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224 Part Two  Information Technology Infrastructure


                                   Software Outsourcing
                                   Software outsourcing enables a firm to contract custom software develop-
                                   ment or maintenance of existing legacy programs to outside firms, which
                                   often  operate offshore in low-wage areas of the world. According to the indus-
                                   try  analysts, spending on offshore IT outsourcing services was approximately
                                   $251 billion in 2012 (Gartner, 2012). The largest outsourcing expenditures are
                                   to domestic U.S. firms providing middleware, integration services, and other
                                   software support that are often required to operate larger enterprise systems.
                                     For example, Cemex, Mexico's largest cement manufacturer, signed a 10-year
                                   $1 billion outsourcing deal with IBM in July 2012. Under the deal, IBM respon-
                                   sibilities include application development and maintenance as well as IT infra-
                                   structure management at Cemex company headquarters in Monterrey, Mexico,
                                   and around the globe. IBM will take over and run Cemex's finance, accounting,
                                   and human resources systems (McDougall, 2012).
                                     Offshore software outsourcing firms have primarily provided lower-level
                                   maintenance, data entry, and call center operations, although more sophisti-
                                   cated and experienced offshore firms, particularly in India, have been hired
                                   for new-program development. However, as wages offshore rise, and the costs
                                   of managing offshore projects are factored in (see Chapter 13), some work that
                                   would have been sent offshore is returning to domestic companies.

                                   Cloud-Based Software Services and Tools
                                   In the past, software such as Microsoft Word or Adobe Illustrator came in a box
                                   and was designed to operate on a single machine. Today, you’re more likely to
                                   download the software from the vendor’s Web site, or to use the software as a
                                   cloud service delivered over the Internet.
                                     Cloud-based software and the data it uses are hosted on powerful servers in
                                   massive data centers, and can be accessed with an Internet connection and stan-
                                   dard Web browser. In addition to free or low-cost tools for individuals and small
                                   businesses provided by Google or Yahoo, enterprise software and other complex
                                   business functions are available as services from the major commercial software
                                   vendors. Instead of buying and installing software programs,  subscribing compa-
                                   nies rent the same functions from these services, with users paying either on a
                                   subscription or per-transaction basis. Services for delivering and providing access
                                   to software remotely as a Web-based service are now referred to as software as a
                                   service (SaaS). A leading example is Salesforce.com, which provides on-demand
                                   software services for customer relationship management.
                                     In order to manage their relationship with an outsourcer or technology
                                     service provider, firms need a contract that includes a service level  agreement
                                   (SLA). The SLA is a formal contract between customers and their service
                                     providers that defines the specific responsibilities of the service provider
                                   and the level of service expected by the customer. SLAs typically specify the
                                   nature and level of services provided, criteria for performance measurement,
                                     support options, provisions for security and disaster recovery, hardware and
                                   software  ownership and upgrades, customer support, billing, and conditions for
                                     terminating the agreement. We provide a Learning Track on this topic.

                                   Mashups and Apps
                                   The software you use for both personal and business tasks may consist of large
                                   self-contained programs, or it may be composed of interchangeable compo-
                                   nents that integrate freely with other applications on the Internet. Individual
                                   users and entire companies mix and match these software  components to
                                   create their own customized applications and to share information with others.







   MIS_13_Ch_05_Global.indd   224                                                                             1/17/2013   3:04:29 PM
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