examines the concept of information technology (IT) outsourcing to external service providers. It is a relatively new concept in the South African scenario and there are many risks associated with the process that can cause a company to loose large amounts of money if outsourcing is not done right. The study project will aim to examine the most important aspects regarding IT outsourcing in order to reduce the risks associated with the process. The definition of IT outsourcing is the practice of transferring an organisation's computer centre operations, telecommunications networks, or applications development to external vendors of these services. There are different variations of outsourcing applicable to IT, for example: contracting out, outsourcing, in sourcing and co-sourcing. Companies have different reasons for outsourcing and the risks associated with the process have to be taken into account when embarking on an outsourcing initiative. With IT outsourcing there are different services that can be outsourced, for example: mainframe services, desktop computer services, security services and different application services. The decision to outsource a specific area of IT is a strategic issue and the risks, costs, and selection of the service provider are all very important factors to take into account. One of the main factors that any company should take into account when embarking on a big initiative is of course costs. The aim is the reduction of costs of the specific outsourced area. Therefore the necessary measures need to be in place to measure costs before and after the outsourcing process. It could happen that the outsourcing process do not provide the reduced cost benefits envisaged initially. This could be due to hidden costs that were not taken into account when the outsourcing initiative was planned. Normally the outsourcing process is driven by a structured project and numerous important factors need to be taken into account when managing the whole process. The factors include: the vendor evaluation process, setup of the service level agreement, the request for proposal, relationship with the supplier, communication of the whole process inside the company, the contract between the two parties, and the transition period with the measuring of results thereafter. The current IT skills shortage in South Africa is causing companies to rethink their IT strategies and make use of external service providers to supply them with the necessary skills to get the job done. The research illustrates this fact that IT consulting has one of the highest adoption rates currently and with regard to the future. Full blown outsourcing is still a relatively new concept in South Africa and companies will only adopt the concept as soon as it has proved to be successful and cost effective. As mentioned it is important that a structured methodology should be used to drive an outsourcing process. It is important that the approach is structured around proven project management principles with the correct measures in place to support and sustain the whole process. Outsourcing of IT services is a strategic decision that a company must take and the risks associated with the process mean that it must be planned and executed very carefully. Outsourcing has various risks associated with it like the appointment of the wrong service provider. However, the outsourcing process can also have its merits and the most important of these are most probably lower costs, new IT skills, and better service. The shortage of IT skills in South Africa makes the idea of outsourcing more and more attractive because of the fact that companies can now "buy" the skills without having to commit to long term permanent employment contracts for permanent staff.

AFRIKAANSE OPSOMMING: Die navorsingsverslag handel oor die konsep van uitkontraktering van inligtingstegnologie(IT) dienste aan eksterne diensverskaffers. Aangesien dit 'n relatiewe nuwe tendens in Suid Afrika se IT bedryf is, en die risiko bestaan dat 'n maatskappy groot geldelike verliese kan ly indien dit nie reg aangepak word nie, word daar gepoog om na die belangrikste aspekte van uitkontraktering te kyk om die risikos daaraan verbonde so laag as moontlik te hou. Die definisie van IT uitkontraktering is die oordrag van 'n organisasie se rekenaar sentrum operasies, telekommunikasie netwerk, of toepassing ontwikkeling na 'n eksterne verskaffer van hierdie dienste. Daar is verskillende variasies van uitkontraktering van toepassing op IT soos byvoorbeeld: uitkontraktering, inkontraktering, en gesamentlike kontraktering. Maatskappye het verskillende redes om 'n diens uit te kontrakteer en die risikos verbonde aan die proses moet sorgvuldig in gedagte gehou word wanneer die uitkontrakteringsproses aangepak word. Met IT uitkontraktering is daar verskillende dienste wat uitgekontrakteer kan word soos byvoorbeeld: hoofraam dienste, persoonlike rekenaar dienste, sekuriteitsdienste en verskeie rekenaar applikasie dienste. Die besluit om 'n spesifieke area van IT uit te kontrakteer is 'n strategiese kwessie vir die maatskappy en die risikos, kostes en keuse van eksterne diensverskaffer is almal baie belangrike faktore wat in gedagte gehou moet word. Een van die vernaamste faktore wat enige maatskappy in ag behoort te neem wanneer 'n groot inisiatief aangepak word, is natuurlik kostes. Die doel van uitkontraktering is om die kostes van die spesifieke area te verlaag. Daarom moet die nodige maatreëls in plek wees om die kostes vooraf en na die uitkontrakteringsproses te meet. Die uitkontraktering inisiatief kan die maatskappy egter baie duur te staan kom en glad nie die koste voordele bied wat aanvanklik beplan is nie. Dit kan wees as gevolg van verskuilde kostes wat nie met die beplanning van die proses in ag geneem is nie. Gewoonlik word die uitkontrakteringsproses gedryf deur 'n gestruktureerde projek en verskeie belangrike faktore moet in ag geneem word vir die hele proses. Die faktore sluit in: die evaluasieproses om die regte diensverskaffer aan te stel, die opstel van die regte dokumentasie in terme van die diensvoorstel voorlegging, verhouding met die diensverskaffer, die opstel van die diensvlak ooreenkoms, kommunikasie oor die hele proses binne die maatskappy, die kontrak tussen die twee partye, oorgangstadium en die meting van voordele daarna. Die huidige tekort aan IT vaardighede in Suid Afrika veroorsaak dat maatskappye hul IT strategie moet herdink en die opsie van eksterna diensverskaffers wat die nodige vaardighede kan verskaf, oorweeg word. Die studie illustreer hierdie feit dat IT konsultasie een van die hoogste vlakke van ingebruikneming tans en vir die toekoms het. Volledige IT funksie uitkontraktering is nog 'n relatiewe nuwe konsep in Suid Afrika en maatskappye sal slegs die idee aanneem sodra uitkontraktering as suksesvol en koste effektief bewys is. Soos reeds genoem is dit belangrik dat 'n gestruktureerde metodologie gebruik word om 'n uitkontrakteringsinisiatief te dryf. Dit is belangrik dat die aanslag geskoei is rondom bewese projekbestuursbeginsels en dat die regte maatreëls getref is om die proses te ondersteun. Uitkontraktering van IT dienste is 'n strategiese besluit wat 'n maatskappy moet neem. Die risikos daaraan verbonde veroorsaak dat die beplanning en aanpak van die proses baie deeglik en noukeurig gedoen moet word. Uitkontraktering het verskeie risikos soos om die verkeerde eksterne diensverskaffer te kies, maar kan ook voordelig vir die maatskappy wees en die grootste voordele wat 'n maatskappy kan verwag is verlaagde kostes en nuwe IT vaardighede. Die probleem van 'n tekort aan goed opgeleide IT personeel in Suid Afrika maak die idee van uitkontraktering al meer aanlokliker omdat dit 'n goeie manier is om goeie vaardighede in te "koop".

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