e company faces and design team recommendation. Then IM request for information to numerous vendors. After compare their response with evaluation checklist which includes technical, HR, financial, contractual factors, IM conclude the feasibility of outsourcing and make recommendation for management. Then, with the Management’s approval, IM start to build best-case model and contract terms while evaluate the vendors’ proposal using evaluation checklist again. Then, the final negotiation and selection for contract development will be made and, finally, terms are finalized and contract is drafted.THE PROBEMS IN OUTSOURCINGMany outsourcing contracts are structured for very long periods in a world of fast-moving technical and business change. Eight to ten years is the normal length of a contract in an environment in which computer chip performance is shifting by 20 to 30 percent per year. Consequently, a deal that made sense at the beginning may take less economic sense three years later and require adjustments to function effectively. Exacerbating the situation is the timing of benefits. The first-year benefits are clear to customer, who often receives a one-time capital payment. The customer then feels relieved to shift problems and issues to another organization. The situation from the outsourcer’s perspective is just the reverse. The first year may require a heavy capital payment followed by the extraordinary costs for switching responsibility to them and executing the appropriate cost-reduction initiatives. All this is done in anticipation of a back-loaded profit flow. At precisely the time the outsourcer is finally moving into its earnings stream, the customer, perhaps feeling the need for new services, is chafing under monthly charges and anxious to move to new IT architectures. If the customer has not had experience in partnering activities before, the relationship can develop profound tensions.The evolution of tech...
