Managing the Projects Using IT Outsourcing or Not IT Outsourcing - Research Paper Example

MANAGING THE PROJECTS USING IT OUTSOURCING OR NOT IT OUTSOURCING By Name Course Instructor Institution City/State Date Managing the Projects Using IT Outsourcing or Not IT Outsourcing 1.0 Introduction These days there is no doubt that information technology (IT) outsourcing is an exceedingly fast-evolving and popular trend. Scores of business organisations are searching for means to bring more success to their companies through outsourcing, not just in the field of IT, but in every key business domain like human resources, manufacturing, and finance. Managing projects is to a great extent complex and varied organisationally and technically; thus creating the need for IT outsourcing. 1.1 Context and Rationale Heightening numbers of businesses as well as other organisations are outsourcing their information technology requirements so as to cut down the commitments of the internal staffing and costs, get access to particular skills, release resources for productive uses, and, in a number of instances, strengthen or establish strategic business relationships. IT outsourcing has confirmed to be valuable but it comes with considerable risks that have to be identified as well as managed, as evidenced in the literature review. In managing projects using IT outsourcing, an organisation depends on another organisation to run IT functions. Therefore, if poorly managed, companies could harmfully impact their customers and operations. The service or product may be outsourced, but it is impossible to outsource the risk. IT Outsourcing agreements may as well fail to accomplish the planned benefits, not because the objectives were misbegotten but due to poor planning as well as implementation, including cultural inflexibility. With scores of layoffs emerging in the near future, even the bigger companies cannot manage to pay a full project management workforce; therefore, outsourcing is normally the answer for business organisations concerning various management needs. 1.2 Background Information In their hunt for most favourable cost-efficiency as well as performance, scores of organizations have been crucially analysing the significance of the apparently escalating dependence on and, cost of IT. While analysing the feasible substitute as well as possibly more resourceful approaches to management of IT, the idea of outsourcing has turn out to be a subject of much debate. For that reason, it has drawn top interest amongst both the government and industry. Regardless of this top of interest as well as heightening enthusiasm to think about outsourcing, lots of ambiguity exists amongst possible users concerning both the implications and meaning of managing projects through outsourcing. With reference to top-line revenue growth, IT outsourcing as mentioned by Kumar (2012, p.304) is usually a much more useful lever in improving overall profitability of the company. The theme of this study is to provide a clear justification of whether managing projects is effective using IT outsourcing or without IT outsourcing. 1.3 Identification of the Issue An essential element of managing projects is the ability to use workforce to meet application objectives. In the past, getting the skills required to manage workforce was less stressed as compared to having the skills needed to manage technical details. Even though this could give explanation to why IT professionals struggled in the workplace, it is no more tolerable to remain as just an agent of technology. Obviously, project managers who have been successful are those who skills for working with various types of organisations, including consultants, contractors, as well as vendors. Such essential skills are not effortlessly attained and habitually require years of practice to grow. Lack of experienced IT professionals, in addition to the necessity to concentrate on core competencies have encouraged lots of, if not all, business organisations to look for expertise further than the conventional boundaries. Whereas the abilities of IT outsourcing have been recognized successfully, there are still scores of issues that need project management experience. Outsourcing IT functions does not pledge triumphant achievement, nor does it make certain that the finest project interests will be realised. As it will be evidenced in the study, comprehending the suitable rewards and risks for using IT outsourcing is a compulsory component in managing projects. 