...Benefits vs. Risks of Outsourcing IT Services Benefits Vs. Risks Of Outsourcing IT Services The Chron article, “Benefits vs. Risks of Outsourcing IT Services” focuses on the benefits and risks associated with outsourcing information technology (IT) and services. It also suggests that businesses carefully weigh the benefits and risks of outsourcing their IT functions. The article cites four benefits and three risks that are commonly associated with outsourcing IT services. The benefits include: 1) Saving money. This is one of the most important reasons why companies choose to outsource because it frees up capital for business operations that directly produce revenues. 2) Controlling expenses. Outsourcing functions to businesses that specialize in IT services reduces internal operating costs and allows for more competitive pricing of goods and services. 3) Focus on Core Operations. This allows managers to focus on business goals and objectives without splitting time and energies outside of their competencies. 4) IT Resources Near Those of Big Businesses. Outsourcing IT functions allows small businesses to gain more equitable cutting edge technology and services that are comparable to large businesses. Conversely, the author cites the following risks associated with outsourcing IT: 1) ‘Dubious Accessibility’. The company may experience lengthy downtime during caused by system failures, which are likely to result in loss of money and productivity. 2) Loss...
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...Outsourcing IT Functions Lionil Alvaerez CIS Strategic Planning / CMGT-578 May 13, 2010 Professor: Robert Whaler University Of Phoenix Abstract Outsourcing is defined as the process of obtaining professional services from third party companies that will perform the same duties as in-house employees (Thompson, 2010). But outsourcing goes beyond just obtaining professional services, it is in fact the strategic use of outside resources (Faulhaber, 2005).There are many reasons an organization can take into account to consider outsourcing their IT functions. They can range from cost cutting measures, and improving IT services, to have the opportunity to tap into professionals with a higher level of expertise, that among other things can provide the rapid deployment of IT projects, or to have the IT team concentrate on projects that can provide the organization with a higher and faster Return On Investments or ROI. As there are many good reasons for outsourcing, there are also drawbacks that in the end could have a detrimental effect on the organization. Therefore, there are many issues to consider. This paper will discuss various aspects of outsourcing IT function such as, what are some of the determining factors that may lead an organization to outsource or not their IT functions, risks and benefits associated with outsourcing, where do the costs originate in an outsourcing agreement, and what are some examples of the dollar impacts which might be expected...
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...1. What are the benefits and risks associated with outsourcing? The primary benefit of outsourcing is saving money. The client can gain maximum productivity with the minimum costs. Benefits of Outsourcing: • Outsourcing is a way of risk sharing. Company minimizes risk when they outsource their business to a third party. This works in the same principle, as those diversifying investments in various plans. • Outsourcing helps in problem solving and the growth of the company. If a business outsources some of their services, the currently employed, experienced employees can focus on the critical issues or core business activities of the company. • The productivity of the company can increase when skilled employees hired at lower rates, which in turn, make it possible to hire employees in large numbers. • The quality and speed of the outsourced activities are increased. The client companies can save on taxes by hiring the right kind of outsourcing companies. Risks of Outsourcing: The major disadvantage of outsourcing is, once the agreement is signed, it is the responsibility of the supplier to look after the day-to-day business operations. It becomes difficult for a client company to take control over the business to some extent. • The chances of fraud could be the number one risk from the third party. For instant, company secrets leakage may occur, especially in IT companies. • Outsourcing could result in failure of delivering products before the deadline. It...
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...ABSTRACT While outsourcing internal audit function in the private sector has been extensively Investigated by various researchers (Carey and Chua, 1999; Petravick, 1997; and Sharma and Subramaniam, 200l; amongst others), there is scant empirical data from the public sector. This study attempts to fill the gap by providing some preliminary evidence in food and beverages industry. Using responses from 3 firms which includes Dangote flour mills, UAC and Northern Nigeria flour mills plc, the study found that more than 85% of the respondents had either fully outsourced or co-sourced their internal audit function. Further, non-department entities were found to more likely to fully outsource their internal audit function than the departments. Lack of technological know-how and service quality of external providers seem to outrank cost-related factors as reasons for outsourcing. The study also raises several issues in relation to a lack of segregation of duties in the process of selecting and monitoring outsourced arrangements. Implications for policy setting and avenues for future research avenues are discussed. INTODUCTION In today’s business environment, outsourcing processes to a third party has become relatively commonplace. The practice gives organizations an opportunity to gain efficiencies, improve performance, lower costs, and focus on core competencies. Many businesses, however, fail to complete necessary due diligence work before the outsourcing relationship begins and neglect...
