Outsourcing involves hiring an external independent firm to perform business operations that internal employees are at a position to handle. The field of information technology is the latest to be affected by the practice of outsourcing when the firm has the capacity to own and develop those business functions. However, this practice has its advantages and disadvantages. One of the advantages of outsourcing that Sebastian considered for Mudra was the cost. In his view, outsourcing was a cost-effective means that offered the opportunity to expand the services and products of the firm into new markets. Besides cost, Sebastian also viewed outsourcing as a way the firm could easily achieve flexibility. Therefore, the firm would be able to defer its details to a specialized company giving it the opportunity to concentrate on other important issues within the firm. On the other hand, the disadvantages were inevitable. To begin with, the contracted firm failed to deliver due to lack of knowledge on the function (advertising), incapability to find solutions to issues regarding technology, and the inability to map the user requirements. Some of these problems arose from the challenges that the firm faced at the implementation stage of change management. Eventually, the firm would not effectively communicate with other firms and clients.
The risk of owning and developing them in–house is that it could influence cash flow. There could be doubts that whether the cost would be meaningful and long-term proceeds would cover the cost. Meanwhile, the large-scale and complexity of the project was also a problem, since the infrastructure included parts of different forms which should be linked together as a whole
Outsourcing:
Pros: It is cheaper than buying, and software film would have more experience IT stuff to develop the package.
cons: Software firms failure to deliver the ES package because they were lacking understanding of the Mudra’s business needs and user requirements. Mudra would have to deal with the information security risk of outsourcing.
Developing in-house:
Pros:It is cheaper than outsourcing and Mudra does not need to deal with the contract with the software firm.
Cons: Mudra’s IT team does not have such experience for development ES package because its previous in house information system were causing difficulty of communication.
Hi Shuyue, I agree that developing in-house is the cheapest way. Mudra is in the advertising industry which is different than manufacturing industry or even the service industry in general. I would be better if they could develop it in-house. However, it does not have experience in building the system.
3. IT outsourcing is the process of delivering responsibility for IT infrastructure, software and processes. The pros of outsourcing include:
• Mudra could focus on core competencies to avoid using resources to handle internal IT requirements and provide customer service at the same time.
• Access to skilled resources instead of hiring and training own technical experts.
• Cheaper than developing by themselves in short-term.
• Reduce service interruption risk. By outsourcing IT, the companies can access multiple backup servers, significantly reducing the risk of outages.
Cons:
• The most important consideration is the security and trust issues.
• If Mudra works with the wrong type of vendor, they may push Mudra to invest in equipment or software that is not needed at this stage.
Owning and developing IT infrastructure and software in-house could provide more specialized services based on the Mudra’s own needs. This could also reduce the unnecessary use of resource.
The cons of development them in house is that Mudra has to hire more skilled people to develop IT infrastructure and software because of current employees’ lack of expertise in this area.
The benefits of outsourcing IT infrastructure and software module development include several factors. First, it seems that it was the trend that the price of IT infrastructure was decreasing over time. Secondly, the payment could follow an ongoing way instead of an advanced charge, which could practically reduce the financial pressure of the company.
The risks of outsourcing IT infrastructure and software module development are related to control and flexibility. The convenience of utility may be based on the sacrifice of detail-focused quality and may result in loss of control. Besides, the platform outsourced may also be proved to be risky for bugs, leaks, and hidden illegal uses.
The benefits of owning and developing them in-house cover such factors. Fundamentally, since the company could obtain a system of its own, it would be able for the company to monitor each link of information storage, process, and transmission by rigid control. And then, the company has much more flexibility on trial and improvement, through which the internal platform could be better to match the needs of the company during operation.
The risk of owning and developing them in-house is that it could influence cash flow. There could be ups and downs of the cash flow at intervals, which could raise instability and weaken financial prudence dramatically. On one hand, such turbulence could send a signal to investors as a result of which they may reduce investment or withdraw capital in order to avoid the financial hazard.
Outsourcing has grown in popularity with U.S. businesses and corporations since they typically have to pay low wages and little or no benefits. However, the downside is that numerous jobs are being eliminated and job security seems to no longer exist for many Americans.
When outsourcing, there are many positives and negatives. The cons can stem from the principal-agent issue that occurs in most outsourcing endeavors. The communication can be very spotty from the vendor and the paying company. And the labor my not have the most in depth understanding of your business. The positives are that the labor should be experts in the skills that you hired them for. The purchasing company does not need to “worry” about the project as much as in-house. And the purchasing company should be saving time and money through the contracts.