1.4 Statement of the Position This study supports the use of IT outsourcing for managing projects, but it is worth understanding that successful delivery of IT applications needs a manager to have a solid knowledge of principles which are of interest to the process of project management. Skilled IT professionals understand how to use the fundamental concepts irrespective of the project. Simultaneously, it is similarly vital to admit disparities in project scope devoid of blind observance to the rules. Without a doubt, the cost of overlooking principles of management is usually devastating, and in various instances takes place well into the programme of a certain project. Scores of managers who become unsuccessful at managing projects are either victims of careless experimentation or rigid discipline. Through IT outsourcing, the vendor may offer the needed services cheaply and still b profitable. By outsourcing IT function, an organisation can achieve efficiencies through economies of scale related to running large functions and the expertise as well as experience knowledge base in the company leads to a more effective and efficient organization. 2.0 Literature Review Since the beginning of 21st century, scores of studies on IT outsourcing have been carried out by score of consulting and research firms. Such studies point out that nearly all companies use between 40% and 60% of profits with third parties. Evidently, the percentage of expenditures on third-party is progressively increasing with the heightening trend toward IT outsourcing, particularly to Asian countries, and more and more to South America and Eastern Europe, Mexico, mentions. Based on O’Keeffe and Vanlandingham (2004, p.3) study, they established that the main drivers that make most managers to outsource their IT functions include: need for reducing internal headcount or cost; in-house capacity limited by escalating demand in the market; and internal service or production performance is unsatisfactory. Fascinatingly, most managers in Wang (2009, p.17) study selected limited capacity instead of the need for reducing costs as the key motivator of using IT outsourcing for managing projects. However, as mentioned by Benvenuto and Brand (2005), most employees presume that IT outsourcing is utilised for the reason that costs are insufficient. Possibly management can reduce outsourcing resistance by more purposely communicating the underlying principle and goals of using IT outsourcing program for project management purposes (Benvenuto & Brand, 2005). 2.1 Proponents of Managing Projects using IT Outsourcing Early wins in managing projects through IT outsourcing are imperative, and as mentioned by proponents of managing projects using IT outsourcing, implementing the main components of service governance and management should be the priority (Benvenuto & Brand, 2005; McIvor, 2010, p.170). Complex and long implementation of IT outsourcing often brings challenges in project management, but outsourcing must help the organisation realize it needs. IT outsourcing according to Benvenuto and Brand (2005) can be successful only if it does not add intricacy or needless work, especially when it is vital to concentrate just on the key relationship and governance aspects. Basically, as indicated by Ashley (2008, p.334), there exists no solution that does everything, and that can make managers to concentrate just on what the solution will accomplish. Solutions do not hinder the need for comprehensive and industrious management of project as well as program using outsourcing engagement. Whereas companies that have outsourced their IT services benefit from scores of advantages, cost efficiency remains to be the most persuasive reasons behind outsourcing. As mentioned by Antonucci et al. (1998), outsourcing aids in controlling capital outlay, particularly when starting the business operations considering that IT services make up fixed costs for business organisations that prefer not to outsource. Therefore, business organisations that decide to outsource IT, whether through domestic contractor or offshore, change the fixed cost to variable ones; thus, making available capital for using in other project-related operations. This according to Antonucci et al. (1998) makes the company more attractive to investors, given that there is more capital that can be used by the business in other business operations that directly generate incomes. Therefore, when businesses decide to manage its project by not using IT outsourcing, they have to carry out all operations’ aspects internally by passing on the costs related to these activities to end users. Therefore, outsourcing IT functions to an organisation that focuses on business support as well as networks lessens a number of this cost, providing the company a competitive advantage with regard to pricing of services and goods (Benvenuto & Brand, 2005). When managers outsource IT function, it becomes easier to focus on core goals of the projects. A number of managers may possibly have to divide their energies between deeds that engage potential clients and worries with operations beyond the core objectives of the business. For that reason, IT outsourcing eases this need, and the project managers may concentrate their energies where lie their competencies. IT outsourcing, as argued by Elmuti (2003, p.33) is the appropriate approach for a number of companies, especially those in need of time to accurately structure an accord that results in reduction of costs, exploitation of best practices from the outsource supplier, visibly