Information Technology Outsourcing in Business Management - Coursework Example

IT Outsourcing Introduction Information technology outsourcing is an expression being used to describe the exercise of subcontracting or seeking resources outside the structure of an organization for part or the entire part of the information technology function. IT outsourcing would be used by an organization for functions like infrastructure, software development, support, and maintenance. For example, an organization, or enterprise may outsource its IT management because they may find it cheaper to involve the third party than to build one of its IT management team which might be very expensive. If a company finds it hard to buy and maintain its devices for data storage, the company might outsource all of its needs for data storage. Most of the large companies and organization only outsource a given portion of their IT function. IT plays a vital role in most organization efficiency running. However, some of the companies may not have the budget, staffs or infrastructure to support it hence the need for IT outsourcing1. Information technology outsourcing can also be defined as the utilization of external service providers to efficiently deliver IT- enabled processes in business, solutions in infrastructure and application service solution for the business outcome. Outsourcing is also included in the utility services, cloud-enabled outsourcing and software as a service. It helps the companies and organizations to develop the right sourcing vision and strategies. Furthermore, it selects the right IT service providers, presides over deals for sustainable win-win interaction with outer providers and arranges the best contracts. Outsourcing can enable organizations to reduce cost2, take advantage of external assets, expertise or intellectual property and accelerate time to market. Although Information Technology outsourcing has various advantages, it also faces various challenges. In information technology outsourcing, it is also important for a person to understand some of the factors associated with outsourcing and different types of outsourcing. Furthermore, understanding of the success of the different type of outsourcing and the activities that can be successfully outsourced is vital. Finally, a person should also understand the activities that can not be outsourced. Challenges of Outsourcing Some of the challenges faced by information technology outsourcing include real cost, time factor, familiarity with the system and network, employees relationship, loss of work, liability, priorities, control and continuity. Time factor In case of an emergency, the organization will have to wait until the outsourcing information and technology department to send somebody to provide the service. The organization is also subjected to the outsourcing company calendar, and some factors may cause the emergency of the organization to be pushed back. In the case of any emergency, the organization or companies are always at the mercy of the outsourcing company. In case the IT would be in-house the experienced emergencies would have been dealt with immediately hence saving time. The relationship of employees In case the company or organization has an in-house IT department, the employees know and understand each employee. The firm may get the same engineers showing every time if IT is being outsourced. For cases like this, the employees of the organization or company have to be ready to understand different contractors and how they work. For the companies and organizations with an in-house IT, the relationship can form and solidify. This does not mean that building relationship with an outsider staff is impossible. The organization needs to understand that bring IT from the outside causes fluctuation. This issue may not be a problem, but in some cases some of the engineers have been banned from being deployed to a given organization or company. Loss of work When any machine of an employee stops working, the employee will have to lose the working ability till the outsourced IT department can make it to the organization to resolve the issue. The loss of the productivity can be very costly. The issue to do with the outsourcing department of IT calendar and the response time issue will continuously cause loss of work. For organizations and companies with the in-house IT department, the response time is just working to the machine and repairing it. Control It is hard for an organization or a company to control an external company. The organization has one component in a machine that is already extremely complex. The addition of outsource IT department will mean that the organization will lose more control of the organization. This is to mean that the organizations will lose control over the company performance, behavior, and growth. For the owners of the companies, managers and shareholders who are interested in taking total control of the company, it is of know sense to outsource this critical aspect of the smooth operation of the system. Real cost There are many costs involved in IT outsourcing that most of the organizations do not consider. For example, when an organization schedules an appointment with the outsourcing company, the charges for the drive time to and from the organization are going to be catered by the organization. The organization should also consider the cost incurred when the outsource IT engineer has no idea on how to solve the issue faced by the organization. The engineer will have to learn about the job, and the organization should ask itself if it is ready to pay for that. The organization should understand that it is one thing if they own employees learn as they go. However, it is a different story when a contracted employee doses it. Some of the real cost that also exists includes costs like the organization getting a recommendation from outsource IT department that are not needed. The organization should learn that the up sales are very common and are sometimes unnecessary. Familiarity with network and systems The organization has an in-house IT worker; the workers understand that system and the network very well. This may be because they are the once who built it. So there is a high chance that the in-house IT workers can maintain the