Outsourcing Information Technology: Keys for Decision-Making

In the early 1990’s, Web technology appeared to be a good tool for business taking the communication and collaboration into the next level.  Businesses moved towards outsourcing direction as companies were losing in-house resources because technologies have been dramatically changed.  According to Haag and Cummings (2008), Information Technology outsourcing was an enabler of the organization in utilizing new technology while reducing cost and stress of manpower and expertise.  So it was safe to say that an idea of outsourcing software development by purchasing software or hiring a software company to develop the applications reduces the cost, and by utilizing IT effectively increases the business performance. 

                          With the  availabilities of new technology in today market, organization considers to outsource IT to achieve the advantages of technology, economic, and strategies although for the large organization it seems that outsourcing of IT does not economically bring advantage (Gottschalk & Solli-Saether, 2005).  However, outsourcing IT support seems to be a good choice because of the growing of economy and low unemployment rate (Haag & Cummings, 2008).  Making decision to outsource part or whole IT operations involves in an analysis of critical success factors.  Whether organizations view their IT resources as core competencies, they will outsource IT operations (Gotschalk & Solli-Saether, 2005).  Companies weigh on expenditure of IT investment and production to make their decision as well.  In addition, outsourcing IT will increase and improve the contract relationship which exploits a social exchange, an alliance, and a vendor behavior control (Gotschalk & Solli-Saether, 2005).

                           The objectives over outsourcing are quantifiable and established as key criteria at the time of contract negotiation.  It makes sense that the service quality and customer satisfaction are measurable through outsourcing. Nevertheless, organization that outsources IT and outsource provider will need to improve the performance and relationship by learning different cultural values.  Organization should keep in mind  that outsourcing IT equals to lose an opportunity to build IT resources, meaning they will reduce the technical know-how in their future innovation (Haag & Cummings, 2008).  Moreover, the confidentiality of the information or data is at risk.

                          Short cycle development is defined as a rush development which put a product in production with a minimal testing and be modified along the operational process.  This process will enable organization to quickly utilize the new product, to meet the evolving demands of the growing markets (Baskerville & Pries-Heje, 2004).  However, the product contains defects and may be malfunctioned which will make the maintenance process harder.  Short cycle development, therefore, seems to create issue with outsourcing.

                          Business globalization becomes more and more popular as supply chain management moves to the outsourcing direction.   Offshoring IT development gives company a chance to establish an effective relationship worldwide.   As technology plays a great role in improving the communication and information flow, international outsourcing becomes more popular and sophisticated. However, a difference in cultural values will enhance the relationship.   

                           Outsourcing brings an opportunity for both organizations to be clear in a negotiation which normally ends up in a Service Level Agreement (SLA).  Clear understanding and firm agreement are the key components for success of a relationship.  Although information technology provides a great tool for better communication, it is only to facilitate the process. Human beings would need to coordinate the connection, relationship, and collaboration.

Baskerville, R., & Pries-Heje, J. (2004). Short cycle time systems development. Information Systems Journal, 14(3).

Gottschalk, P., & Solli-Sæther, H. (2005). Critical success factors from IT outsourcing theories: An empirical study. Industrial Management & Data Systems, 105(5/6).

Haag, S., & Cummings, M. (2008). Management information systems for the information age. (Laureate Education, Inc., custom ed.). Boston: McGraw-Hill/Irwin.

About Phat Pham

I don't have money to share, but I do have a desire to transform our society, starting from the workplace and the local community I serve.
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4 Responses to Outsourcing Information Technology: Keys for Decision-Making

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