On the in-house development side, the cons could be that the company does not have the expertise to complete the job/project at hand. And the company must devote more time and energy into the project management aspect of the business. Whereas the first positive is that communication channels are much more clear. And the leadership at the top is the same throughout the business. Therefore the objectives, goals, and leadership should be the same.
Hi, Alexander
I cannot agree with more, communication is the key when the company decides to outsource its IT project. The vendor would have less business understanding of the paying company, and it would lead to the delivery failure eventually, which is exactly the Mudar’s case. In the case, they came out with a better plan, which is a combination of vender’s IT experts under their own people’s control and supervision.
Benefits of Buy:
Overtime, costs decrease
Take advantage of pay-as-you-go pricing models
Risks of Buy:
Infrastructure may not be flexible
Less control and greater surface area of information results in a greater security risk
Benefits of Build:
Owning the system gives Mudra more control
Greater adaptability to align with changing infrastructure needs overtime
Risks of Build:
Budgeting for the build is more complicated, less predictable, and more difficult to manage
Responsibility of security is completely internal, would need to have the experience and expertise to do it
I really liked your section on risks of buy. As IT Auditors, I think our top priority is always to be concerned about the certain risks associated with projects. Furthermore, how those risks impact the overall business purpose financially.
Hey Adam,
In this case, it saves money and time for outsourcing. first of all, the average cost of a software module is far less in Asia than in the United States or Europe. they could provide Low-cost, high-quality programmers
, Secondly, Outsourcing company will provide expert with the ability to fill in gaps in their skillset and save you lots of money for hiring expert and save time for fixing.
Pros of outsourcing: it provides the flexibilities of the development and design phases since each component could be built and tested separately before being finally integrated.
Cons of outsourcing: the contractor could have the disability to deliver the services because they laked the advertising domain and not able to map user requirements.
Pros of in-house: first, it is cheaper compared with outsourcing. In addition, with the help of freelancer contractors, there were several more functional modules in the pipeline, which is helpful to make up the final ES pyramid.
Cons of in-house: it is difficult for the seven full-time employees, who already working at the peak level of 77 hours per week, to spend the time to the planning phase.
Hello,
While reading through your response, I noticed that your approach on the pros and cons of both outsourcing and building enterprise systems in-house were somewhat different from my own. You took more specific HR-related reasonings from the case study, such as how development in-house would be nearly impossible with only seven full-time employees who are already working overtime. I also learned something new from your point on how outsourcing can help improve the flexibility of the design and development.
Pros of Outsourcing:
-Access to personnel that specialize in software development.
-Cost effective since the amount of time needed would most likely be shorter than for the general IT staff to develop the software themselves.
Cons of Outsourcing:
– It is necessary for vendors to have documented requirements regarding specific functionality of the software, which has been a challenge for Joseph, meaning more time would be needed to determine these requirements due to lack of employee compliance.
-Choosing the wrong vendor, as noted in the case, may cause drawback due to lack of knowledge in terms of problem solving and industry specific requirements on the vendor’s behalf.
Pros of In-House Development:
-Knowledge of the business itself, along with current system, means in-house developers have a better understanding of what specific functions are necessary for the new software.
-Maintaining and customizing built-in-house software is less of a financial burden than needing to go through the vendor in order to meet new business requirements.
-Other in-house personnel may not be as resistant to change when software is developed by a coworker.
Cons of In-House Development:
-IT staff may not have the skill set required to build custom software, thus more time would be needed for employees to successfully complete the project.
-The company is relying on seven people to build custom software while also performing their day-to-day activities, thus creating a stressful work environment.
The pros of outsourcing IT infrastructure and software module development would be their experience and the price. The contractors would have more experience than its IT department. Also, the price is half of the buying option. But even the contractor could not understand the need of the advertising industry and unable to find solutions to technology-related issues. On the other hand, for owning and developing them in-house, the advantages are it is the cheapest option among these three options; more flexible; Mudra understands its industry, and it knows what they want. However, it needs to spend more time and human resources to develop its system.
Hi Ryu, I agree with everything you said. The level of customization from in-house developed software is also a pro for in-house developed software comparing to outsourcing software. Outsourcing software tends to be more trustworthy but might not fit in the company 100% as an in-house developed one.