organization system running more smoothly. Furthermore, the workers can solve the arising emergency in a faster way. It is also true that even outsource IT department can learn the organizations system and network. However, there will be ramp-up time. Serious issues can be caused by lack of documentation. Liability There are a various occasion where situation or information can be a liability in the presence of a third party. For the protection of the organization or companies employees, data, system and many others, the organization needs to take security measures. The organization or the company will never know when data may accidentally transfer into an external hard drive or may be stolen from a car. This may make most of the things in the company to go wrong. Also, the outsource IT department will not treat the organizations data with importance and care as the in-house IT department will. Priority This is a main problem affecting the IT outsourcing. There is a possibility of an organization to in the long list of the IT outsourcing company it is working with. In a situation like this, the organization or company that spends the most will have the top priority. If your organization is not the one that spends the most, it means that the organization will be pumped down when the big spenders tell the outsource company how high to jump. For an organization to be given the priority by the outsourced IT department, it has to spend huge amount of money. Continuity This accounts for most of the previous points. When the organization or companies IT is outsourced, there will be the need to redirect the engineers constantly. Furthermore, the organization will have to retrain the employees with regards to security and conduct. Also, the company will have to deal with the scheduled fluctuating IT they have no control over. When the variety of engineers steps in an organization, the arising issues will be solved differently. Furthermore, setups will be accomplished without considering the standards of the in-house3. Benefits of the IT outsourcing Employing of an outside company or outsourcing to handle the issues that are mainly performed in-house is a concept that is known by most of the companies or organizations. Some of the duties such as bookkeeping, payroll, and logistics are the functions that are commonly outsourced to increase efficiency and to cut the cost. Over the last decades, outsourcing the organization IT function has been very popular as most of the organizations have started to appreciate its benefits. Most of the information systems of the organizations are similar. People do access the accounting system or the customer database without thinking of the system. However, if the system is down or stops to work properly, it is identified, and the organization suffers. Like any other import item in the organization, the information system also needs IT maintenance and administrator to help in the performance of the regular tasks and to perform properly. The organizations with resources that are limited have no option but to outsource the IT management responsibility or have a third party host instead of having them in-house. However, dependants on the external company to manage the organizations important IT process and information is very scary, and many organizations might find it hard to accept the idea. The companys information system is vital to it and trusting an outsider to handle the IT needs of the company or organization with the same care. Putting any of the companys functions that are critical in the hands of a stranger may be very risky. However, there are many benefits to outsourcing the IT department of the organization and ways of handling the risks that are involved. Control capital costs Cost cutting is the main issue to why most of the organization chose to outsource4. Providers of the outsourcing can cut the capital cost of an organization by reducing the number or internal equipment. These reductions may be on the software costs, servers, and desktops. The organization capital reduction will be mainly on the equipment required to keep the information system running efficiently. Increase efficiency The IT administration is most likely not the organization or companys core competence, hence is also not the organizations most efficient time use5. However, it should be the main focus of companys IT outsourcing provider, whose structure, the economy of scale and cost can give the organization an important competitive advantage. An outsourcing company will be in a position to provide a good number of capable professionals in IT with different areas of technical specialization for the cost of a single in-house employee. Reduce labor costs The organization can be cost a good amount of money, time to look for and hire and train the whole of the staffs of in-house IT. However, the outsourcing companies handle the providing the organization with the right people. They provide the right people who are trained with the latest technology. Most of the outsourcing companies take a good part of their time and money in making sure that their technical knowledge through and of the latest6. Start new projects quickly Starting new IT projects may take a longer time to handle internally. These may be between hiring and training the people, determination of the software and hardware needs and the procurement of all the resources that are necessary7. The IT outsourcers have the experience, resources, and knowledge to start a new project immediately. By using the hosted application model, new projects for software can be quickly role with the expenditure of minimal capital. For example, a given business application line could be tested in a hosted model with low upfront costs and with a reduction in the risk exposure of a solution that does not work. If the application solves the business needs and is a fit, it can be rolled out company-wide or brought in-house after it has been proved to be successful. Focus on the core business In term of personnel and time, the organization has resources that are limited. These organizational resources are mainly spent with regards to the companys core competence that creates revenue. Outsourcing of the companies IT function can help the organization mission remain the focus8. Level the