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...Outsourcing Human Resources Management Functions: Recruitment and Selection Uni*********** Research Paper for HRM**** Section 1202 ********** March 16, 2012 Outsourcing Human Resources Management Functions: Recruitment and Selection Introduction In the recent past, the competitive environment for many organizations has changed, with the organizations having to operate in globally capitalized environments, rapid industrialization, and changing technology (Abraham, 1988); and just recently a global economic downturn which has had organizations to downsize their operations. As a result, these organizations are constantly seeking new managerial methods, as both a way for the organization to be competitive and to cut operating cost; the most successful method is the outsourcing of business processes. Normally the Human Resources Management (HRM) function of recruitment has traditionally been performed in-house; advocates for outsourcing this function have increased and argue that outsourcing can reduce costs associated with recruitment and selection (Klass, 2001). Some organizations delegate crucial human resource functions to outside firms as a means of utilizing available expertise, reducing expenses, and to be able to concentrate on important business activities (Abraham and Taylor, 1996). The influence of increasing levels of globalization, technological changes, the complexity of business...
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...INFORMATION SYSTEMS RISK MANAGEMENT Week-4 assignment Wonyie V. Zarwee November 29, 2010 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 exclusive examination of four different outsourcing activities and the associated risks that an organization needs to be aware of. Let me begin with the use of an external service provider for data storage for an organization. This situation is mostly attributed to midsized and few large business with less capital to develop and operate a databases of their own. They may neither have the finance to purchase and operate a database adequately nor the additional funding to hire a skilled IT team to manage a database in-house. In an attempt to effectively and securely manage their data at a lower and affordable budget, many of these organizations choose to outsource their data storage. Even though outsourcing of their database helps an organization to save on cost, there are many risk involve with...
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...Risk Analysis for Outsourcing Decisions Linda Duvall CMGT/442 Mr. Thomas Maricle February 23, 2011 Abstract The purpose of this paper is to identify the possible risks to an organization in each of the following outsourcing situations: a) the use of an external service provider for your data storage; b) the use of an enterprise service provider for processing information systems applications such as a payroll, human resources, or sales order taking; c) the use of a vendor to support your desktop computers; and d) the use of a vendor to provide network support. The paper will include a risk mitigation strategy for each situation. Risk Analysis for Outsourcing Decisions “Outsourcing”, as defined by Wikipedia, the free encyclopedia, is the contracting out of a business function to an external provider. In this sense, two organizations enter into a contractual agreement involving an exchange of services and payments. Paul Strassmann, in his paper “The Squandered Computer” would prefer the term “out-tasking” because one organization is utilizating the specialization of another organization. According to “Microsoft Business for Small and Mid-Size Companies”, small business owners are outsourcing a range of services, from Human Relations to finance and accounting to customer services. Small businesses can now tap outside facilitators for a much greater range of services. As an example, entrepreneurs with strong sales often assume a full-time...
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...Outsourcing of outsourcing the IT function Introduction Outsourcing is contracting with another company or person to do a particular function, (Schaffhauser, 2005). Outsourcing of almost every department of a business is a real option for all businesses. In today’s world of business, most companies have an IT department; however, management may consider the option to outsource the IT function for various reasons to include increasing the bottomline. This paper will address the reasons to outsource in addition to the risks and rewards. Determining Factors in the Decision The first question that management must address is “Why outsource?” Outsourcing enables companies to reduce and control operating costs by eliminating costs related to talent acquisition. When a company hires an employee, they usually provide a benefit package that includes health insurance and vacation time. In addition, companies are responsible for for training, employment taxes and other related costs. And by outsourcing non-core business functions, more capital funds are freed up to spend on items that are directly related to its product or service. Outsourcing also enables companies to gain superior talent. Instead of just the knowledge of one person, the company would benefit from the combined experience of a team of IT professionals. Outsourced IT companies usually require their IT staff to have proper industry training and certifications as well. The cost of keeping up with technology is another...
