Assess the main threat of IS/IT outsourcing and put these possible threat in order based on important. Justify your answer.
Companies outsource are to avoid a certain types of costs. Among the reasons companies elect to outsource include the avoidance of regulations, high taxes, high energy costs, and costs associated with defined benefits in labor-union contracts and taxes for government-mandated benefits. Perceived or actual gross margin in the short run incentivizes a company to outsource. With reduced short-run costs, executive management sees the opportunity for short-run profits, while the income growth of the consumer base is strained. This motivates companies to outsource for lower labor costs. However, the company may …show more content…
This often requires the assimilation of new communication methods such as Voice over ip, Instant messaging, and Issue Tracking Systems, new Time management methods such as Time Tracking Software, and new cost- and schedule-assessment tools such as Cost Estimation Software.
Quality of service (QoS)
Quality of service is best measured through customer satisfaction questionnaires which are designed to capture an unbiased view.
In the area of call centres end user experience is deemed to be of lower quality when a service is outsourced. This is exacerbated when outsourcing is combined with offshoring to regions where the first language and culture are different.
Foreign call centre agents may speak with different linguistic features such as accents, word use and phraseology, which may impede comprehension. The visual cues that are missing in a telephone call may lead to misunderstandings and difficulties.
Security Before outsourcing, an organization is responsible for the actions of their entire staff, sometimes a substantial liability. When these same people are transferred to an outsourcer, they may not even change desks. But their legal status changes. They are no longer directly employed by (and responsible to) the organization. This creates legal, security and compliance issues that are often addressed through the contract between the client and the suppliers. This is one of the most complex areas of outsourcing and sometimes involves a
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The most populace countries in the world, China and India, seem to be the two countries tapped into most for outsourcing. I’m pretty sure everyone has called into a call center at least once and reached some Indian person on the other end. The language barrier is evident. This has an impact on the level of quality service they can provide. “India appears to be a global business nightmare. People speak dozens of different languages throughout the country. Getting around is a challenge due to a terrible infrastructure. Foreign companies must deal with tight regulations on investment, slow bureaucratic culture, and the politics of family owned big- business. UPS delivery men, for example, must often ask for directions because there are no street numbers. (Williams, 2010). This is a perfect example of what is going on in foreign countries with which we are outsourcing business too. A bit scary if you ask me.
economy. Outsourcing leads to the fragmentation and disintegration of the supply chain, inviting new competitors into the industry, and undermining pricing power and profitability. For instance, is feasible only if it can be separated from other supply chain activities: product development, branding, marketing, distribution, and after sales services. Consequently, the more and more activities outsourced, the supply chain turns from a single integrated process performed within the boundaries of traditional corporations to a fragmented process, performed across several independent subcontractors. Another disadvantage, outsourcing’s unintended consequences extent to company relations with another partner—valued customers. Customers may feel betrayed in each and every activity is outsourced. If I hire Home Depot to make certain improvements in my house because they have reputation to reliable services, I would feel betrayed if I get services from a strangers hired by Home Depot. And I will feel even more betrayed if I end up discussing my medical or financial records with overseas strangers. What seems to be trendy and virtually in business strategy is not always a good
Next is a legal compliance and security. It is important that issues regarding the legal compliance and security be addressed in formal documentation. Example of this outsourcing the IT function is their access to confidential customer data for their own gain.
Many businesses have turns to offshoring as a way to boost their profits. The most obvious benefits of offshoring for the businesses and English-speaking destination countries are the lower wages in foreign countries such as India, China, Korea, Philippines, etc… which translates into significant savings and often, improved quality.
Outsourcing is characterized as the utilization of firms outside the host (outsourcing) nation to handle all non-center elements of the host organization. Each organization has some non-center capacities like HR, finance, managerial administrations and some more. An organization chooses to outsource these non-center capacities in light of the fact that the organization could lessen expenses, think about distinctive target markets, access to more talented specialists all inclusive, and so forth. The civil argument still proceeds about outsourcing and off shoring employments/IT work force. Individuals see this as the procedure of sending work outside the nation which at the end of the day implies loss of employments and more unemployment in the host nation. In my point of view, outsourcing/off shoring is useful for organizations over the long haul.
Outsourcing IT services causes organizational risks that services recipients must have pay serious attention to. About a decade ago, very few companies had any experience with the contracting process. Much experienced has been gained outsourcing non-core process such as catering, security, logistics and treasury and archive services. in fact, many companies now have experienced with IT outsourcing itself, since they have contracted out their IT services before sometimes even to several consecutive suppliers.
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
Over the past decade or more, outsourcing is becoming an essential success factor. Many multinational organizations rely on outsourcing for a variety of products and services such as technology, customer support, automobile, clothes, telecommunication products and many more (Gottschalk, 2006). Outsourcing is an excellent process when it comes to cost advantage. Additionally, it provides organizations the time and workforce to focus on organization’s core business capabilities (Gottschalk, 2006).
When a business makes the decision to outsource there are numerous factions affected. First and foremost is the person or team from within the company who are charged with the task of deciding who they will choose to outsource them. They are termed the “buyers”. Being a buyer is perhaps one of the
The strategic effort of outsourcing is to allow concentration on what the organization does best. In addition, outsourcing assist companies to acquire cost advantage by tabbing into cheap labour; identifying companies with high competency level in the area outsourcing is required; and adds value to the overall process of the organization. However, it is important to note that as mentioned by Child (2005) if outsourcing is not carefully considered the organization may be prone to failure. Therefore, it is very crucial that various elements be thoroughly considered before deciding on what aspect of the organization to outsource.
Many people imagine only enormous Fortune 500 companies as moving production and jobs overseas. However, in today's weakened economy, even smaller businesses are now opting for outsourcing more and more to keep costs low. Even smaller companies have to deal with complex issues that are normally thought to be dealt with by larger Fortune 500 companies. Yet, despite benefits, there are also high risks involved in outsourcing, risks that go far beyond the boundary of the single organization in questions.
The first one is the industry and the second one is the new technologies that become an important part of the core business of the firm. Following the external forces are the internal reasons that push a firm to outsource. Although many have been identified in the literature, the most relevant refer to reduction of costs, focus on the core business, avoid the investment in specific assets and increase in efficiency and performance. A ranking of these reasons is presented in Figure 2 (Pai, 2007).
The reason for the popularity of outsourcing is that it allows many companies to reduce the overall service costs, particularly the labour costs, be close some of their customers together with the combination of environmental pressure, efficiency and competitive pressure (Tate et al. 2009; Frattochi et al 2014; Hutzel and Lippert 2014). As a consequence, when these advantages are no more exist, many manufacturing firms in developed countries have started to shift their business strategies from offshoring and outsourcing and reshoring.
In the current competitive environment, satisfying customers has emerged as the primary challenge for many service companies. Emerging technologies, rising and ever changing customer expectations has significantly narrowed the quality gaps, thus thrusting customer satisfaction into a preeminent role in achieving a sustainable competitive advantage. Service quality is clearly essential for organizational success and is typically defined in relation to exceeding customer expectations (Humprey, 2004). Customer perceives services
Johnston and Kong (2011) defined service quality using two perspectives; operational service quality and customer perceived quality. In their study, they noted that operational service quality is the operation’s assessment of how well the service was delivered to its specification as defined in operational procedures, training manuals while customer perceived quality is the customer’s judgement of the quality of the service; their experience and the perceived benefits when in comparison to their needs and expectations.