OUTSOURCING IT

OUTSOURCING IT

Mike VuChinh Dang

John GilliganRex Santa Cruz

Athena Lim

Mike VuChinh Dang

John GilliganRex Santa Cruz

Athena Lim

What is Outsourcing IT?What is Outsourcing IT?

The exporting of IT-related work from the United States and other developed countries to areas of the world where there is both political stability and lower labor costs or tax savings.

The exporting of IT-related work from the United States and other developed countries to areas of the world where there is both political stability and lower labor costs or tax savings.

No Child Left Behind Act of 2001

No Child Left Behind Act of 2001

United States ranked No. 18 out of 24 nations

About 1.2 millions students drop out every year

17 % of 12th grade students scored at the proficient level in 2000

Better education in math and science

United States ranked No. 18 out of 24 nations

About 1.2 millions students drop out every year

17 % of 12th grade students scored at the proficient level in 2000

Better education in math and science

Porter’s Five ForcesPorter’s Five Forcesoutsourcing labor and productions a

company can save 30-70% in expenses competitive advantage over rivals

services or product that a company has would offer a lower price and offer a higher quality

threat of substitutes product that is cheaper and better in quality than

everyone else

outsourcing labor and productions a company can save 30-70% in expenses competitive advantage over rivals

services or product that a company has would offer a lower price and offer a higher quality

threat of substitutes product that is cheaper and better in quality than

everyone else

Porter’s Five ForcesPorter’s Five Forcesbuying power

company can afford more products and the company can be a major player in the industry

Supplier Powerconcentrating its required materials at a lower

costBarrier to Entry

Makes it harder for other companies to enter because of the higher entrance cost

buying power company can afford more products and

the company can be a major player in the industry

Supplier Powerconcentrating its required materials at a lower

costBarrier to Entry

Makes it harder for other companies to enter because of the higher entrance cost

Porter’s Value ChainPorter’s Value Chain

Cheaper advancements in technology will help with companies primary activities.

Parts of the company’s primary activities are being outsource to cut cost.

When cost is lower it is passed on to the customers.

A better customer relationship at a lower cost and better quality

Cheaper advancements in technology will help with companies primary activities.

Parts of the company’s primary activities are being outsource to cut cost.

When cost is lower it is passed on to the customers.

A better customer relationship at a lower cost and better quality

Outsourcing is not as bad as it seems

Outsourcing is not as bad as it seems

Adds $214.2 billion to the U.S. GDPCreates 317,000 new jobsCost savings are more attractive to

investors

Adds $214.2 billion to the U.S. GDPCreates 317,000 new jobsCost savings are more attractive to

investors

Outsourcing I.T. Outsourcing I.T. After 9/11, Computer economic slowdown, these effects caused

a declined the purchase and software develop of computers. During this point of time, software companies loss almost 25% of sales.

By 2015, 3.3 millions I.T. jobs would be outsources to India or China.

In 2000 to 2003, many of the programmer salaries were $130,000. Currently, programmer salaries are $40,000, but there are some programmers are out of the job.

After 9/11, Computer economic slowdown, these effects caused a declined the purchase and software develop of computers. During this point of time, software companies loss almost 25% of sales.

By 2015, 3.3 millions I.T. jobs would be outsources to India or China.

In 2000 to 2003, many of the programmer salaries were $130,000. Currently, programmer salaries are $40,000, but there are some programmers are out of the job.

Many of them in I.T. started in this profession because they lost their jobs because of outsource. They went back into schools or a trade trying to start a new career without fear of being outsourcing.

According to, “Economists Ashok Bardhan and Cynthia Kroll of the University of California at Berkeley estimate that in July of 2003 between 25,000 and 30,000 IT (information technology) positions were outsourced to India alone.

500,000 jobs lost due to corporations sending to many third world countries after 2009?

Many of them in I.T. started in this profession because they lost their jobs because of outsource. They went back into schools or a trade trying to start a new career without fear of being outsourcing.

According to, “Economists Ashok Bardhan and Cynthia Kroll of the University of California at Berkeley estimate that in July of 2003 between 25,000 and 30,000 IT (information technology) positions were outsourced to India alone.

500,000 jobs lost due to corporations sending to many third world countries after 2009?

What companies are risking?

What companies are risking?

One problem companies would faced when outsourcing are geographic locations

Second issue facing American corporations, if the countries went under some sort of natural disaster, or social uprising, or lack of communications’ between corporate headquarters and the faculty located in the country

Final risk facing American consumers, are their personal information safe?

One problem companies would faced when outsourcing are geographic locations

Second issue facing American corporations, if the countries went under some sort of natural disaster, or social uprising, or lack of communications’ between corporate headquarters and the faculty located in the country

Final risk facing American consumers, are their personal information safe?