defines levels of service that meet the needs of the company, and permits the organisation to concentrate on its core competencies. In nutshell, a well designed and implemented, IT outsourcing relationships offer significant benefits to the company, and enable the manager to effectively concentrate on the project at hand. 2.2 Supporters of Managing Projects without IT Outsourcing Supporters of managing projects without IT outsourcing argue that when outsourcing levels of end customer satisfaction and on-time delivery performance can decline due to third parties’ delays (Ponis, 2010, p.53). This risk as mentioned by Ponis (2010) can be exacerbated severely when IT is outsourced, even if the delays cannot be controlled by the outsourcing company. Some of the delays than can result to losses, and that is brought about by outsourcing include labour rows, political unrest, and cyber terrorism. As variability and lead-time heightens, the desire for higher levels of stock also increases, while the confidence of supply chain generally worsens. Another reason for not using IT outsourcing is that the quality of service could be poor, as a result, impacting customer satisfaction. In this regard, business organisations should cautiously choose, qualify, and manage their IT outsourcing associates to make certain that the quality does not get worse. As indicated by Ashley (2008, p.332), this usually needs sufficient periods of transition as well as parallel production and valuable cross-training between the two companies. Such features are regularly ignored as a consequence of cost saving attempts. Scores of IT outsourcing programs have failed because the budgets and schedules are not achieved due to inadequate resources and planning (Elmuti, 2003). Also, suppliers could not be monetarily feasible, in that way exposing the organisation to risk of supply interruption. Shockingly, criterion for financial viability effectiveness in O’Keeffe and Vanlandingham (2004, p.4) study was largely ignored by most companies, connoting that majority of companies may be vulnerable to supply interruption due to their suppliers’ scarce financial resources. Furthermore, dynamics in the IT outsourcing market are generating issues for outsourcers to keep their proposed value. According to Alcor Solutions Inc (2014, p.3), there is no need to outsource IT functions because inflation of wages in IT outsourcing markets is exerting pressure on outsource suppliers to get substitute locations for delivery and to change their staffing mix so as to remain competitive financially; therefore, such changes can lead to reduced quality. 2.3 Summary In summary, it has been argued that factors such lack of financial resources are driving a number of companies to revisit their equation of in-house service delivery. Regardless of whether managing projects using IT outsourcing is successful or in an unsubstantiated condition, increasing profit and lowering costs is the crucial goal for all companies. Businesses organisation as argued in the literature review often decide to outsource their IT services for various reasons, and this decision carries with it a number of noticeable benefits as well as numerous risks. Even though, managing projects using IT outsourcing is successful, companies deciding to us this method have to think about the benefits as well as risks cautiously, espouse measures for easing the related risks as well as get their workers ready for the change by initiating a campaign concerning the IT outsourcing benefits. 3.0 References Alcor Solutions Inc, 2014. A Case For Insourcing ITSM Tools While Managing Multiple Vendors. White Paper. California: Alcor Solutions Inc Alcor Solutions Inc. Antonucci, Y.L., Lordi, F.C. & III, J.J.T., 1998. The Pros and Cons of IT Outsourcing. [Online] Available at: http://www.journalofaccountancy.com/Issues/1998/Jun/antonuci.htm [Accessed 1 December 2014]. Ashley, E., 2008. Outsourcing For Dummies. New York: John Wiley & Sons. Benvenuto, i.A. & Brand, D., 2005. Outsourcing—A Risk Management Perspective. [Online] Available at: http://www.isaca.org/JOURNAL/PAST-ISSUES/2005/VOLUME-5/Pages/Outsourcing-A-Risk-Management-Perspective1.aspx [Accessed 1 December 2014]. Elmuti, D., 2003. The Perceived Impact of Outsourcing on Organizational Performance. American Journal of Business, vol. 18, no. 2, pp.33 - 42. Kumar, S.R., 2012. Case Studies in Marketing Managemen. Delhi, NCR: Pearson Education India. McIvor, R., 2010. Global Services Outsourcing. Cambridge : Cambridge University Press. O’Keeffe, P. & Vanlandingham, S., 2004. Managing the Risks of Outsourcing: A Survey of Current Practices and their Effectiveness. Survey. Chicago, IL: APICS APICS ; Protiviti. Ponis, S., 2010. Managing Risk in Virtual Enterprise Networks: Implementing Supply Chain Principles: Implementing Supply Chain Principles. Hershey, Pennsylvania: IGI Global. Wang, J., 2009. nnovations in Supply Chain Management for Information Systems: Novel Approaches: Novel Approaches. Hershey, Pennsylvania: IGI Global. Read More