SYSTEM ANALYSIS AND DESIGN

OUTSOURCING

No. 1. 2. 3. 4. 5.

Name DAEVAN A/L RAVEE GANESAN A/L THANARAJ MOUVIN A/L SUNDERAN NAVINDRAN A/L MARIAPPAN

I.D 1111112771 1111111859 1111111343

Introduction
What is outsourcing? Outsourcing is the act of one company contracting with another company to provide services that might otherwise be performed by in-house employees. Often the tasks that are outsourced could be performed by the company itself, but in many cases there are financial advantages that come from outsourcing. Many large companies now outsource jobs such as call center services, e-mail services, and payroll. These jobs are handled by separate companies that specialize in each service, and are often located overseas. Recently outsourcing has seen a lot of press. Some of the them look to outsourcing as the savior of their company ,and the others see outsourcing as an evil job-killing tactic of the management. The most common model of outsourcing that is in the news today are refers to the jobs that are being sent overseas. This is more commonly called offshoring. The top outsourcing country in the world is India. The second top outsourcing country in the world is Indonesia. And the third top outsourcing country is China. Malaysia stands in the tenth top outsourcing country in the world.

Source of software
 Information technology services firm  Packaged software producers  Enterprise-wide solutions  Application service providers (ASPs)  Cloud computing  Open source software  In-house developer

Information technology services firm

y Information technology services firm is a field that focuses on advising businesses on how best to use information technology to meet their business objectives. In addition to providing advice, IT consultancies often estimate, manage, implement, deploy, and administer IT systems on businesses' behalf, known as Outsourcing.

Packaged software producers y Packaged software producers is Serve many market segments and provide software ranging from broad-based packages to niche packages . packaged

Advantages of Outsourcing

Outsourcing offers numerous advantages to the customers. The first advantage of outsourcing is to allows a business to focus on core activities. Outsourcing frees companies from having to manage non-core functions, and puts the focus back on their core competencies. The second advantage is streamlines a business operations. It also gives you access to professional capabilities. Outsourcing also shares the risk. Example the concept of hiring another company to handle non-core functions has been around since companies began. But its only been in the last several decades that the term outsourcing has been coined. It also can piece the mind that the process is in good hand. It also known as Reliability. And by having outsourcing we do not have to worry about continually introducing new technologies. The customer can thus avoid technology obsolescence and leverage the vendors access to diverse and advanced technologies. It also helps to improves services quality. However, the customer has to carefully select a vendor that will provide it with the quality of services that it requires. Oursourcing has frees up human resources and and also cash flow. The prices of labor and/or materials keep increasing and competition keeps forcing prices lower. By having outsourcing, it has increases the control of your business. And it also has make the business more flexible to change. Many outsourcing deals incorporate conditions for change in requirement or termination of contract ensuring flexibility.

Disadvantages of outsourcing

There are some drawbacks to outsourcing as well. One of these is that it often eliminates direct communication between a company and its clients. This may prevent a company from building solid relationships with their customers, and often leads to dissatisfaction on one or both sides. There is also the danger of not being able to control some aspects of the company, as outsourcing may lead to delayed communications and project implementation. Hidden costs and legal problems also may arise if the outsourcing terms and conditions are not clearly defined. 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. If important functions are being outsourced, an organization is mightily dependent on the outsourcing provider. Risks such as bankruptcy and financial loss cannot be controlled. And the most common disadvantages of outsourcing that can happen is losing management control of business functions mean that you may no longer be able to control operations and deliverables of activities that you outsource. Sometimes those problems with quality can arise if the outsourcing provider doesnt have proper processes and is inexperienced in working in an outsourcing relationship. Then, not understanding the culture of the outsourcing provider and the location where you outsource to may lead to poor communication and lower productivity.

Top Reasons of Outsourcing

There are few top reasons of outsourcing and there are 2 main reasons with a same percentage. It is Focus On Core and also Reduce Costs. Both of them are having 36 % each on a pie chart. Then followed by the Improve Quality. It has 13% on the pie chart. And 10% of the reasons on the pie chart is Increase Speed To Market. The fourth top reason is Foster Innovation. It is on 4 %. And the 1% of the reason is the Conserve Capital. Those are the top reasons of outsourcing and the percentage.\

The pie chart of the top reasons of outsourcing.

