Financing Organizational Technology - Coursework Example

In this ever changing global business scenario, for a company to stay ahead of its competitors, there is a need to think out of the box, think slightly outside of the monetary profit that the company would get, and look objectively at what the company stands to gain or lose from their outsourcing decisions. FINANCING ORGANIZATIONAL TECHNOLOGY IT OUTSOURCING IN TODAY’S WORLD In today’s highly competitive business management scenario, outsourcing is the most effective way to decrease costs and overheads for more time-consuming and man hour depleting tasks for most companies.

IT services such as call center services and e-mail are the tasks that are most commonly outsourced by companies. The main benefit of outsourcing is the fact that to most companies, outsourcing is a lot cheaper for them, because the companies they contract are dedicated to this task, so they charge less than what the companies might have to spend in order for them to do the tasks themselves. Also, it allows the company to focus its efforts and man power towards other objectives and problems that are more important.

The management does not have to waste time on such menial tasks, and can turn their heads to more significant problems (Innes, Liu, Miller, 2008). Now people usually just look at the direct financial indicators involved in outsourcing, which is undoubtedly the single most important factor which needs to be taken into account. However, when it comes to IT, only the financial indicators do not give a complete or the most accurate picture of the investment or consequences of outsourcing (RivardNah & Aubert, 2008).

Globalization and the ever changing technological scenario of the world has changed the way business is carried out. Core business processes are no longer looked upon as the sole responsibility of the owner. The management of the companies no longer distinguishes between core and non-core business processes, but views them as dispensable components that they can either focus on themselves, or outsource to external partners. In order for a company to reach a decision as to whether it is going to outsource a certain task, there are some criteria against which the advantages and disadvantages of outsourcing to that company are evaluated (Innes, Liu, Miller, 2008).

The main points include: 1. Profitability 2. Capital Structure of the Company 3. Debt Measures of the Company These are some of the main points an organization must keep in mind before outsourcing it’s tasks. The company must also keep in mind the aspects of the organization that it is contracting for the outsourcing, which include: 1. Sales Achievements 2. Performance 3. Quality of Service 4. Responsiveness 5. Competence 6. Reliability 7. Satisfaction As can be seen above, profitability heads the list of criteria against which the outsourcing decision is to be judged.

The most obvious financial benefit is the fact that the outsourcing would cost less money for the company as compared to doing the work internally, thereby resulting in an increase in profits. Since the personnel cost of the IT department decreases, the cost of goods sold would also decrease (IBM Corp, 2008). However, profitability refers to not just the visible financial benefit that the company would get from outsourcing, but also that the company will be able to reduce the costs in