I agree the pros and cons for outsourcing are heavily dependent on the current company’s model as well. If they’re experienced, they would be able to save a lot of money rather than buying off the shelf software.
The pros and cons of outsourcing IT infrastructure and software module development versus owning and developing them in-house are as follows:
Pros:
-Comparing to owning and developing IT infrastructure and software in-house, outsourcing software is quicker thus saves companies lots of time because companies know outsourcing software is more tested and updated day by day. Outsourcing software is usually trustworthy because companies will choose the most commonly used software by the big public.
Cons:
-In-house developed software tends to have more customization that fits the company more. The in-house developed software is designed to cover the business needs while outsourcing software might covers a broader perspectives, which would cost more money often time.
The level of customization is perhaps the biggest benefit of custom software. While a commercial package may fit many of your business’s needs, it’s doubtful that it will have the same efficiency as custom software. By meeting your exact specifications, you can cover every aspect of your business without unnecessary extras. It gives you greater control, which is important if your business has specific needs that your average commercial product can’t fulfill. Having customized software should also make the interface more familiar and easy to use.Because in-house software is developed by a team of your choosing, it also gives you access to knowledgeable support. Rather than dealing with technicians who may not understand your unique situation, you can get support from the individuals who have developed your software firsthand. They will understand any subtle nuances and minimize downtime from technical errors.
Disadvantages of outsourcing IT Infrastructure and Software module:
> Mudra’s case study is a best example to understand the disadvantages of outsourcing IT services. In this case study, we can note that Joseph had changed from outsourcing model to staffing model as the vendors lacked the advertising domain knowledge, contractors were unable to map user requirements and even they were unable to find solutions for technology related issues. Inexpertise is one of the reasons why most of the outsourcing services fail.
>Security and trust issues are one of the biggest concerns when outsourcing IT Services. You might not know what security protocols vendors have in place and they might not be well-versed in country’s regulations.
Advantages of outsourcing IT Infrastructure and Software module:
> You can have massive savings when you outsource by saving on IT resources, technology, office space etc.
> Company can focus on core competencies without worrying much on outsourced services.
> Outsourcing would also help in lessening the service outage risk.
Advantages of owning and developing your IT applications in-house:
> One of the biggest advantage of in-house software development is that it could be customized based on the business requirement at any later stages that can have exact fit for the company.
>You can have complete control over the functionality and gives you an in-depth knowledge of how the system works.
Disadvantages of owning and developing your IT applications in-house:
> High switching costs: it is more expensive to change to newer technology.
> It would be costly to maintain and improve the system to continuously meet business needs.
> It requires more IT personnel which in turn lead to High overhead cost.
Hello Deepa, I couldn’t agree more with your opinions. it seems the costs is the biggest issue when it comes to own and develop the IT applications in-house. What I missed is that the high and continuous maintenance costs of would happen in the long term, which would also be a huge expenditure for a company.
When considering the pros and cons of whether Midra Communications as an organization should outsource the development of their Enterprise Systems solution or develop in-house, it is important to remember Midra’s noted lack of organization and communication. This disorder as a result of the four business units functioning nearly independently from each other and most of the business processes being entered manually played a significant role in the failure of two outsourcing options to deliver an appropriate solution. They elaborated further by stating that the disorder made it difficult for the contractors to understand the advertising domain and map user requirements. However, the major benefit Joseph was seeking in this solution was cost reduction and the ability to reallocate resources and company focus to other pressing issues. Developing in-house, on the other hand, comes with its own set of challenges in the form of significantly increased costs relating to development and ensuring the appropriate resources and talent are present. The benefits to developing in-house are also plentiful, in that there is reduced risk of not meeting the organization’s unique needs and excessive use of resources.
Hi Jordan,
I appreciate that you brought up this opinion and share with it by reply to my comments. The organization and communication you brought up are what I did not found, which is a great thing to help me understand the scenario better.
I think outsourcing might have been successful the first time around if the proper communication, organization, and planning techniques had taken place. If Joseph would have just taken the time to fully understand the project and communicate with other departments, he would have been able to properly identify what qualifications were needed from an outsourcing contractor, and in turn provide them with the exact requirements necessary for the project.
The pros of outsourcing IT infrastructure are very similar to outsourcing an ES project. You are hiring an outside firm to develop your infrastructure that is most likely very experienced in handling such projects. They likely have plenty of more resources and man-hours to develop the project. It can be done much quicker, which would also allow you to focus more on your business purpose. You hire specialists to do speciality work, whereas building in-house might not always be the case. This allows you to focus on your company’s core competencies.
