Information Technology Outsourcing”Information Technology outsourcing is the contracting out of part orall of an organization’s IT activities.” New trends have included operations,programming, and technology planning. The main reason for informationtechnology outsourcing is to gain immediate economic gains for the company,usually through savings. Financial motivations aren’t first on businesses mindsthough; other strategic objectives are.Outsourcing can make it easier to downsize.
Because you are bringing inoutside help, and can cut back on fixed salaries, the company becomes morevariable. Outsourcing leads to tighter linking of strategy and IT. Knowledgewhich usually flows slowly can flow freely, and a company has more access tooutside technology. Plus businesses receive information faster than other typesof hierarchical communication, and the resources are endless. Outsourcing canunlock organizational structures.
“The unlocked IT organization can provide abetter mechanism for costing user requests, prioritizing technology initiativesand controlling expenditures.” It offers the benefits of both systems involved.Another important goal that IT outsourcing takes on, is reducing technologicalrisk. By outsourcing your needs you know that that the employee know what theyare doing.Some of the problems IT outsourcing may encounter are, loss of strategiccontrol, risk of technological obsolescence, limiting of long-term flexibility,difficulty in benchmarking initial contract, hostage to additional charges,high exit or switching costs, limited choice of vendors, the fixed nature oflegal contracts, legal exposure, from dissatisfied former employees, andcultural conflicts.The people doing the outsourcing for the companies are sometimes thelife’s-blood of that company.
If the outsourcers want more money, then they arealmost obligated to give that money. This is usually the case when thecontractors are bringing new technology into the system.High exit or switching costs entail the switch-over costs the companymust shoulder if they decide to end the outsourcing and hire full time employees.It is important not to put too many resources at the hands of the contractors.
Limiting this will ease the switch-over costs.Legal issues also creep into the picture when a company chooses tooutsource. Some companies have problems with employees that are not happy withtheir current arrangement or are mistreated. There tends to be a highunionization with these kinds of workers. A company can not only be held forits actions but also for the actions of the outsourcing agent.Finally an important factor is cultural conflicts. What is excepted inone culture may be different in another, causing worker and management relatedproblems. For instance the role of leadership in an organization or the numberof hours a worker is expected to work a week.
These variables have to bescrutinized by the outsourcing company.