Because it can take years to progress to higher levels within the Capability Maturity Model (CMM), many organizations are outsourcing. Outsourcing is an approach for improving productivity and lowering costs by contracting the support or development of one or more software applications to a software services firm. Productivity and quality objectives can be aligned with the CMM and structured into an outsourcing contract.

Software services providers can be significantly effective in assisting the move up the CMM. This effectiveness is gained through the tight management controls, formal processes, and constant measurements that are the hallmarks of organizations high in CMM. IS managers can use outsourcing as a means for obtaining and implementing "best-in-class" processes in their organizations.

Most IS organizations are level 1 organizations — far from the level of flexibility required for today's competitive business environment. Even with the CMM providing guidelines for process improvements, lower-level organizations find it difficult to implement new processes and advance from their current level. Process reengineering of any kind is undoubtedly challenging, and in an IS organization it can be even more difficult. In fact, it can take years to progress from one level of maturity to the next, and the move from level 1 to level 2 requires the most commitment, effort, and expertise.

Outsourcing is a viable method for introducing and more quickly institutionalizing new processes within an IS organization. This section of the chapter provides background on outsourcing and discusses how outsourcing can be used to accelerate the implementation of process improvements. The discussion focuses on application outsourcing — contracting a software services firm to manage and be accountable for one or more software applications — as an example of the processes and methods that are available to IS organizations. In this presentation, highlights from the methodology of Keane for application management are included to illustrate the environment and processes required to move up the CMM.

A Note on Terminology Outsourcing is a term used to describe the contractual transfer of an internal corporate function to an external service provider. Typical IS functions that may be outsourced include data center operations, help desk operations, new application development projects, and maintenance and support for applications. The term outsourcing is reserved for situations where the service provider supplies its processes and takes direct responsibility for the daily operations of specific portions of the IS requirements of a corporation according to a predefined level of service. This mixture of processes, expertise, and accountability is the foundation for the major benefits that can be gained from outsourcing. In this chapter, supplemental staffing is not considered a form of outsourcing.

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