The cons of outsourcing IT infrastructure could, in some cases, be deal breakers. There are plenty of inherent disadvantages involving control and risk. Furthermore, you could end up paying a lot more than you had to. You have to go through licensing and contract agreements and you are revealing how you want your company’s architecture to be built to an outside firm. Although unlikely, there are always inherent security risks involved with outsourcing work to a firm. You also lose a lot of the project control when you are outsourcing.
Good points! When reading through your disadvantages of outsourcing IT services, I had recalled some of the other risks aswell – One of the biggest disadvantage is the risk of losing sensitive data and the loss of confidentiality. It is therefore important to have checks in place to avoid data loss.
From what we lerant from case study – Losing management control of business functions in which you may not be able to control operations and deliverables of activities that you outsource and hence, it might result in project failures.
Programs that are specifically designed with your needs in mind can enable your team to work faster and smarter. You can create one comprehensive technology platform as opposed to using multiple different programs. An integrated platform can yield major efficiency gains since all the data is one place and users do not have to switch between different websites as part of their workflow.
When you rely on the same off-the-shelf software as your rival does, it is that much more difficult to outperform them. By designing your own technology that is ideally suited for your specific business operations, you can garner a competitive advantage relative to your competitors. That advantage grows as you invest more heavily in your proprietary systems.
To build great custom software, you must first hire a stellar software development team. Once that team is in place, they can build a variety of products, tools, and systems. As your business needs change and as your industry evolves, being able to quickly shift technology strategies can mean the difference between market dominance and obsolesces.
OUTSOURCING
Pros: You’ll be dealing with professionals who have knowledge of how to developing your IT infrastructure, you’ll just need to let them know your needs and constraints. It can be developed to be specific for you company, as long as funds are provided, you wouldn’t need to be very hands-on with the project.
Cons: If they don’t fully understand Mudra’s needs and requirements, they’ll have to deal with IS risks and maybe even data breach. If they fail to deliver the specific product, Mudra needs, it’ll all be a waste of time and resources.
DEVELOPING IN-HOUSE
Pros:It is cheaper than hiring a team of outside professionals, and Mudra can directly oversee the project and alter if there needs to be any change.
Cons: If Mudra’s IT team aren’t skilled in development, it’ll be a waste of money and resources. To build custom software, your development team has to be knowledgeable in all the aspects.
Mei, all good points. To add to your analysis, if Mudra outsources, they can focus their energy on what matters most for the business. On the other hand, if Mudra builds in-house, there is more control over the quality of work that is produced and better alignment to business. But I guess at the end of the day, everything revolves around money and which option will save it.
When it goes to outsource IT infrastructure and software module development, the advantage is it is time-saving and effective. And the outsource is like to be more experienced. The disadvantage is the communication issue that they might not fully understand your request. And the trustworthy issue is another risk.
When it goes to own and developing them in-house, the advantage is it is much cheaper, more direct to the subject and customized. The disadvantage is that the assigned might be less experienced.
Pros: the average cost of a software module is far less in Asian than the United States or Europe. they could provide Low-cost, high-quality programmers
Outsourcing company will provide expert with the ability to fill in gaps in their skillset and save you lots of money for hiring expert and save time for fixing.
Cons: The language barrier and culture barrier may exist, since the outsourcing company may comes from foreign counties.
The quality of service provided by outsourcing companies cannot be guaranteed.
Developing
Pros: Developing in house offers employees more position and could help them fit in company culture and get skills improved.
Outsourcing IT Infrastructure and Software Module Development
PROS
a) Cost-effective
b) Experienced individuals who understand the market trends and their client’s requirements
CONS
a) Communication gap
Developing In-House
PROS
a) IT team can be trained to the company’s specific needs and will always be available when needed
b) No communication gap
CONS
a) Staffing
Feng Gao says
Outsourcing involves hiring an external independent firm to perform business operations that internal employees are at a position to handle. The field of information technology is the latest to be affected by the practice of outsourcing when the firm has the capacity to own and develop those business functions. However, this practice has its advantages and disadvantages. One of the advantages of outsourcing that Sebastian considered for Mudra was the cost. In his view, outsourcing was a cost-effective means that offered the opportunity to expand the services and products of the firm into new markets. Besides cost, Sebastian also viewed outsourcing as a way the firm could easily achieve flexibility. Therefore, the firm would be able to defer its details to a specialized company giving it the opportunity to concentrate on other important issues within the firm. On the other hand, the disadvantages were inevitable. To begin with, the contracted firm failed to deliver due to lack of knowledge on the function (advertising), incapability to find solutions to issues regarding technology, and the inability to map the user requirements. Some of these problems arose from the challenges that the firm faced at the implementation stage of change management. Eventually, the firm would not effectively communicate with other firms and clients.
