Information Computer Technology Outsourcing - Research Paper Example

IT Functions s Affiliation Information computer Technology (IT) outsourcing describes the process or the practice of subcontracting for IT services from outside the organization’s structure. The practice involves outsourcing for all or part of the Information Technology function. Many organizations use IT outsourcing in various departments for distinctive functions ranging from maintenance, support, and infrastructure and software development. For instance, an organization might outsource its ICT management because of the high cost factors involved if the functions were developed in-house. Secondly, an organization may outsource all or part of its data storage because it is not willing to purchase, maintain, and manage its data storage system. Therefore, outsourcing is imperative to all organizations regardless of its size. The three most popular Information Technology functions that organizations outsource are Virtualization, Datacenter operations and Disaster recovery. There are different factors to consider while making an informed decision whether to outsource or not. The factors to consider include Quality, communications, staff morale, agility, ability to hire and retain employees, and resource management ability. Firstly, most organizations decide to outsource Information Technology functions, when there is a shortfall of skilled human resources or skill sets of the current IT employees. In other cases, non-strategic IT or menial tasks are outsourced because they are less costly. Secondly, Outsourcing can lead to unique communication difficulties that comprise not only culture, but also language . Therefore, onshore managers responsible in managing an offshore outsource company relationship should have special training in cultural sensitivities. Thirdly, when organizations outsource all or part of Information Technology, onshore staff morale arises. Therefore, it is critical for IT management team to explain to staff reasons as to why a certain project has to be outsourced and how this matches with other strategic objectives. The more staff comprehends why outsource, the better they appreciate the decisions and assess the reason they stand as long-term workforce. Lastly, it might be difficult to control and manage geographically distributed employees than it is to manage workforce in relative geographic proximity. Therefore, different time zones pose the barrier to project coordination. Another barrier is the inability to have viable face time with employees, something that online collaboration devices, email and instant messaging cannot replace. IT managers opting outsourcing should, therefore, meet the above criteria and must have a well-perceived plan for communications and project management in place before initiating a working relationship with an outsource organization. Although outsourcing is beneficial to organizations, the practice poses a number of risks that firms might face when assessing the use of an outsourcing company. These risks include Logical IS Security/privacy confidentiality, total dependence and human resource issues, exit barriers and physical IS security. Total dependence refers to the reliance that a firm has on an outsourcing organization and the problems that result when the outsourcing contract ends. Physical IS security involves the firm’s loss of control and management over physical security, because security is under the responsibility of the outsourcing company. By outsourcing, the firm abandons control in the location of the system, physical access to its system, and the location and frequency of system backups. Legal consequences relate to the lack of a fiduciary association between the company and the outsourcing firm and the rise in obligations that may result during the outsourcing relationship creation. Logical IS security risks concerns the loss of privacy and confidentiality the company experiences by contracting an outsourcing firm. Human resource problems arise from changes in staffs skill sets that an organization faces when it opts to outsource. The term also refers to the probable negative impacts that arise from a change in employee skill sets (Orlikowski & Baroudi, 2012). Outsourcing of IT functions has many advantages some of which include increased efficiency, control capital costs, reduced risk, reduced labor cost, focus on own core business, and ability to start new projects quickly. Cost-reduction is the major reason most organizations opt to outsource. Outsourcing firms cut the capital costs by minimizing the cost of internal devices such as software costs, servers, and desktops. The equipment support the performance of the information systems and ensure they run smoothly or promote the development of new IT solutions (Orlikowski & Baroudi, 2012). Secondly, outsourcing increases efficiency in that IT administration is not the primary competency and, therefore, not the organizations most efficient utilization of time. However, the role is the primary focus of the IT outsourcing firm, whose economy of scale and cost structure can provide the organization with critical competitive advantage. An outsourcing firm is, therefore, able to provide a whole employee of proficient IT experts with special areas of professional expertise for the cost of a single in-house staff. Thirdly, outsourcing reduces labor costs. It might cost to an organization unnecessary money and time to locate, hire and train a completely in-house IT employee. IT service providers will be responsible for staffing the potential employee and keep them trained on the current technology. Professional IT firms spend a significant finance and time to ensure that the technical knowhow is comprehensive and up-to-date (Orlikowski & Baroudi, 2012). Fourth, outsourcing promotes starting of new projects quickly. The start of a new IT projects may take much time to handle internally (weeks or months), between locating, hiring and training staffs and evaluating software or hardware requirements and procuring all the sufficient resources (Orlikowski & Baroudi, 2012). IT providers have the experience, resources and knowledge necessary to initiate a new project immediately. By use a hosted application system, new software undertaking can be performed more quickly with reduced capital outlay. For example, a line of business application might be tested in a hosted system with reduced up-front expenditure and minimal exposure to the demerits of unreliable solution. Therefore, If the application fits and solves the business requirement and needs, the application is brought in-house or used in the entire organization after it has been proven viable. Lastly, outsourcing allows an organization to focus on core business activities. Therefore, in terms of personnel and time, the organization has limited resources; the resources can be better utilized on the core competencies that release revenue. Outsourcing the IT functions can assist the firm focus on more critical activities such as serving clients, and assist the organization’s mission and vision to remain the focus (Orlikowski & Baroudi, 2012). Outsourcing agreement has two types of costs. The first cost originated from contracts that the organization and the outsourcing firm agree. The second cost originated from the hidden cost, such as selecting the service provider that include negotiating contract, sending out RFP, evaluating project leader and outsource adviser, and assessing the response. In addition, transition cost is also incurred. The time taken to hand over the contract to outsource firm ranges from three months to a year (Orlikowski & Baroudi, 2012). According to a study regarding with any outsourced service, the cost of determining the service provider may cost from 0.2 percent to 2 percent in addition to the normal annual cost of the project. Organizational structure changes that may result from an outsourced department include downsizing, acquisitions and mergers. The changes accompany layoffs, certainly as particular posts become redundant. The department may also lead to the development of new product or advanced service delivery. This has implications for transition in sales, customer service and production. New management, for example, change in chief executive officer or chief operational officer, hence bringing a period of transition where top management is likely to alter the current personnel policies and business processes. Reference Orlikowski, W. J., & Baroudi, J. J. (2012). Studying information technology in organizations: Research approaches and assumptions. Information systems research, 5(2), 11-34. Read More