Emergence of web 2.0 paradigm opened windows for Information Technology (IT) business outsourcing and off-shoring (Garner 22). Outsourcing has developed mainly due to changes in the market and industry conditions. …
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Impact of IT Outsourcing and Off-shoring on Companies
Information technology is an important factor in the modern world given the advance in technology. It helps firms innovate and produce high quality products that meet customer needs and demands. Due to changing business environment, firms have found it necessary to reduce operating costs while exploiting the comparative advantages of human IT skills offered by other countries (Manaschi 87). Therefore, companies have opted to outsource critical IT skills from other firms from other nations that are endowed with the expertise. In spite of the benefit of cost reduction and improved operations, IT outsourcing poses security and generic risk issues to the firm (McKendrick 130). If these issues are well managed, the outsourcing firm is likely to benefit through increased innovativeness and high product quality that could positively improve customer satisfaction hence increasing customer loyalty. This study examines outsourcing and explores outsourcing as applied in IT organizations.
Outsourcing is the act in which a company or an organization pays another firm to produce goods or offer services on their behalf (Blokdjik 98). In many cases, the company could have produced the goods or offered the service themselves but sometimes it involves higher costs. Off-shoring on the other hand is a business process that companies use when they decide to relocate their operations to lower cost locations, mainly overseas.
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Companies contemplate on various ways in which they would reduce on the output of their money and intern saves on cost. Therefore, the main idea that comes across is outsourcing of some of their work. There is a notion that outsourcing has the ability of saving on cost of employment.
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First, we review historical changes from outsourcing to offshore outsourcing. Offshore services have grown rapidly in recent years. (Davis, G.; Ein-Dor, P.; King, W.; and Torkzadeh, R. 2006). The advent of the Internet in large scale operations gave industry the opportunity for more cost effective labor since the 1990s.