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...TUI University BUS 401 Case Study Module 3 Dr. Yi Ling Abstract Outsourcing occurs when a company either buys products or services from outside sources or sends work to outside contractors versus doing it themselves. There are several advantages and disadvantages to outsourcing to include cost savings, sharing risk and developing better leaders internally. There are also some disadvantages like lack of quality control, loss of some management functions and losing the ability to build well rounded leaders in all aspects of the company. In a country like Iraq, the United States military is outsourcing many occupations in an effort to rebuild the Iraqi economy and eliminate the need for military presence at the same time As our lesson for module 3 starts out with in one of the first comments, in that people are the main asset of any organization, it is up to the organization itself, mainly through its Human Resources Department to figure out what parts of a companies process or performance could be contracted out for somebody else to perform. I am going to discuss some advantages of outsourcing to include saving money, the shared risk associated with outsourcing, accommodating fluctuations in requirements, and the assistance in developing internal staffs. I will also discuss some disadvantages to utilizing outsourcing within a business to include poor quality control, loss of managerial control, decreased loyalty among company employees, and the loss in developing...
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...Outsourcing the IT Function of an Organization Frank Bicocchi CMGT/578 12/15/2014 DENNIS FINIGAN Outsourcing the IT Function of an Organization Strategic analyst and business analyst in the organizations of today have uphill battles. Often miss understood or limited by the executives of an organization, these positions function as the go-betweens for internal operations, clients and stakeholders. Managers also have the duty of handing similar aspects in terms of managing teams, ensuring project profitability and improving process efficiencies. Enter outsourcing; a solution that helps managers and analysts maintain standards while provide the most ‘bang’ for the ‘buck.’ Information systems and information technology are the latest functions to see large segments become outsourced to third parties as a means to an end. Outsourcing is not a new trend. In most businesses some percentage of each department is outsourced in some way. For instance, 94% of the businesses surveyed by HR Magazine outsource some aspect of their organizations’ human resource functions to be handled by one or more third parties; in most cases it is more than 60% of the given function (Gurchiek, 2005). Strategic planners use outsourcing as a tool to help organizations meet their goals while maintaining financial leanness and low cost/benefit ratios. In the information technology environment, outsourcing has increased primarily due to the sheer number of specialties involve in the field as a...
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...suppliers. The two main key factors that drive the decision to source internally or outsource is driven by the supply base structure and in customer to supplier relationships. Outsourcing since has become a more favored approach for most organizations. Studies show that last year companies within the United States spent about $29 billion on outsourcing services or products (Thomas, 2009). It’s obvious that outsourcing has become a huge driver for organizational business strategies. Some advantages in increased sales, higher profits, new knowledge and experience Some advantages of global sourcing include: lower costs, tapping into skills or resources unavailable domestically, developing alternate suppliers and sources to stimulate competition. Some disadvantages include: communicational barriers between the organization and the suppliers. Hidden costs associated with different cultures and time zones, exposure to financial and political risks in countries with emerging economies, a risk of the loss of intellectual property, and increased monitoring costs relative to domestic supply. For manufactured goods, some disadvantages include long lead times, the risk of shutdowns interrupting supply, and the difficulty of monitoring product quality. Bringing together people from different cultures for outsourcing will not create any value. The organization will need to invest time and money into designing and implementing diversity initiatives that will help make use of what...