Zhu Li says
The risk of owning and developing them in–house is that it could influence cash flow. There could be doubts that whether the cost would be meaningful and long-term proceeds would cover the cost. Meanwhile, the large-scale and complexity of the project was also a problem, since the infrastructure included parts of different forms which should be linked together as a whole
Shuyue Ding says
Outsourcing:
Pros: It is cheaper than buying, and software film would have more experience IT stuff to develop the package.
cons: Software firms failure to deliver the ES package because they were lacking understanding of the Mudra’s business needs and user requirements. Mudra would have to deal with the information security risk of outsourcing.
Developing in-house:
Pros:It is cheaper than outsourcing and Mudra does not need to deal with the contract with the software firm.
Cons: Mudra’s IT team does not have such experience for development ES package because its previous in house information system were causing difficulty of communication.
Ryu Takatsuki says
Hi Shuyue, I agree that developing in-house is the cheapest way. Mudra is in the advertising industry which is different than manufacturing industry or even the service industry in general. I would be better if they could develop it in-house. However, it does not have experience in building the system.
Yuqing Tang says
3. IT outsourcing is the process of delivering responsibility for IT infrastructure, software and processes. The pros of outsourcing include:
• Mudra could focus on core competencies to avoid using resources to handle internal IT requirements and provide customer service at the same time.
• Access to skilled resources instead of hiring and training own technical experts.
• Cheaper than developing by themselves in short-term.
• Reduce service interruption risk. By outsourcing IT, the companies can access multiple backup servers, significantly reducing the risk of outages.
Cons:
• The most important consideration is the security and trust issues.
• If Mudra works with the wrong type of vendor, they may push Mudra to invest in equipment or software that is not needed at this stage.
Owning and developing IT infrastructure and software in-house could provide more specialized services based on the Mudra’s own needs. This could also reduce the unnecessary use of resource.
The cons of development them in house is that Mudra has to hire more skilled people to develop IT infrastructure and software because of current employees’ lack of expertise in this area.
Zhu Li says
The benefits of outsourcing IT infrastructure and software module development include several factors. First, it seems that it was the trend that the price of IT infrastructure was decreasing over time. Secondly, the payment could follow an ongoing way instead of an advanced charge, which could practically reduce the financial pressure of the company.
The risks of outsourcing IT infrastructure and software module development are related to control and flexibility. The convenience of utility may be based on the sacrifice of detail-focused quality and may result in loss of control. Besides, the platform outsourced may also be proved to be risky for bugs, leaks, and hidden illegal uses.
The benefits of owning and developing them in-house cover such factors. Fundamentally, since the company could obtain a system of its own, it would be able for the company to monitor each link of information storage, process, and transmission by rigid control. And then, the company has much more flexibility on trial and improvement, through which the internal platform could be better to match the needs of the company during operation.
The risk of owning and developing them in-house is that it could influence cash flow. There could be ups and downs of the cash flow at intervals, which could raise instability and weaken financial prudence dramatically. On one hand, such turbulence could send a signal to investors as a result of which they may reduce investment or withdraw capital in order to avoid the financial hazard.
Feng Gao says
Outsourcing has grown in popularity with U.S. businesses and corporations since they typically have to pay low wages and little or no benefits. However, the downside is that numerous jobs are being eliminated and job security seems to no longer exist for many Americans.
Alexander Reichart-Anderson says
Development by Outsourcing vs. In-house
When outsourcing, there are many positives and negatives. The cons can stem from the principal-agent issue that occurs in most outsourcing endeavors. The communication can be very spotty from the vendor and the paying company. And the labor my not have the most in depth understanding of your business. The positives are that the labor should be experts in the skills that you hired them for. The purchasing company does not need to “worry” about the project as much as in-house. And the purchasing company should be saving time and money through the contracts.
