In-house or Outsourcing?
Assignment # 8
As a student, you were invited by the Dean of the Institute of Computing to attend a seminar-workshop on information systems planning with some of the faculty members. In one of the sessions, a discussion of outsourcing came up. You have been asked to present your evaluation about outsourcing the information systems functions of the school.
Required:
You are to take a position- outsource or in-source and justify your position.
Before I would state where I stand between in-house and outsourcing, I will first define the term in-house and outsourcing for the information of those who are not familiar with the terms yet. So here it goes.
What is outsourcing?
According to this SITE:
"..Outsourcing refers to a company that contracts with another company to provide services that might otherwise be performed by in-house employees."
Here is another definition of outsourcing according to this white paper that can be accessed through this link :
http://www.aramarkhighered.com/pdfs/articles/IHEP%20Outsourcing%20White%20Paper%209-05.pdf
"..Outsourcing is a form of privatization that generally refers to a higher education institution’s decision to contract with an external organization to provide a traditional campus function or service. The contractor either takes over the task of compensating and managing the employees of the university, paying the group according to its standards, or replaces the university employees with its own staff."
What is in-sourcing?
In-sourcing (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.
from : wikipedia.com
Based on my opinion, I think it would be better for the university to apply in-house instead of outsource. why? the following are my reasons.
If we have the manpower, why not utilize it?
If in terms of skilled professionals, I believe that our university probably has some of the best IT professionals in Mindanao if not the whole Philippines. It's undeniable that all our faculty (especially in the IC department) are very competent and world class. We are not called a “university” for nothing. Most of our faculties are really good at their field of expertise. Since our faculties are competent enough, why not utilize those skills that we 'already' have in order to improve our system in our university?
I believe that tapping our "well equipped faculties" will definitely increase the morale of the faculties and the university in general for utilizing and recognizing the talents that we have. Tapping our faculties to make our systems will also serve as an inspiration and example to students to have an idea of what would be their role when they will go out in the real world. The students will have higher respect and admiration to the faculties knowing that they do not only teach pure theories but they can also apply it to the real world.
If in terms of skilled professionals, I believe that our university probably has some of the best IT professionals in Mindanao if not the whole Philippines. It's undeniable that all our faculty (especially in the IC department) are very competent and world class. We are not called a “university” for nothing. Most of our faculties are really good at their field of expertise. Since our faculties are competent enough, why not utilize those skills that we 'already' have in order to improve our system in our university?
I believe that tapping our "well equipped faculties" will definitely increase the morale of the faculties and the university in general for utilizing and recognizing the talents that we have. Tapping our faculties to make our systems will also serve as an inspiration and example to students to have an idea of what would be their role when they will go out in the real world. The students will have higher respect and admiration to the faculties knowing that they do not only teach pure theories but they can also apply it to the real world.
Outsourcing is cheaper. I beg to disagree.
During our interview with the MIS programmer of DOLE Philippines, when we asked her what are the advantage of having an in-house information system in a company, she said that in a long-run if you will compute the cost that will be generated...in-housing is much cheaper compared to outsourcing.
Most people think that outsourcing is cheaper compared to in-housing. Well, I beg to disagree. Yes, at first the university will pay more in the first few months in in-housing compared to outsourcing. But if you calculate how much is the university will be paying for let’s say five years in outsourcing, it’s definitely higher compared to what can the university can pay on in-housing. All the university have to do is to pay additional incentives for the faculty for the maintenance of the whole system which is way to cheaper compared to outsourcing the system.
To support this idea, here is an excerpt of the article entitled “Outsourced customer service operations can cost almost a third more than those retained in-house, according to a new study by Gartner.” by Alexa Bona which can be found on this SITE:
“...The research firm found that outsourced operations are 30 percent more expensive than the top quartile of in-house customer service operations.
Alexa Bona, research director at Gartner, said businesses often fail to take hidden costs, such as in-house backup support to the outsourced function, into account.
"The outsourced service is often more efficient, but then outsourcers need to make a profit too," she said.
Gartner also said 80 percent of organizations that outsource their customer management operations purely to cut costs will fail to do so, while 60 percent of those who outsource parts of the customer-facing process will have to deal with customer defections and hidden costs that outweigh any potential savings offered by outsourcing.
"If all you are trying to do is save money, you are not going to be successful," Bona said.”
This just goes to show that people tend to disregard the long term effects of outsourcing which is losing a considerable amount of money in the long run. I think we should also look on the positive benefits of in-house in the long run.
To support this idea, here is an excerpt of the article entitled “Outsourced customer service operations can cost almost a third more than those retained in-house, according to a new study by Gartner.” by Alexa Bona which can be found on this SITE:
“...The research firm found that outsourced operations are 30 percent more expensive than the top quartile of in-house customer service operations.
Alexa Bona, research director at Gartner, said businesses often fail to take hidden costs, such as in-house backup support to the outsourced function, into account.
"The outsourced service is often more efficient, but then outsourcers need to make a profit too," she said.
