Information Technology Outsourcing

Information Technology Outsourcing

"Information Technology outsourcing is the contracting out of part or

all of an organization's IT activities." New trends have included operations,

programming, and technology planning. The main reason for information

technology outsourcing is to gain immediate economic gains for the company,

usually through savings. Financial motivations aren't first on businesses minds

though; other strategic objectives are.

Outsourcing can make it easier to downsize. Because you are bringing in

outside help, and can cut back on fixed salaries, the company becomes more

variable. Outsourcing leads to tighter linking of strategy and IT. Knowledge

which usually flows slowly can flow freely, and a company has more access to

outside technology. Plus businesses receive information faster than other types

of hierarchical communication, and the resources are endless. Outsourcing can

unlock organizational structures. "The unlocked IT organization can provide a

better mechanism for costing user requests, prioritizing technology initiatives

and controlling expenditures." It offers the benefits of both systems involved.

Another important goal that IT outsourcing takes on, is reducing technological

risk. By outsourcing your needs you know that that the employee know what they

are doing.

Some of the problems IT outsourcing may encounter are, loss of strategic

control, risk of technological obsolescence, limiting of long-term flexibility,

difficulty in benchmarking initial contract, hostage to additional charges,

high exit or switching costs, limited choice of vendors, the fixed nature of

legal contracts, legal exposure, from dissatisfied former employees, and

cultural conflicts.

The people doing the outsourcing for the companies are sometimes the

life's-blood of that company. If the outsourcers want more money, then they are

almost obligated to give that money. This is usually the case when the

contractors are bringing new technology into the system.

High exit or switching costs entail the switch-over costs the company

must shoulder if they decide to end the outsourcing and hire full time employees.

It is important not to put too many resources at the hands of the contractors.

Limiting this will ease the switch-over costs.

Legal issues also creep into the picture when a company chooses to

outsource. Some companies have problems with employees that are not happy with

their current arrangement or are mistreated.