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IT Sourcing Approach: Advice on Future IT Sourcing - Essay Example

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IT SOURCING APPROACH: ADVICE ON FUTURE IT SOURCING Name: - Professor: - Institution: - Course: - Date: - The term offshoring has extended from its only financial meaning to the term materials (Winkler 2009)…
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IT Sourcing Approach: Advice on Future IT Sourcing
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Download file to see previous pages Information technology outsourcing has been made possible by the rapid development and reliability of the infrastructure and communication. The above variables have also become affordable in many parts of the world. Offshoring has a significant positive effect on productivity in the US (Amiti 2005). The idea of IT offshoring is supported by the fact that some countries have low costs in handling the IT processes than others. In these countries, the tax policies may also be more business friendly resulting into extra cost savings. It so happens that companies will wish to shift their IT activities from their home country if operational costs of supporting their activities are higher relative to those of the other country. The diagram below gives the basic model that is often used for IT firms that outsource their services from overseas companies. Source: Lab Partners Off shoring has also been motivated by the improved internet connectivity and high speed internet connections in most parts of the world. India has somehow benefited from IT offshoring due to several favorable factors. First, the country has benefited from the impact of offshoring since her people are well versed in the English language hence minimal language barrier. Another factor is that India has significant technical abilities and proficiency compared to its other Asian counterparts. As an IT consultant for GlobShop, I would take several considerations into account to assess the feasibility of moving more value-added IT work offshore. Offshoring in the IT industry led to an increase in productivity of zero point three percentage points for the period 1995 to 2002 (Amiti 2005). From the company’s report on the first phase of introduction of offshoring, it is clear that the company enjoyed a reduction in its IT expenses by over thirty five percent. Since as of the time, the managers can only go by historical data, moving more value-added IT work offshore would imply that the company will enjoy further reductions in costs by an even greater magnitude. When costs are reduced, the net returns to the company will increase thereby improving the profitability of GlobShop Company. As profitability increases, the value of the company consequently increases and this is good for both the shareholders and other stakeholders such as the company’s creditors and financiers. The increase in profits will lead to growth and expansion in the long run. It is evident in this report that as the company undertook offshoring for the first time; some of the workforce was laid off since there was no more work left for them. This presents a substantial logistical problem to GlobShop’s managers. The IT staff of the company was cut off by about forty three percent in the first year and around fifty nine percent the second year. This is quite a large number of employees being sent home within a span of two years. This laying off of the workforce is not healthy for the GlobShop’s image as a company. The laid off workers will not be happy by the management’s decision of relieving them of their duties. Since these workers hail from the society in which the company offers its travel services, the workers’ families and friends will not be impressed by this act. This might cut the company’s returns since the locals will shift to other competing firms in the travel industry. If the company decides to move more IT work offshore, it will also face some challenges in firing IT workers. This is so because the company relied on their IT employees ...Download file to see next pagesRead More
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