Reasons of Outsource

There are a few reasons of outsource. And one of it is Cost savings. The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, and cost re-structuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations. Then the second reason of outsource is Focus on Core Business .The resources (for example investment, people, infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specialised IT services companies. And the third reason is Cost restructuring .Its operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable. Then followed by the Improve Quality .Its to achieve a steep change in quality through contracting out the service with a new service level agreement. Then is the Knowledge .Its to access to intellectual property and wider experience and knowledge. Another reason of outsource is Contract. The services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services. Other than that reason is Operational expertise. It is to access to operational best practice that would be too difficult or time consuming to develop in-house. Access to talent is another reason of outsource. It can access to a larger talent pool and a sustainable source of skills, in particular in science and engineering. Another reason of outsource is Capacity management . It is an improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier. Other than that ,Catalyst for change are also a reason of outsource. an organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a change agent in the process. Enhance capacity for innovation is another reaon of outsource too. Companies

increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation. Another reason is the Reduce time to market. It is the acceleration of the development or production of a product through the additional capability brought by the supplier. Then is the Commoditization. It is the trend of standardizing business processes, IT Services, and application services which enable to buy at the right price, allows businesses access to services which were only available to large corporations. Risk management is a reason of outsource too. It is an approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation. Another reason is Venture Capital. Some countries match government funds venture capital with private venture capital for start-ups that start businesses in their country. Then followed by Tax Benefit. Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country. Another reason is Scalability. The outsourced company will usually be prepared to manage a temporary or permanent increase or decrease in production. Next reason is Creating leisure time. By creating leisure time individuals may wish to outsource their work in order to optimise their work-leisure balance .Another reason is Liability. By this organizations choose to transfer liabilities inherent to specific business processes or services that are outside of their core competencies. Next is Revenue. The classic outsourcing "mega-deal" tended to be the sale of a function and its associated capital [equipment, people, etc.] to an external vendor. The function was then rented back from the vendor over a series of years. The result was a short-run windfall.

The Positive Effects of Outsourcing

There are 3 positive effects of outsourcing. And the first positive effects is Save Money. Lets assume you currently have 20 employees doing routine data entry tasks; you would probably need around 1000 square feet of office space, which might cost you around $30,000.00 per year. You would also need 20 workstations, tables, chairs, etc. -- which might cost you another $30,000.00. You, of course, also have to include your salaries + labor burden and lets not forget our other overhead items (such as electricity, ISP, telephone, water, office supplies, facility maintenance, computer repairs and upgrades, security and so much more) which we will round of to a conservative annual cost of approximately $500,000. The second positive effects of outsourcing is Save Time and Energy. We are all familiar with the headaches that come from managing our human resources. The less people we have to directly manage the better. This frees you up to focus on other important business issues such as planning for business growth. You should be focusing more on the competition, refining business processes, and marketing, rather than spending your time interviewing people, performing quality reviews, dealing with employee problems, etc. Outsourcing allows you to grow your staff without increasing the HR headache that can come from a larger staff. And the last positive effect of outsourcing is Higher Quality End-Product. It is a positive effect of outsourcing because you are outsourcing a specific part of your process, the outsourced staff usually only have to worry about one single, repetitive task. Because they are so focused on that one task, they become very efficient and effective at performing this task resulting in a higher quality end-product. Also, because they are physically removed from your office, they dont have to deal with the other distractions that can arise in an office and can remain focused on the task at hand.

Conclusion
As a conclusion, outsource must be included in company or factory to be organised and developed. Outsource also give benefits and improvement in every organization. Outsourcing based solely on cost reduction or tactial problem is shot term solution. Outsourcing will undermine a companys potential for long term success. The organization have ability to adapt new behaviours and processes to successfully manage an external part of business. Tactic knowledge should be considered when outsourced exists internally and valueable institutional knowledge will be lost.

Reference
Book y The Black Book of Outsourcing

Internet
en.wikipedia.org/wiki/Outsourcing www.wisegeek.com/what-is-outsourcing.htm thestar.com.my

y y y