Gartner also said 80 percent of organizations that outsource their customer management operations purely to cut costs will fail to do so, while 60 percent of those who outsource parts of the customer-facing process will have to deal with customer defections and hidden costs that outweigh any potential savings offered by outsourcing.
"If all you are trying to do is save money, you are not going to be successful," Bona said.”
This just goes to show that people tend to disregard the long term effects of outsourcing which is losing a considerable amount of money in the long run. I think we should also look on the positive benefits of in-house in the long run.
Security and data integrity
In comes to data security and integrity, it is safe to say data that is generated from in-house is much more secure and private compared to outsourcing. Since in-house system is generated from the mother institution, it is safe to say that because of loyalty and self preservation, data generally cannot get-out from the walls of the institution.There is also the danger of not being able to control some aspects of the institution, as outsourcing may lead to delayed communications and project implementation. Any sensitive information is more vulnerable, and a company may become very dependent upon its outsource providers, which could lead to problems should the outsource provider back out on their contract suddenly.
http://www.wisegeek.com/what-is-outsourcing.htm
In comes to data security and integrity, it is safe to say data that is generated from in-house is much more secure and private compared to outsourcing. Since in-house system is generated from the mother institution, it is safe to say that because of loyalty and self preservation, data generally cannot get-out from the walls of the institution.There is also the danger of not being able to control some aspects of the institution, as outsourcing may lead to delayed communications and project implementation. Any sensitive information is more vulnerable, and a company may become very dependent upon its outsource providers, which could lead to problems should the outsource provider back out on their contract suddenly.
http://www.wisegeek.com/what-is-outsourcing.htm
Easier access to support for better communication
Since the in-house personnel are already located within the institution itslef, the support for the system is much more accessible compared to outsourcing. All you have to do is call the faculty downstairs if there is any problem which can be solve right then and there. Compared to outsourcing where they have to travel from somewhere before they can go to the university and solve the problem.Lack of communication between the outsourcer and the company may also be a problem. This poor communication may result in the misunderstanding of the job to be done with unsatisfactory results. This is another disadvantage of outsourcing for a large organization such as our university because there is the difficulty in managing the relationship with the vendor/third party.
http://caribbeanresumes.com/career_tools/articles/outsource-or-not-outsource
Since the in-house personnel are already located within the institution itslef, the support for the system is much more accessible compared to outsourcing. All you have to do is call the faculty downstairs if there is any problem which can be solve right then and there. Compared to outsourcing where they have to travel from somewhere before they can go to the university and solve the problem.Lack of communication between the outsourcer and the company may also be a problem. This poor communication may result in the misunderstanding of the job to be done with unsatisfactory results. This is another disadvantage of outsourcing for a large organization such as our university because there is the difficulty in managing the relationship with the vendor/third party.
http://caribbeanresumes.com/career_tools/articles/outsource-or-not-outsource
Other issues of Outsourcing that discouraged me.
According to this SITE,
"..Outsourcing critics claim that private business practices are contrary to the established traditions of shared governance and to the academic profession, which require substantial professional autonomy, peer rather than hierarchical authority, and a less materialistic culture. Further, critics of outsourcing point out the human resources consequences, including lost jobs or decreased loyalty to the university."
To sum up,
According to an outsourcing white paper from this site:
http://www.aramarkhighered.com/pdfs/articles/IHEP%20Outsourcing%20White%20Paper%209-05.pdf
The apprehensions on choosing outsourcing are due to the following major concerns on educational institutions such as our university:
“..They are:
(1) loss of control and ability to manage the contractor,
(2) service quality and customer satisfaction inconsistency,
(3) employee displacement or morale, and
(4) impersonal nature, loss of identity, community, culture,and collegiality (Norris and Olson 2003).
The first three of these concerns are issues that would be found in any organization to some degree—whether public or private, small or large, business or university. It is the fourth concern—loss of identity, community, and collegiality—that is particularly unique to the academy. “
According to this SITE,
"..Outsourcing critics claim that private business practices are contrary to the established traditions of shared governance and to the academic profession, which require substantial professional autonomy, peer rather than hierarchical authority, and a less materialistic culture. Further, critics of outsourcing point out the human resources consequences, including lost jobs or decreased loyalty to the university."
To sum up,
According to an outsourcing white paper from this site:
http://www.aramarkhighered.com/pdfs/articles/IHEP%20Outsourcing%20White%20Paper%209-05.pdf
The apprehensions on choosing outsourcing are due to the following major concerns on educational institutions such as our university:
“..They are:
(1) loss of control and ability to manage the contractor,
(2) service quality and customer satisfaction inconsistency,
(3) employee displacement or morale, and
(4) impersonal nature, loss of identity, community, culture,and collegiality (Norris and Olson 2003).
The first three of these concerns are issues that would be found in any organization to some degree—whether public or private, small or large, business or university. It is the fourth concern—loss of identity, community, and collegiality—that is particularly unique to the academy. “
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