IT outsourcing is gaining importance in the business world, especially as businesses begin to work on a multi-national level that transcends geographic boundaries. This means that there is some importance in understanding the components that make IT outsourcing work…
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The following is an overview of managing the IT outsourcing relationship, which includes the business process of outsourcing, the tools and resources, understanding the cost and return on investment. Furthermore, there will be some examples of risk management and data security, as well as a look at the dimensions of relationship management and its importance.Business Process Outsourcing is best explained by Medas Company, an outsourcing management consultant. Their document, A Practical Guide to Business Process Outsourcing (2006) gives straightforward information on the actual process of Managing IT Outsourcing. The following matrix (Medas 2006) shows the services and steps in functional IT management outsourcing:Medas (2006) states that first, it is important for the manager to identify the organisation's needs as the scope of activities, the reasons for outsourcing, and how this will impact or change the business model. This includes understanding the current organisational structure, the IT system infrastructure including the team members functional roles and the systems that support them. Medas notes that the current volume of transactions being internally processes must be examined. Once the current functionality and organisation's objectives for outsourcing have been established, Medas states that the next step is to choose an outsourcing partner:"the Outsourcing partner's people need to fully understand the organisation's needs. ...
They need to understand the systems that support the back office processes as well as having experience in managing complex systems environments, running and supporting hardware and developing systems, including web enabling. At this stage, it is also important to consider whether the Outsourcing partner can ensure network connectivity in a secure environment that permits data integration" (Medas pp 10 2006).
The next step in the process of managing IT outsourcing is to agree on a commercial framework. This allows the involved parties to agree on the provisions of service, and should compromise "Details such as fixed costs, unit pricing and the level of investment could all be defined in the commercial framework" (Medas p 11 2006). Lastly, the IT manager wants to develop a transitional plan that establishes the business process and features. This includes:
A review of the current systems, processes and organisational structure -identifying which systems are to be transferred (Medas p 11 2006).
Definition of services to be provided (Medas p 11 2006).
Agree the definition of service levels in terms of Service Level Measures (SLM) and Service Level Agreements (SLA) (Medas p 11 2006).
How employees will be affected by the transition e.g. how many staff and what types of jobs will be transferred, where they will be located, how they will be dealt with in terms of motivation and ongoing training and development (Medas p 11 2006).
How the process of staff transferral will be managed (TUPE) and what changes, if any, are to be made to the retained organisation - and how this will be communicated to all those involved (Medas p 11 2006).
The stages of the transition - and the timeframe involved (Medas p 11 2006).
Agree and finalise the contractual terms of the arrangement
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