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(1)Definition of outsourcing

Outsourcing is rapidly becoming an accepted management tool for redefining and re-energizing the corporation. It challenges today’s executive to rethink the traditional vertically integrated firm in favor of a more flexible organization structured around core competencies and long-term outside relationships. Outsourcing is being applied to every facet of the company –from fleet vehicle management to business support service to human resource staffing to information technology.

In an economy where most organizations can gain access to resources, sustainable competitive advantage has to come from intellectual capital, knowledge, and expertise. Outsourcing- with its focus on specialization, alliances, and innovation—has become one of the most widely used management tools for building and sustaining competitive advantages.







The shift to outsourcing is a widely share belief that outsourcing is delivering tangible benefits. According to the Federal Sources study, 88 percent of all officials believe outsourcing provides them with skills and technologies. The chief information officials expressed a strong belief that outsourcing is gaining support Because it provide access to hard-to-find skills and new technology.

Information Technology Outsourcing belief that the outsourcing of information systems management and operation is growing rapidly primarily because outsourcing often allows organization to add expertise and improve end-user services in their operations at a reduce cost. Because of the emerging hardware and software technologies and the demands by end-users for more memory , speed, and flexibility, many organizations have been forced to selectively deploy their IT assets and personnel. In addition, as an increasing number of organizations elect to concentrate on core business functions, ITO believes that more such organization will hire ITO to operate all, or a greater portion of, their IT functions.





The New Outsourcing Model

In the New Outsourcing Model, the customer looks at the outsourcer as a long-term asset that is a source of ongoing value to the company. As an assets, time and resources are dedicated to managing the relationship and maximizing its value. The customer’s resource are held accountable for extracting value from the outsourcing relationship. The intent is to keep the relationship for as long as it bring value—understanding that over time new parties and new alliances may need to be formed as technology and organizations change. There is an interdependency between the two organizations—change in one affect the other. Therefore both parties must understand the cost drivers of the two infrastructures and coordinate changes so as not to drivers additional costs into the process. Customer and outsourcer must behave as an integrated supply chain rather than win/lose adversaries.






There are the conclusions of research carried out by GUY FITZGERALD(of Birkbeck College) into outsourcing.

The points are:

*The outsourcing of IT should not be the result of an exasperation with current performance or a desire to get rig of problem. This is likely to lead to unsuccessful outsourcing, because an organization which can not successful performed its own IT is unlikely to be able to specify and organize the outsourcing of it.

*Organizations should be very careful not to outsource those aspects of IT which are strategic to their or which differentiate them from the competition.

*100% outsourcing of an organization’s IT is likely to be problematic, especially in the long term.

*Companies should put their own house in order prior to outsourcing. Many organizations outsource element of their IT which are less than efficient and the price is agreed on that basic.

*Even after collect outsourcing decisions have been made, the client company must not assume that they can wash their hands of any further involvement. One important to success is for the client to manage the vendor and evaluate performance on an ongoing basic.






The extensive knowledge to help you set appropriate objectives for your outsourcing relationship and to understand whether or not cost savings can be achieved. Everest’s pre-outsourcing services include:


*Goal setting: Determine the appropriate goals/objectives for your outsourcing relationship.

*Cost Saving Analysis: Help you understand whether or not cost savings can be generated.

*Outsourcing Assessment: Is outsourcing right for your company? If yes, what commodities should be outsource for how long, and in what terms.


*Infrastructure assessment

*Baseline modeling

*Performance metrics identification, including service levels/financial metrics

*final Report: a clear document outlining your option to retain or outsource part or all of your commodities.

Proprietary Everest Tools:

*Activity-based modeling of the baseline

*Alliance with compass American for benchmarking