On the in-house development side, the cons could be that the company does not have the expertise to complete the job/project at hand. And the company must devote more time and energy into the project management aspect of the business. Whereas the first positive is that communication channels are much more clear. And the leadership at the top is the same throughout the business. Therefore the objectives, goals, and leadership should be the same.
Shuyue Ding says
Hi, Alexander
I cannot agree with more, communication is the key when the company decides to outsource its IT project. The vendor would have less business understanding of the paying company, and it would lead to the delivery failure eventually, which is exactly the Mudar’s case. In the case, they came out with a better plan, which is a combination of vender’s IT experts under their own people’s control and supervision.
Adam J Wolf says
Benefits of Buy:
Overtime, costs decrease
Take advantage of pay-as-you-go pricing models
Risks of Buy:
Infrastructure may not be flexible
Less control and greater surface area of information results in a greater security risk
Benefits of Build:
Owning the system gives Mudra more control
Greater adaptability to align with changing infrastructure needs overtime
Risks of Build:
Budgeting for the build is more complicated, less predictable, and more difficult to manage
Responsibility of security is completely internal, would need to have the experience and expertise to do it
Panayiotis Laskaridis says
Hello Adam,
I really liked your section on risks of buy. As IT Auditors, I think our top priority is always to be concerned about the certain risks associated with projects. Furthermore, how those risks impact the overall business purpose financially.
Xinye Yang says
Hey Adam,
In this case, it saves money and time for outsourcing. first of all, the average cost of a software module is far less in Asia than in the United States or Europe. they could provide Low-cost, high-quality programmers
, Secondly, Outsourcing company will provide expert with the ability to fill in gaps in their skillset and save you lots of money for hiring expert and save time for fixing.
Penghui Ai says
Pros of outsourcing: it provides the flexibilities of the development and design phases since each component could be built and tested separately before being finally integrated.
Cons of outsourcing: the contractor could have the disability to deliver the services because they laked the advertising domain and not able to map user requirements.
Pros of in-house: first, it is cheaper compared with outsourcing. In addition, with the help of freelancer contractors, there were several more functional modules in the pipeline, which is helpful to make up the final ES pyramid.
Cons of in-house: it is difficult for the seven full-time employees, who already working at the peak level of 77 hours per week, to spend the time to the planning phase.
Imran Jordan Kharabsheh says
Hello,
While reading through your response, I noticed that your approach on the pros and cons of both outsourcing and building enterprise systems in-house were somewhat different from my own. You took more specific HR-related reasonings from the case study, such as how development in-house would be nearly impossible with only seven full-time employees who are already working overtime. I also learned something new from your point on how outsourcing can help improve the flexibility of the design and development.
Sarah Puffen says
Pros of Outsourcing:
-Access to personnel that specialize in software development.
-Cost effective since the amount of time needed would most likely be shorter than for the general IT staff to develop the software themselves.
Cons of Outsourcing:
– It is necessary for vendors to have documented requirements regarding specific functionality of the software, which has been a challenge for Joseph, meaning more time would be needed to determine these requirements due to lack of employee compliance.
-Choosing the wrong vendor, as noted in the case, may cause drawback due to lack of knowledge in terms of problem solving and industry specific requirements on the vendor’s behalf.
Pros of In-House Development:
-Knowledge of the business itself, along with current system, means in-house developers have a better understanding of what specific functions are necessary for the new software.
-Maintaining and customizing built-in-house software is less of a financial burden than needing to go through the vendor in order to meet new business requirements.
-Other in-house personnel may not be as resistant to change when software is developed by a coworker.
Cons of In-House Development:
-IT staff may not have the skill set required to build custom software, thus more time would be needed for employees to successfully complete the project.
-The company is relying on seven people to build custom software while also performing their day-to-day activities, thus creating a stressful work environment.
Ryu Takatsuki says
The pros of outsourcing IT infrastructure and software module development would be their experience and the price. The contractors would have more experience than its IT department. Also, the price is half of the buying option. But even the contractor could not understand the need of the advertising industry and unable to find solutions to technology-related issues. On the other hand, for owning and developing them in-house, the advantages are it is the cheapest option among these three options; more flexible; Mudra understands its industry, and it knows what they want. However, it needs to spend more time and human resources to develop its system.
Yuchong Wang says
Hi Ryu, I agree with everything you said. The level of customization from in-house developed software is also a pro for in-house developed software comparing to outsourcing software. Outsourcing software tends to be more trustworthy but might not fit in the company 100% as an in-house developed one.