UnemploymentUnemployment Persons are classified as

unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work

As of August, 605,000 jobs were lost

Unemployment rate rose to 6.1 Board of Labor and Statics

25,000 people applied at the new Wal-Mart in Chicago . Only 325 positions are available

BLS implied outsourcing is creating JOBS!

Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work

As of August, 605,000 jobs were lost

Unemployment rate rose to 6.1 Board of Labor and Statics

25,000 people applied at the new Wal-Mart in Chicago . Only 325 positions are available

BLS implied outsourcing is creating JOBS!

Opportunities and Advantages for ITO vendors

- Enormous Employment Opportunities

-Encouraging Wage increases

-Market Share

-Overall Growth of the developing country

Opportunities and Advantages for ITO vendors

- Enormous Employment Opportunities

-Encouraging Wage increases

-Market Share

-Overall Growth of the developing country

Because of its resources, India has become one of the most important global off shore

destinations primarily because of the rising number in English speakers.

Because of its resources, India has become one of the most important global off shore

destinations primarily because of the rising number in English speakers.

Potential OpportunitiesPotential Opportunities

Disadvantages for ITO vendors

Disadvantages for ITO vendors

Effect on local economy?

India 7%

Philippines 3.5%

Argentina 4%

Q: Do ethics play a role in outsourcing work?

A: Though business relationships are more economic in nature, their

moral and ethical dimensions have an equal impact on profitability.

- Ranjini Sivaswamy

Q: Do ethics play a role in outsourcing work?

A: Though business relationships are more economic in nature, their

moral and ethical dimensions have an equal impact on profitability.

- Ranjini Sivaswamy

“We have to stop providing tax breaks for companies that are

shipping jobs overseas and give those tax breaks to

companies that are investing here in the United States of

America.”

“We have to stop providing tax breaks for companies that are

shipping jobs overseas and give those tax breaks to

companies that are investing here in the United States of

America.”

Obama’s stance on outsourcing:

better education = better job training = better job opportunity

H1-B Visa Program

tax benefits for companies that DON’T outsource

Outsourcing IS vs. ITOutsourcing IS vs. IT

Dependence and Exit BarriersPhysical IS SecurityLogical IS SecurityLegal Ties and Consequences

Dependence and Exit BarriersPhysical IS SecurityLogical IS SecurityLegal Ties and Consequences

Physical IS SecurityPhysical IS Security

Loss of control of physical security

Now requires assessment of outsourcing firm based on one question

“Does the Outsourcing Firm have the underlying firm’s best interest at hand?”

Loss of control of physical security

Now requires assessment of outsourcing firm based on one question

“Does the Outsourcing Firm have the underlying firm’s best interest at hand?”

Dependence & Exit Barriers

Dependence & Exit Barriers

Set contract between two parties exist

Firm must turn over control of ISFunctions may not always be

executed upon contract terminationChanges can’t always be done

w/out consent of both parties

Set contract between two parties exist

Firm must turn over control of ISFunctions may not always be

executed upon contract terminationChanges can’t always be done

w/out consent of both parties

Logical IS SecurityLogical IS Security

Most risky concern associated with outsourcing

Increased number of users of systemsIncrease chances of system being breached

OF obtains access to all information Trade Secrets, software, customer info.

Leads to a loss of confidentiality

Most risky concern associated with outsourcing

Increased number of users of systemsIncrease chances of system being breached

OF obtains access to all information Trade Secrets, software, customer info.

Leads to a loss of confidentiality

Legalities & LiabilitiesLegalities & Liabilities

Outsourcing is not considered fiduciary

The party entrusted isn’t responsible for services that are delivered upon termination

No specific obligations are needed to be fulfilled

Contracts are signed on an “As-is” basis

All liabilities held against originating firm

Outsourcing is not considered fiduciary

The party entrusted isn’t responsible for services that are delivered upon termination

No specific obligations are needed to be fulfilled

Contracts are signed on an “As-is” basis

All liabilities held against originating firm

Why IT and not IS?Why IT and not IS?

IT outsourcing indicates lower risk

IS deals with the business side of organizations rather than technology

Reduction of operational costs aren’t worth the liabilities & downfalls

IT outsourcing indicates lower risk

IS deals with the business side of organizations rather than technology

Reduction of operational costs aren’t worth the liabilities & downfalls

Questions or Comments?Questions or Comments?

Please feel free to contact our call center in New Dehli at 1-43-583-43242 for your concerns!

and THANK YOU!

Please feel free to contact our call center in New Dehli at 1-43-583-43242 for your concerns!

and THANK YOU!Note; That is not a real number. We do not assume liability for phone charges if you actually call it.