preview

It Outsourcing

Better Essays
It Outsourcing

INTRODUCTION

Companies are increasingly outsourcing the management of information technology (IT) for reasons that include concern for cost and quality, lagging IT performance, supplier pressure, access to special technical and application skills, and other financial factors. The outsourcing solution is acceptable to large and small firms alike because strategic alliances are now more common and the IT environment is changing rapidly.

REASON TO OUTSOURCE

Although the mix of factors raising the possibility of outsourcing varies widely from one company to another, there are a series of themes that explain most of the pressures to outsource.

First of all, general managers’ concerns about cost and quality drive outsourcing. The same issues such as getting existing services for a reduced price at acceptable quality standard came up repeatedly.

Second, failure to meet service standards can force management to find other ways of achieving reliability. It is not atypical to find a company in which cumulative IT management neglect eventually culminated in an out-of-control situation the current IT department could not recover from. Management can see outsourcing as a way to fix a broken department.

Third, a firm under intense cost or competitive pressures, which does not see IT as its core competence, may find outsourcing a way to delegate time-consuming, messy problems so it can focus scarce management time and energy on other differentiators. Next, several financial issues can make outsourcing appealing. One is the opportunity to liquidate the firm’s intangible IT asset, thus strengthening the balance sheet and avoiding a stream of sporadic capital investments in the future. Also, outsourcing can turn a largely fixed-cost business into one with variable costs. This is particularly important for firms whose activities vary widely in volume from one year to another or which face significant downsizing.

THE BENEFITS FROM OUTSOURCING

Outsourcing has identified numerous potential benefits.

Financial benefits from outsourcing included rapid funding of new systems development and economies of scale and scope. As consolidate infrastructure through IT outsourcing, a firm can experience cost reductions in hardware and software licensing, facilities, and support headcount.

Outsourcing, also, can capitalize on an outside ve...

... middle of paper ...

...s not had experience in partnering activities before, the relationship can develop profound tensions.

The evolution of technologies often changes the strategic relevance of IT service to a firm. From the customer’s viewpoint, assigning a commodity service to an outsider is very attractive if the price is right. Delegating a firm’s service differentiator is another matter. The customer that made the original decision on efficiency will judge it differently if using effectiveness criteria later.

CONCLUSION

IT outsourcing has so many positive effects for a company even though it still contains various problem needed to be solved. In the Internet age, any company may want to focus its internal staff on moving it to the environment that will support them tomorrow and outsourcing could be one of the best solutions. Also, outsourcing is really more of an integration of two separate businesses to be successful. Both want to take the best parts of each culture and put them together. In addition, critical success factors including existence of a multi-years, corporate commitment to the IM strategy and outsourcing, and quality culture and attitude should be considered in outsourcing.
Get Access