playing field Organizations that are large have great advantages when it comes to resources. However, sometimes the smaller organizations find it hard to the IT infrastructure and the in-house support of these large organizations. Outsourcing of the IT function may mean that organizations that are small can have efficiency levels that are same9. Furthermore, they can have the same level of dependability and expertise that organizations that are large benefit from. The outsourcing application also provides the ability to obtain the organization core information from any computer with an internet connection. This type of access that is ever-present helps organizations that are small project a much larger presence, by giving a chance to everyone to be more responsive and present to the needs of the clients. Reduce risk The technology of today can quickly change. Unless the organization area of specialization is technology, outsourcing providers are greatly equipped and qualified to the rapid changes. Furthermore, the outsourcing providers can manage and assume the risk coming with the new technology. Outsourced providers have the service level agreement and infrastructure that allow the realization of the uptimes and resiliency of the system by the smaller organization the large organization enjoys. IT administration outsourcing may not be for every organization. However, if the organization decides that the way to go is outsourcing, the following tips will be important. First the organization should ensure that the outsourcing provider understands exactly what they want10. This may look obvious, however, ensuring that the outsourcer providers understands the timeline and scope of the organization IT function and project is vital for the success of a project. The organization should be clear of the business expectation and requirement. Second, the organization should seriously take its decision. The contracted firm to provide outsourced services must undergo evaluation as the in-house employees undergo. The provider will form part of the organization team. These outsourcers provide will greatly impact on the success and operation of the organization. The organization should take time in selecting the right outsources provider. Thirdly the organization should consider the type of experience. When it comes to important organization function, the organization should be sure to select an outsourcer provider that has experience. This type of experience should not only be on the type of work being outsourced, but also understanding of some of the law firms. The fourth is the consideration of other factors apart from cost. Although most of the organizations reason for outsourcing their IT department is because of cost-cutting, should not be the only reason for the outsourcing by most of the company. Outsourcing might solve certain issues that are within the organization or encounter other risk factors that may not directly relate to the organization. When a wise selection of the outsourcing firm is done, the organization can experience a lot of benefits. In case, the organization wants to free all the IT staffs to work on an issue that is more important, or the organization wants to reduce the recourses of the in-house IT. Outsourcing the functions of the IT has a variety of advantages. Flexibility Most of the organizations or companies must be very flexible to adapt to the constantly flux business environment. For this to be achieved, the there is a need for the IT functions to respond quickly to the changing demand. Vendors are always in a position to tap a wide range of resources, capacity and skills while limited capability might be there for the internal IT staffs11. Different types of outsourcing Outsourcing is of different types, they may include professional process outsourcing, manufacturer outsourcing, process- specific outsourcing, operational outsourcing, and project outsourcing. Professional process Outsourcing Professional outsourcing includes legal, information technology, accounting, purchasing, administrative support and many more specialized services. This is the areas that are most common for specialize outsourcing service type. The company or organization will only pay for the provided services by the outsourcing providers while accessing high-quality resources. This will have a significant reduction of the overhead cost12. Manufacturer Outsourcing The popularization of term outsourcing in the US was in the 21st century and was forged and widely adopted in the manufacturing industry. This mainly entailed the transfer of blue scholar in to a third party for reasons such as human capital, cost factor, expertise and time to market. Outsourcing has gone some greater changes to include white collar jobs13. For the same reason, the manufacturing companies have has also outsourced their blue collar jobs. In the main outsourcing sector, another common outsourcing service of today is the manufacturing outsourcing companies which are linked to the production of goods need to understand when asking the meaning of outsourcing. The manufacturing company needs also to understand the need of outsourcing the services and the types of services to be outsourced. Manufacture outsourcing services are mainly industrial- specific. For example, an automobile manufacturer has an outsourcing arrangement of installing and building windows in all there existing model. When this type of outsourcing is adapted by the manufacturing companies, it can reduce the assembly time and help the company in cost saving. The only risk that will be faced by the manufacturer in this type of outsourcing is the production line interaction and the quality risk. Most of the people believe that mid-size and small-size needs to adopt manufacturer outsourcing for then to survive in the todays competitive market. Without the companies adopting this type of outsourcing, they will lack the economic of scale that will enable them to compete with large competitors. This is because most of the companies have no ability to invest and continue the upgrading of the process technology, equipment and personnel that are needed for them to be competitive. Process-specific Outsourcing Other services of outsourcing can be exact to the internal procedure or a process, and it is