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Outsourcing in developed nations like the United States is at its pick as the competition in the world economy intensifies. The others, for instance nations in Asia and even Europe are steadily following suit in the new era of outsourcing where organizations strive to concentrate only on the areas they are most competent in. The many different business enterprises venture into the field of outsourcing for various reasons. However, all these organizations are in agreement on some key issues as regards outsourcing. In addition to enhancing satisfaction to the customers and decreasing costs significantly, outsourcing also results to increased efficiency and overall attainment of the organization's objectives. Outsourcing duration is fundamental to the overall benefits that the organization is likely to reap from this venture. One thing that is without doubt is the fact that, business entities that undertake outsourcing for long term purposes are more likely than not expected to benefit the most compared to those business entities that pursue outsourcing for a shorter period of time. Sure, outsourcing is no doubt an attractive prospect for business entities in this global economy that is characterized with cut throat competition. However, the decision of outsourcing is not without risk, therefore organizations should carefully evaluate this venture to ascertain its viability before going along with it.
Outsourcing information technology
The question of whether or not to outsource information technology functions solely depends on the nature of the company and its operations. This implies that, whereas outsourcing may be successful in one company, it does not necessarily mean it will be a success in all other companies that decide to embrace it.
The evolution of information technology and issues pertaining its outsourcing has no doubt come of age. Unlike the regular business activities in organization, outsourcing information technology is a relatively new concept in the business world. Historically, during the early stages of outsourcing information technology functions, only the most shallow and basic work was outsourced, however with time, organizations started to increase the scope of work that was outsourced. As of today, most organizations have almost entirely embarked on outsourcing most of the significant information technology functions. Outsourcing of information technology functions is no doubt a booming business, with the market becoming more lucrative with each passing day. According to research conclusions made by Dataquest, the outsourcing market was estimated to be worth 54 billion dollars in the year 1998 and a staggering 77 billion dollars in the year 2000. In the last decade, most business enterprises in the United States and other nations of the world have resorted to outsourcing of information technology functions, in order to stand a chance of absolute excellence in the ever competitive business sector.
Information technology is extremely fundamental to the operations of an organization in this modern era of technology. Despite this, information technology is not exactly a specialty of the many organizations that rely on it to perform the daily chores. By outsourcing information technology functions the organizations are best placed to concentrate on the core business of the organization.
Companies should outsource information technology function
Outsourcing is no doubt of great beneficial to a company. However the beneficial aspects of outsourcing that accrue to a business enterprise, depend on whether or not the venture is done in the correct manner and for all the right reasons. There are numerous merits that associated with outsourcing information technology functions. Before an organization makes the step to venture into the field of outsourcing information technology functions, it is fundamental for the business entity to weigh the merits against the demerits associated with outsourcing.
The main objective of a business entity is to maximize on wealth hand as a result expansion is certain. As the organization massively expands, the operations and all activities increase. Given that expansion comes with consumption of resources, the company may end up suffering from diseconomies of scale as result of massive expansion of the business entity. This is the point at which it is of great benefit for a given firm to outsource some activities and instead concentrate on those activities that are fundamental to the organization. This is the cognition aspect of business that is envisaged in the model of distribution and specialization of labor.
Outsourcing of information technology functions facilitates reduction in the costs of an organization; most notable in these expenses are the capital expenditures. Should a company take up to run its department of information technology, then the capital expenditures are inevitable. The company may have to spend a lot of money on hardware and relevant software not to mention the recruitment and subsequent payment of huge wages to employees in the information technology department. In the event that information technology is not the core business of the company, then outsourcing of information technology services is ideal as in addition to cutting down costs significantly, it also enhances overall effectiveness and efficiency of the firm.
Management of the company is another factor worth considering. There is no doubt what so ever that, outsourcing is a huge relief to the management. It ensures the work load of management is easy and thus facilitating efficiency (managing a small number of employees is easier than when they are many). Apart from making management work easier, outsourcing may in some instances bring on board adequate skills that are needed in the organization as regards the management of the of the company.
Companies should not outsource information technology function
As discussed earlier, outsourcing though beneficial, it may not necessarily replicate the good results posted by one organization on the other. The nature of the business and more especially the reasons for venturing in outsourcing of services will go a long way to determine and influence the success or failure in the field of outsourcing. One thing is certain, whether or not all requirements of outsourcing are adhered to, there is no denying the fact, outsourcing has its own setbacks that should be considered closely before venturing in outsourcing.
Confidentiality is arguably the biggest challenge posed by outsourcing of information technology functions. In addition to loss of control of the organization, the organization has to contend with the fact that, confidential information will be disclosed to third parties and sometimes this information may some extreme circumstance end up in the wrong hands. The other issue is security and cost of the service. The cost of outsourcing may end up being higher than actually employing staff to take care of operations. This however is dependent on the nature of the contract and the size of the organization with regard to the operations of the organization.
Uncertainty is another factor that is a headache. The fate of the organization outsourcing services is tied to that that firm that is rendering the service. This is certainly not welcome news to the management outsourcing information technology functions. Should the company rendering the service go under, then the operations of the organization may be severely hampered, and therefore result to huge losses that could have been avoided by not seeking outsourcing services in another company.
With the cost of labor constantly escalating, surely, outsourcing of services will no doubt come in hand as it not only ensures services rendered are of high quality but also the firm is in a position to cut down on overall costs associated with running an information technology department. The question of whether or not to outsource information technology functions should be answered after carefully analyzing the advantages and demerits of the service. If the merits outweigh the disadvantages then it is proper to undertake it and vice versa. However the venture should be done for the benefit of the firm and not to serve individual interests.