Mei X Wang says
I agree the pros and cons for outsourcing are heavily dependent on the current company’s model as well. If they’re experienced, they would be able to save a lot of money rather than buying off the shelf software.
Yuchong Wang says
The pros and cons of outsourcing IT infrastructure and software module development versus owning and developing them in-house are as follows:
Pros:
-Comparing to owning and developing IT infrastructure and software in-house, outsourcing software is quicker thus saves companies lots of time because companies know outsourcing software is more tested and updated day by day. Outsourcing software is usually trustworthy because companies will choose the most commonly used software by the big public.
Cons:
-In-house developed software tends to have more customization that fits the company more. The in-house developed software is designed to cover the business needs while outsourcing software might covers a broader perspectives, which would cost more money often time.
Yuan Liu says
The level of customization is perhaps the biggest benefit of custom software. While a commercial package may fit many of your business’s needs, it’s doubtful that it will have the same efficiency as custom software. By meeting your exact specifications, you can cover every aspect of your business without unnecessary extras. It gives you greater control, which is important if your business has specific needs that your average commercial product can’t fulfill. Having customized software should also make the interface more familiar and easy to use.Because in-house software is developed by a team of your choosing, it also gives you access to knowledgeable support. Rather than dealing with technicians who may not understand your unique situation, you can get support from the individuals who have developed your software firsthand. They will understand any subtle nuances and minimize downtime from technical errors.
Deepa Kuppuswamy says
Disadvantages of outsourcing IT Infrastructure and Software module:
> Mudra’s case study is a best example to understand the disadvantages of outsourcing IT services. In this case study, we can note that Joseph had changed from outsourcing model to staffing model as the vendors lacked the advertising domain knowledge, contractors were unable to map user requirements and even they were unable to find solutions for technology related issues. Inexpertise is one of the reasons why most of the outsourcing services fail.
>Security and trust issues are one of the biggest concerns when outsourcing IT Services. You might not know what security protocols vendors have in place and they might not be well-versed in country’s regulations.
Advantages of outsourcing IT Infrastructure and Software module:
> You can have massive savings when you outsource by saving on IT resources, technology, office space etc.
> Company can focus on core competencies without worrying much on outsourced services.
> Outsourcing would also help in lessening the service outage risk.
Advantages of owning and developing your IT applications in-house:
> One of the biggest advantage of in-house software development is that it could be customized based on the business requirement at any later stages that can have exact fit for the company.
>You can have complete control over the functionality and gives you an in-depth knowledge of how the system works.
Disadvantages of owning and developing your IT applications in-house:
> High switching costs: it is more expensive to change to newer technology.
> It would be costly to maintain and improve the system to continuously meet business needs.
> It requires more IT personnel which in turn lead to High overhead cost.
Yuqing Tang says
Hello Deepa, I couldn’t agree more with your opinions. it seems the costs is the biggest issue when it comes to own and develop the IT applications in-house. What I missed is that the high and continuous maintenance costs of would happen in the long term, which would also be a huge expenditure for a company.
Imran Jordan Kharabsheh says
When considering the pros and cons of whether Midra Communications as an organization should outsource the development of their Enterprise Systems solution or develop in-house, it is important to remember Midra’s noted lack of organization and communication. This disorder as a result of the four business units functioning nearly independently from each other and most of the business processes being entered manually played a significant role in the failure of two outsourcing options to deliver an appropriate solution. They elaborated further by stating that the disorder made it difficult for the contractors to understand the advertising domain and map user requirements. However, the major benefit Joseph was seeking in this solution was cost reduction and the ability to reallocate resources and company focus to other pressing issues. Developing in-house, on the other hand, comes with its own set of challenges in the form of significantly increased costs relating to development and ensuring the appropriate resources and talent are present. The benefits to developing in-house are also plentiful, in that there is reduced risk of not meeting the organization’s unique needs and excessive use of resources.
Penghui Ai says
Hi Jordan,
I appreciate that you brought up this opinion and share with it by reply to my comments. The organization and communication you brought up are what I did not found, which is a great thing to help me understand the scenario better.
Sarah Puffen says
I think outsourcing might have been successful the first time around if the proper communication, organization, and planning techniques had taken place. If Joseph would have just taken the time to fully understand the project and communicate with other departments, he would have been able to properly identify what qualifications were needed from an outsourcing contractor, and in turn provide them with the exact requirements necessary for the project.