referred to as process specification outsourcing. Currently, aspects of specific operation –related to other units that specialize in the specific service. For instance, the delivery of a packaged cake can be outsourced by a bakery to a carrier company like FedEx and UPS. Such a contractor for outsourcing would provide details on the timeline for delivery, cost, and customer contact14. This will then allow each company to improve customer service by focusing on its strength while reducing the timeline and cost. Process outsourcing can also be used to describe the act of handing over public sector services control which includes police, fire, armed forces and many more for Profit Corporation. Operational outsourcing This type of outsourcing is very common in within the context of manufacturing than in other industries. This is because an opportunity is provided by the nature of manufacturing for an operational activity that is specific to be handled outside the company. For example, the repair of equipment and machine maintenance can be obtained through information technology outsourcing service. These information technologies outsourcing service specializes in a given type of machine or equipment. Other operational activity type includes cleaning service, property management, facility maintenance, and landscaping15. Project outsourcing A time comes when the organizations or companies have trouble in the completion or management of a given project. In cases like this, companies can include outsources. There are people and units or companies that are specialized in project management that the company can outsource. These services of outsourcing can be given to either complete a given part of the project or manage the whole project. There are various reasons to why the companies may need to outsource these functions. This is mainly because there are many benefits involved when outsourcing part of the project. Most of the project outsourcing occurs because the organization or company does have enough people in the house or skills16. Furthermore, the company may outsource part of the project because it does not have enough funds to do the job by its self. The organization finds it more pleasing to outsource certain role than taking money and time to contract someone in-house for a long time or even to train someone. This is specifically, if the role under consideration can be outsourced through IT. When learning, the companies need to understand these outsourcing benefits. They should understand what outsourcing is all about and some of its benefits as it may help the company to save money and time. Activities that can be successfully outsourced Sales and marketing activities If the organization has nobody that is specialized in sales and marketing, it would be wise for the organization to contract outsource provider. The organization should concentrate on building the business. This is only possible through contracting a company that will assist it to increase the sales and easily gain the market. Small business web design and development The organization may have a great idea for web design and knows that it will be a big hit to the customers. For the organization to convert that vision into reality there is a need for a person who has mastery over issues like web development, coding, graphic design and many more. Social media, company blogs and online presence management To maintain a social media network the organization needs to work. These may entail daily updates, replying to comments and follow-ups. The organization needs to understand that all the listed activities are time-consuming and always need somebody with a creative writing style. Accounting, business taxes, and small business payroll The aim of many businesses that are small is properly management of all the aspects of finance of their companies. However, these can be very challenging for the small business owners. In these small businesses, bookkeeping is one of the most tasks that are intimidating, and a person finds it hard to undertake it. This kind of task should be left for those people who have the ability in these fields17. Conclusion The world of today is more advanced, and the technology is changing at a high rate. Companies are forced to change with the changing technology. Information technology is vital for all the industries. IT helps all the industries to in different ways; it helps the organization to store its data, it also enables faster retrieval of the data by the organization. However, most of the organization finds it hard to obtain the skilled IT personnel and resources. This is majorly due to the high cost of the IT resources and personnel. Because IT is vital for any organization, there the organization has no any other option but to look for a way of acquiring it. At this point is when the IT outsourcing providers come into play. Outsourcing can allow organizations to cut down the cost of IT services and take advantage of the external expertise, assets or intellectual property. Outsourcing can also speed up the market time. Although Information Technology outsourcing enjoys many benefits, it is also faced with different challenges. Outsourcing providers are in a position to solve some issues that are within the organization. These providers can also prevent other risk factors that may not have a direct impact on the organization. When a wise choice of the outsourcing company is done, lots of benefits of great value can be experienced by the organization. This is to mean that the companies should be careful in the selection of the outsourcing IT provider. For most of the organization to be more effective in running their business, there must be the need for a person who has the capability to drive these changes. If the organization has little resources, they can hire an expert or a professional who will provide the latest equipment to the organization at an affordable price. Also, the contractor may also provide highly skilled staffs to assist the organization. References Bush, Ashley A., Amrit Tiwana, and Hiroshi Tsuji. "An empirical investigation of the drivers of software outsourcing decisions in Japanese organizations." Information and Software Technology 50, no. 6 (2008): 499-510. 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