Why is Outsourcing Important?
•Expected 8.1% rise in outsourcing worldwide in 2008
•In 2007 IT work was the number 1 outsourced service
•75% of U.S. companies outsourced some type of IT activity in 2004
Why Companies Outsource?
Drivers of Outsourcing – Protiviti/APIC Survey –
•29% - Cost or internal headcount needs to be reduced
•22% - Internal capacity is constrained by increasing market demand
•20 % - Internal manufacturing or service performance is insufficient
•19% - Strategic process
•6% - Regulatory, legal or environment
•4% - Internal capacity underutilized
(http://www.isaca.org/Content/ContentGroups/Journal1/20058/jpdf0505-Outsourcing-BA-Risk-
Manage.pdf)
Disadvantage of Outsourcing
•Companies may not fully understand the actual work that is outsourced
•This could affect cost and satisfaction with end product or service
•PwC 2007 Global Outsourcing Survey found that less than one third of companies who
outsourced were completely satisfied, but 91% said they would continue to outsource
Categories of Outsourced IT Activities
•Software Development
•Application Support & Maintenance
•Infrastructure Management Services
Audit of Outsourcing
•The objective of an audit of outsourcing is to determine whether:
–Risks associated with outsourcing are mitigated
–Objectives of outsourcing are being met
–IT strategy has been modified to make best use of outsourcing
Risks of Outsourcing:
Business Risks:
•Outsourcing undesirable functions versus the ones that will provide the greatest competitive
advantage
•Costs of outsourcing
•Not having defined goals and objectives carried over to the service provider
•Contract improperly prepared or structured
•Flexibility limitations in the future
•Going concern
SAS 70
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