managing the risks of it outsourcing [2005]

[...]... extend these concepts further with the author The three sections of the book are intended to methodically introduce the reader to some of the key concepts of managing risks but importantly also, introduce the new instrument to represent the range of risks in the IT outsourcing environment Chapter 8 provides the reader with a ‘walkthrough’ of a live example of an IT outsourcing exercise Many of the concepts... external party but there was little to describe the responsibility structures or governance of the supplier organizations A significant portion of the literature mentions the risks involved, along with the benefits and costs; but there is insufficient detail in our understanding to describe the nature of the risks or methods used to mitigate these risks The nature of risks that arise between the buyer and... also contributes to this complexity because of the extended duration of the contract This combination of factors provides for a risk profile that is constructed from multiple risk types 1.1 The need to manage risks in IT outsourcing Managing the risks of IT outsourcing is a combination of the art of management and the science of measuring an indefinite event, i.e risk Risks must never be ignored but... Buyers or suppliers of IT outsourcing services are constantly tormented by the prospect of having to deal with the vicissitudes of risks in their projects In today’s business environment, the precipitous rates of technological change have outpaced the ability of many organizations to support the IT function These organizations are faced with the ‘usual’ challenge to maintain an IT function and to simultaneously... organization, only the outsourcing managers remain Organizations, however, still struggle with the use of outsourcing to support IT IT has been seen as the domain of a single organization because of the specialized functions it supports as well as the unique expertise required to support its operations The ability to choose whether to outsource or not, then selecting the right IT supplier, determining the right... that their effects are never realized Managing risks in an IT outsourcing (ITO) exercise is, in addition, not a discretionary activity The management of risks involves active steps to reduce, to acceptable levels, the probability of an unwanted event occurring It also requires an overall understanding of the operations, the environment and the possible effects as various factors interact Despite the. .. there is so much consternation over the outsourcing of the IT function, why is there significant and growing evidence for the popularity of ITO? One reason is the overwhelming number of benefits that outsourcing offers to organizations that buy and use this concept (buyers) and others that offer it (suppliers) Before taking on the concept of risks in ITO, there are some key terms and concepts where common... party in addition to services that are provided outwith Dell The risks of poor quality, lack of timeliness and variable cost of products become measurement criteria that Dell uses for its suppliers This way, the outcomes of 5 Chap-01.qxd 3/1/05 12:29 PM Page 6 Managing the Risks of IT Outsourcing the outsourcing arrangement include products and services that are almost guaranteed to be of a minimum... is in line with the use and commoditization of selected IT components over the past few decades Value provided in an IT outsourcing situation is generally not available until both the supplier and buyer are interacting; where the quality is subjective and quite difficult to measure fairly The definition and subsequent measurement of value from the provision of services in the IT function therefore need... changes in the behaviour of activities that can cause harm (risks) within the complex and often inexact environment of IT outsourcing This is illustrated in the case study in Section III of this book A supplier is often loath to share proprietary material and experience, possibly because of a fear that its competitors would take advantage of the way it manages its risks As a result there are few, if any, . 45 Outsourcing to derive the benefits of core competency 46 2.2 The ‘economies of scale’ argument 47 2.3 Commoditization of IT 49 2.4 The role of IT in the organization 49 2.5 Outsourcing and the. concepts used in outsourcing 3 1.1 The need to manage risks in IT outsourcing 4 1.2 The practice of outsourcing 5 1.3 Agreeing the definition of outsourcing 7 1.4 Contracting versus outsourcing 9 1.5. University, Australia. He is also a Fellow of the Australian Institute of Management. Ian works in the area of IT outsourcing and is the National Head of Healthcare with KPMG. He works with healthcare