Standard financial investment information - Essay Example

Outsourcing can be defined as, "subcontracting a process, such as product design or manufacturing, to a third-party company. Outsourcing became part of the business lexicon during the 1980s. The purpose of this paper is to agree or disagree with the concept that standard financial investment information and criteria are all that is needed to effectively evaluate IT outsourcing definitions The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of labor, capital, technology and resources" (Wikipedia, 2008).

Significant cost savings, cost restructuring, an improvement in overall quality, access to a greater pool of knowledge, the existence of a legally binding contract, operational expertise that would otherwise be too expensive, the solving of staffing issues such as a small and dependable internal talent pool, improved capacity management, providing a catalyst for major change, reducing the time it takes for a product to reach market, commoditization, improved risk management techniques, the ability to operate 24/7 because of various time zones, and the pressure that is being placed on a company by customers which may only be solved through outsourcing (Wikipedia, 2008).

Provided that the best ethical practices are taken into consideration and implemented, it is not agreed that standard financial investment information is all that is needed to effectively evaluate IT outsourcing definitions . as information risk management or integrity services, providing routine assistance to in-house auditing for operations and control evaluations in peak period activity and conduct special projects such as fraud investigation or plant investment appraisals" (Wikipedia, 2008).

Before any decisions are made, however, it is important that a Return on Investment is conducted. Companies need to way the benefits and the savings against the drawbacks and the costs in order to determine whether they are doing the right thing. This task is accomplished through a Return on Investment. According to the article written by Cresswell, "The choice of how to conduct the analysis should be based on four critical principles pertaining to: the strategic objective(s) of the ROI analysis, the place (and importance) of the IT investment in the overall enterprise architecture, the type of analysis that should be conducted (i.e., what data and methods of analysis are best suited to those objectives), and how the ROI analysis fits in the overall decision context for IT investments" (2008) During the Return on Investment analysis, it is crucial for managers to determine who is going to be impacted by it, what the risk factors are, who will be affected, is it really necessary for the given project, and if it is even worth the cost of an ROI analysis.

In addition, the overall technology infrastructure should be considered, along with business processes, the organizational environment, and external relationships (Cresswell, 2008). Although many firms have chosen to at least partially outsource their IT functions over the past several years, these decisions have not been made for cost reasoning alone. According to Graham and Harvey, who conducted a survey, "The results of our survey were