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...CMGT 442 ENTIRE COURSE Information Systems Risk Management Week 2 Individual Assignment Service Request SR-HT-001 (Huffman Trucking Benefits Election System) Prepare a 3- to 5-page paper describing the considerations necessary to address the possible security requirements and the possible risks associated with the Benefits Elections Systems being requested by the Service Request, SR-HT-001 for Huffman Trucking Company. Week 3 Individual Assignment Security Monitoring Prepare a 3- to 5-page paper describing the security monitoring activities that should be conducted in an organization with both internal IT (payroll, human resources, inventory, general ledger, and so on) and e-commerce (Internet sales and marketing) applications. The paper will include the rationale supporting each monitoring activity you propose and any recommended course of action to be taken when a significant risk is identified. Week 4 Individual Assignment Outsourcing Risks Prepare a 3- to 5-page paper that identifies the possible risks to an organization in each of the following outsourcing situations: a) the use of an external service provider for your data storage; b) the use of an enterprise service provider for processing information systems applications such as a payroll, human resources, or sales order taking; c) the use of a vendor to support your desktop computers; and d) the use of a vendor to provide network support. The paper will include a risk mitigation strategy for each situation. One...
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...Problems of Offshore Outsourcing Abstract: Offshore outsourcing is one of the hot topics influencing the global environment, politically, economically, and socially. While offshore outsourcing is associated with several benefits, these ventures also pose many risks. In this report, I am going to discuss various factors affecting the offshore outsourcing, including risks involved, the challenges faced by managers in these collaboration initiatives, and solutions that may aid in overcoming those challenges. Executive Summary The report outlines the prevailing trends of offshore outsourcing in a global perspective. The purpose of the report is to provide members of the Executive Board Committee, Educational Testing Service with the information essential for considering offshore outsourcing as a strategic decision. It also highlights the risks, challenges, and potential solutions of offshore outsourcing. Despite its widespread diffusion over the years, management of offshore outsourcing projects continues to challenge organizations. Competitive advantages, such as lower cost, technical knowledge, etc., are key factors to search for external solutions. While offshore outsourcing is associated with several important benefits, it also entails number of risk factors. In order to manage outsourcing decision, it is important to have a clear understanding of various risks posed in collaboration initiatives, challenges faced by managers, and solutions that may allow overcoming some...
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...Outsourcing Teresa McGlown BUS 630 Wendy Achilles 08/27/2012 Table of Contents Introduction 1 Forms of business aspects covered by outsourcing 1 Outsourcing with reference to Hechlinger, J. Article 2 Other articles highlighting the application of new learning with respect to outsourcing 3 Dean Meyer’s Article highlighting the advantages of outsourcing 3 Sholstica’s Article highlighting the disadvantages of outsourcing 6 Present and future application of outsourcing within workplace 6 Conclusion 7 References 8 Outsourcing Introduction In the present dynamic environment, one way the companies can gain competitive edge over their competitors is by taking full advantage of all the business aspects. One of such possible aspect of performing organizational activities in an efficient manner is through the platform of outsourcing that provides a company an opportunity to hire an outside firm having proficiency in a particular field and then getting some of the organizational tasks completed through this hired firm either at a reduced cost or an increased productivity rate. A number of factors (both related to internal and external environment) are considered that helps to decide that whether outsourcing is a right answer for a particular company. The process of outsourcing facilitates learning of a number of aspects that if properly applied within an organization can serve as a competitive element for the company, enabling them to remain a competitive force within...
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...The Outsourcing Advantage Abstract Outsourcing has become a well-integrated function in the world of business today. Outsourcing forgoes attempts to perform certain value chain activities internally and instead, farms them out to outside specialists and strategic allies (Gamble & Thompson, pg. 127). An affordable and often more efficient way to meet a goal or perform a task is to have it outsourced. There are many reasons to outsource a task or function. Each reason varies, depending on the nature of the task, the firm’s available resources and the desired outcome. Outsourcing also stimulates the economy, providing a means to support local businesses while simultaneously keeping the organization’s resources aligned internally. There are risks associated with outsourcing as well. One must maintain a localized and unified vision, with the firm’s best interest in mind, before deciding to outsource a job and also for the duration of the contract. In the world of business today, everyone is looking for the competitive advantage. Organization’s need to streamline their business practices in order to maximize profit margins and reach sustainability. One way to do this is to outsource. Outsourcing is simply the function of taking internal resources, and giving them to outside firms who then make those work operations their sole responsibility (driveyoursuccess.com). More and more companies seem to be outsourcing their services. A recent study by BlueWolf revealed that 35%...
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