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Literature Review and Project Specification - Essay Example

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Finding the most cost-effective and efficient method of AD sourcing is a complex and monumental task. Many factors affect the cost of AD project sourcing, and there is a wide variety of sourcing options (such as on-site, off-site, offshore and "nearshore") from which to choose…
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Download file "Literature Review and Project Specification" to see previous pages... Most of them fail to examine how global sourcing integrates with and supports their broader sourcing strategy and business goals.
As organizations evaluate sourcing options, there are many models with no "one size fits all" choice. Although the delivery of outsourcing options is maturing (making outsourcing less risky and potentially less costly),
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making an informed strategic sourcing decision is still complex. It requires a thorough qualitative analysis and a quantitative financial analysis (business case) of all the possible sourcing options. A balance between the two needs to be the foundation for the final sourcing decision. For the purpose of this research, I will concentrate on the quantitative analysis.
The justification for outsourcing therefore looks very straight forward and in the early days the process was thorough and well thought through. By contracting out services to a third party, organisations could reduce their operating costs and refocus their efforts and remaining resources on their core competencies. And this is still true today, the two main reasons for outsourcing attested to by a number of scholars are 1. Improve Company focus, 2. Reduce and control operating costs (Mylot, 1995; Field, 1998; Greaver, 1999; Barthelemy, .2001). However, in recent times, organizations have become increasingly dissatisfied with their outsourcing contracts. An article from the MIT Sloan Management Review (1998) states that a survey by Cap Gemini Ernst & Young found that only 54% of companies are satisfied with their outsourcing, down from more than 80% a decade ago. The landscape of outsourcing has also changed dramatically in the last year with the increased popularity of SOA and raises questions such as 1. How will software vendors react to service-oriented architecture, real-time infrastructure and fusion 2. How will enterprises achieve value on their investments in software Similarly how the ESP are going to address to the questions such as 1. Transform their business models from highly custom one-to-one services to a one-to-many or many-to-many service model 2. Effectively partner with ESP's that are moving or have moved to a leveraged service model.
Interestingly enough Gartner predicts that "by 2007, driven in part by SOA-based Web services, 18 percent of all IT professional services will be deployed in a multi enterprise, shared service environment. Enterprise application vendors are the likely beneficiaries of the SOA bounty when it comes to outsourcing. Vendors such as Oracle and PeopleSoft have grown their IT professional service organizations aggressively and, by 2007, the distinctions between these software vendors and ESP's will begin to blur". Although these software vendors have offered outsourced solutions, they have portfolios of outsourcing contracts that are more standardized and typically are already using a shared enterprise environment. As a result, it is possible for these types of software vendors to make the shift to application utility and process utility models.
Furthermore, many software vendors have already been "burned" once by the application service provider market and realize that a one-size-fits-all approach to functionality does not work (Garaventa and Tellefsen, 2001).
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