Panayiotis Laskaridis says
The pros of outsourcing IT infrastructure are very similar to outsourcing an ES project. You are hiring an outside firm to develop your infrastructure that is most likely very experienced in handling such projects. They likely have plenty of more resources and man-hours to develop the project. It can be done much quicker, which would also allow you to focus more on your business purpose. You hire specialists to do speciality work, whereas building in-house might not always be the case. This allows you to focus on your company’s core competencies.
The cons of outsourcing IT infrastructure could, in some cases, be deal breakers. There are plenty of inherent disadvantages involving control and risk. Furthermore, you could end up paying a lot more than you had to. You have to go through licensing and contract agreements and you are revealing how you want your company’s architecture to be built to an outside firm. Although unlikely, there are always inherent security risks involved with outsourcing work to a firm. You also lose a lot of the project control when you are outsourcing.
Deepa Kuppuswamy says
Good points! When reading through your disadvantages of outsourcing IT services, I had recalled some of the other risks aswell – One of the biggest disadvantage is the risk of losing sensitive data and the loss of confidentiality. It is therefore important to have checks in place to avoid data loss.
From what we lerant from case study – Losing management control of business functions in which you may not be able to control operations and deliverables of activities that you outsource and hence, it might result in project failures.
Yuan Liu says
Programs that are specifically designed with your needs in mind can enable your team to work faster and smarter. You can create one comprehensive technology platform as opposed to using multiple different programs. An integrated platform can yield major efficiency gains since all the data is one place and users do not have to switch between different websites as part of their workflow.
When you rely on the same off-the-shelf software as your rival does, it is that much more difficult to outperform them. By designing your own technology that is ideally suited for your specific business operations, you can garner a competitive advantage relative to your competitors. That advantage grows as you invest more heavily in your proprietary systems.
To build great custom software, you must first hire a stellar software development team. Once that team is in place, they can build a variety of products, tools, and systems. As your business needs change and as your industry evolves, being able to quickly shift technology strategies can mean the difference between market dominance and obsolesces.
Mei X Wang says
OUTSOURCING
Pros: You’ll be dealing with professionals who have knowledge of how to developing your IT infrastructure, you’ll just need to let them know your needs and constraints. It can be developed to be specific for you company, as long as funds are provided, you wouldn’t need to be very hands-on with the project.
Cons: If they don’t fully understand Mudra’s needs and requirements, they’ll have to deal with IS risks and maybe even data breach. If they fail to deliver the specific product, Mudra needs, it’ll all be a waste of time and resources.
DEVELOPING IN-HOUSE
Pros:It is cheaper than hiring a team of outside professionals, and Mudra can directly oversee the project and alter if there needs to be any change.
Cons: If Mudra’s IT team aren’t skilled in development, it’ll be a waste of money and resources. To build custom software, your development team has to be knowledgeable in all the aspects.
Raisa Ahmed says
Mei, all good points. To add to your analysis, if Mudra outsources, they can focus their energy on what matters most for the business. On the other hand, if Mudra builds in-house, there is more control over the quality of work that is produced and better alignment to business. But I guess at the end of the day, everything revolves around money and which option will save it.
Haixin Sun says
When it goes to outsource IT infrastructure and software module development, the advantage is it is time-saving and effective. And the outsource is like to be more experienced. The disadvantage is the communication issue that they might not fully understand your request. And the trustworthy issue is another risk.
When it goes to own and developing them in-house, the advantage is it is much cheaper, more direct to the subject and customized. The disadvantage is that the assigned might be less experienced.
Xinye Yang says
Outsourcing:
Pros: the average cost of a software module is far less in Asian than the United States or Europe. they could provide Low-cost, high-quality programmers
Outsourcing company will provide expert with the ability to fill in gaps in their skillset and save you lots of money for hiring expert and save time for fixing.
Cons: The language barrier and culture barrier may exist, since the outsourcing company may comes from foreign counties.
The quality of service provided by outsourcing companies cannot be guaranteed.
Developing
Pros: Developing in house offers employees more position and could help them fit in company culture and get skills improved.
Cons: Time consuming and cost ineffective
Raisa Ahmed says
Outsourcing IT Infrastructure and Software Module Development
PROS
a) Cost-effective
b) Experienced individuals who understand the market trends and their client’s requirements
CONS
a) Communication gap
Developing In-House
PROS
a) IT team can be trained to the company’s specific needs and will always be available when needed
b) No communication gap
CONS
a) Staffing