Risks Associated With The Outsourcing Of It Functions

The case identifies struggle and problem faced by organizations outsourcing IT projects and allows us to ponder on how to manage outsourcing well.

Today most of the companies wants cost cutting in their business. Nowadays outsourcing helps to achieve such goals. According to the internet, (www.flatworldsolutions.com), outsourcing can be to as the allocation of specific business processes to a specialist external service provider. Outsourcing is an arrangement in which one company provide services for another company that missing or don't have a specialist in the certain area of expertise. Most of the times, an organization cannot handle all aspects of a business process internally. Additionally some processes are temporary and the organization does not intend to hire in-house professionals to perform the tasks.

Companies are increasingly outsourcing the management of information technology (IT) for reasons that include concern for cost and quality, lagging IT performance, supplier pressure, access to special technical and application skills, and other financial factors. The outsourcing solution is acceptable to large and small firms alike because strategic alliances are now more common and the IT environment is changing rapidly.

Outsourcing has become an integral part of many organizations today. Outsourcing has its advantages and disadvantages that organizations will have to weigh to decide whether or not outsourcing is the best possible solution to their current problems and business operations. Outsourcing refers to the process of hiring external provider to operate on a business or organization function (Venture Outsource, 2012). In this case, two organizations or businesses enter a contract where there will be an exchange of services and payments. This paper will discuss the possible risks an organization may encounter in outsourcing in relation to the use of an external service

(Pearlson,2001). Cost is the most important factor when the enterprise make a decision of insourcing or outsourcing. If the company produce the products or service on its own, there are costs more than producing, which can include investments of researching, training, and equipment.The investment of insourcing can be a lot more than the outsourcing because of economies of scale.Outsourcing providers can gain significant savings from economies of scale, which client companies usually can’t get on its own(Pearlson,2001). This benefit could be magnified in IT outsourcing.In the case of Project Harmony, as a food company, Campbell soup was a lack of sufficient scale within their own IS departments and IT technical expertise, so the saving between outsourcing and insourcing was significant.To conclude, cost reducing is the first of core benefits of outsourcing due to economies of

The only means for the IT companies to maintain business and to have minimal losses was to transfer their services overseas to India. Nonetheless, many of the people who had lost their IT jobs saw this as a disadvantage since they were the ones who had to either find another job that matched their skills or had to obtain new skills. Along with this, they, along with the majority of the workforce, saw outsourcing as something harmful to the American economy and that it caused increase in cost (Easterls, 166). These outlooks are not necessarily true, however.

Summary: The above article talks about how IT outsourcing is the most cost-effective way for companies to hire qualified individuals for specific jobs without having to commit to the significant cost or maintaining a year round in house team. IT outsourcing is

Office Supply Incorporated (OSI) is a company in crisis, with challenges in its cost structure and poor IT performance. Outsourcing to Technology Infrastructure Solutions (TIS) is an opportunity to both reduce costs and complexity for the firm, but first must consider whether outsourcing is a good strategic fit for OSI. Outsourcing is known as the practice of turning over responsibility of some or all of organizations information systems to a foreign firm in order to stay competitive. Outsourcing is not new to the business world, as it dominated the manufacturing sector the past couple of decades. There are various advantages and disadvantages. Advantages include lower costs, better quality, and downsizing to focus on the

The origins of many outsourcing endeavors begin as part of a strategic planning session during a period of lean years for a company or anticipation of a prolonged impending down-cycle. This is a time-period when the organization does not have a viable competitive product to offer in the market or the

The business case for outsourcing IT infrastructure most often is anchored in the benefits of gaining expertise external to the enterprise first, despite the commonly-held belief that this strategy is purely for cost reduction. The value of gaining external expertise in critical IT infrastructure processes and

Page 2 of 4 customers that rely on the consistent availability of OSI’s products. Therefore, the successful outsourcing of OSI’s IT infrastructure would not pose a threat to the fundamental business strategy and could even help reduce risks in their highly competitive market. In analyzing the factors that could make outsourcing IT infrastructure to TIS valuable to OSI, it’s useful to consider Carr’s three main “Rules for IT Management.” The first of these rules says to “spend less,” as more is not necessarily better when it comes to a commodity input such as IT. In outsourcing, TIS will provide cost savings to OSI in a few main ways. First, there would be a lower capital investment in hardware for OSI, as these costs could be diverted into operating expenses paid on a monthly basis to TIS. Moreover, these operating expenses could be based around a “per-transaction” model so that their costs could more closely follow fluctuations in the market. This means that if one month OSI saw a reduction in online sales and thus a corresponding reduction in server usage, OSI’s costs could scale with

While it lessens the burden on organizations, reducing and shifting the cost and risk of its IT operation, security and management issues to an external service provider or vendor, outsourcing any portions of an organization's Information System has significant risks that can sometimes become detrimental to the outsourced organization. According to the Commission on Government Outsourcing, "when outsourcing an organization exposes itself to significant risks in terms of security, accuracy, and completeness of information (Holroyd City Council, 2008)". Comprised in the rest of this document is an

Outsourcing refers to hiring an outside, independent firm to perform a business function that internal employees might otherwise perform. Many organizations outsource jobs to specialized service companies, which frequently operate abroad. The outsourcing trend stands to continue; the latest wave of outsourcing impacts the information technology field. IT outsourcing includes data center operations, desktop and help desk support, software development, e-commerce outsourcing, software applications services, network operations and disaster recovery.2

Because of the important relationship between insourcing/outsourcing and competitiveness, organizations must consider many variables when considering an insourcing/outsourcing decision. This may include a detailed examination of a firm’s competency and costs, along with quality, delivery, technology, responsiveness, and continuous improvement requirements. Because of

In the rapidly evolving global marketplace we live in today, companies and organization have to deliver their goods and services at faster rate and at a higher quality of service than ever before. An organization also has to be able to quickly diversify its services in order to meet the changing needs of its clients and customers. To meet these needs always requires the adaptation of new skills and abilities to provide newer and improved goods and services. In essence, organizations need to develop according to the demands of its clientele and needs the capital, talent and human resources to do so. Again, the speed at which organizations need to evolve to meet its demands often leads to the procurement of resources outside the organization. “The speed with which firms need to respond to the market and the call for diverse products are forcing businesses to invest in forming strategic business alliances” (Doz & Hamel, 1998). Almost every business organization today has enlisted the aid of an outside entity to perform one or many of its daily business function. Functions such as payroll services, health and benefit administration, talent acquisition, and human resource management that were handled in-house, are now outsources to outside specialized agencies. Additionally, companies have even sought to move their business hubs overseas for financial advantages. The factors that determine the benefits of outsourcing on either a specific project or business function as a whole