IT outsourcing
Outsourcing is the lifeblood of IT. The prevailing theory is that outsourcing saves companies’ money and enables them to engage a broader pool of IT skills and talent than they could in-house. Many articles shade more light on this topic. For instance, Pankowska (2019), in his article, he identifies the outsourcing chain and the effectiveness of the company to apply the outsourcing strategy. The writer intends to emphasize that inter-chain coordination can be easily improved by enterprise architecture modeling and through the block-chain economy application. In this regard, outsourcing is the practice of service subcontracting as well as manufacturing works to businesses externally. More importantly, it involves service procurement and products from an outside supplier to reduce costs. Additionally, information outsourcing services are provided by fixed costs into variable costs which may be avoided as a result of expanding the business costs arising from the surge. This enables the IT budgets to remain linear as well as the cost being easier to predict, control, and avoiding IT black hole (Xi, Xu & Todo, 2013). As a result, it results in cost savings and spending cuts.
According to Pankowska (2019), there exist assumptions regarding IT outsourcing, for instance, it is assumed to support the diffusion of innovations. Regarding this, it creates opportunities to develop innovations through strategic procurement. Diffusion innovation is essential for co-sourcing stakeholders. Nevertheless, based on the resource-based theory, the companies undergoing performance differences are attributed to the variance of the capabilities and resources of the firm. In this regard, Outsourcing enables performance that the company might offer due to economies of scale. A large scale can result in a variety of functions as well as opportunities that help to save the best available worker who might not be willing to work in a less stimulating consumer environment. The key reason for outsourcing for many companies is flexibility. Flexibility reflects the changing business environment (Tayauova, 2012). Nevertheless, flexibility enables the business to adjust the internal process and adapt to unexpected changes. The changes may include refining the value proposition of the company, adapting to the latest technological changes and having top talent that possesses the skill to handle the latest challenges.
Outsourcing internal IT staff reduces pressure. As such, it steers the improvement of the IT staff’s ability to learn. However, in some cases, the organization will base on its business development and IT building needs to develop a system on IT outsourcing management. Furthermore, the concept of IT outsourcing improves the financial status of the company. Financial considerations make use of outsourcing making it especially attractive (Xi, Xu & Todo, 2013). For example, it provides an opportunity to liquidate the tangible IT assets in the company. Consequently, it helps in tissue remodeling budget information systems through outsourcing, therefore, improving the corporate balance report as ell as preventing enterprises from the future investment uncertainties.
The article by Bera (2017), extrapolates the outsourcing concept from the norm of many companies. The article supports the idea of outsourcing being the lifeblood of IT by indicating the advantages. On the other hand, it encounters this concept by giving disadvantages. Regarding advantages, outsourcing enables the company to concentrate on the core process. As such, outsourcing the supporting process allows the company to have more time in strengthening their core business process. Moreover, outsourcing is essential in shifting certain responsibilities to the outsourced vendor. The firm can plan mitigating factors better when the outsourced vendor is a specialist. Furthermore, outsourcing ensures better and faster services (Bera, 2017). For example, the vendors outsourced have specific equipment as well as expertise than the outsourcing company. As a result, the tasks are completed faster with better quality output. Besides, outsourcing saves on infrastructure and technology.
The negative sides of outsourcing are that when a company outsources HR, payroll, as well as recruitment services, there may exist a risk of exposing confidential information of the company to the third party (Bera, 2017). Also, signing contracts with other companies can result in extra time than legal time. Besides, it may result in the delay in the completion of projects due to a lack of enough communication between the company and the outsourced provider. The idea behind outsourcing is the expectation of receiving better service from the outsourcer compared to internal staff (Tayauova, 2012). Outsourcers must be chosen in a particular way to ensure that there is no bad influence on the quality of goods and services produced. Without this, the company may lose its position on the market.
Also, it degrades employee relationships, morale, and motivation. Full-time employees may consider that they are supervising the third-party vendors’ employees. Therefore, they may not pay attention to the tone of voice which can result in moral issues. Engineering outsourcing will make the engineers within the company not feel well and this will cause attrition issues (Xi, Xu & Todo, 2013). Therefore, IT outsourcing risk management requires enterprises to develop a practical risk assessment model, clear risk management process, and good communication channels.