Systems Development the Case for Rejecting Outsourcing

Systems Development

The Case for Rejecting Outsourcing the IT Department

The data and information within an organization is its life blood, it was what makes one company differentiated from another and valuable to customers. With IT being at the center of the information engine of any business, the idea of outsourcing it, allowing a third party company to manage this vital aspect of the company's health is like allowing a podiatrist to do heart surgery. It's not going to end well for either the doctor or the patient. The costs and benefits of IT outsourcing are presented in this analysis. Granted, IT outsourcing of menial, low-end tasks shows potential for streaming the operations of a business, allowing it to concentrate on its core business more effectively (Goo, Huang, Hart, 2008). Conversely outsourcing all aspects of IT can lead to a company abdicating its leadership in its main markets by sacrificing its core intellectual property (IP) (Goo, Huang, Hart, 2008)

Analysis of Costs and Benefits of IT

The most common misconception of outsourcing IT is the belief it will lower costs. From the many empirical studies of outsourcing, cost reduction is often the secondary benefit (Jae-Nam, Miranda, Yong-Mi, 2004) and often does not materialize at all given the massive amount of coordination and knowledge transfer that has to happen for any outsourcing relationship to be successful (Goo, Huang, Hart, 2008). The cost savings of outsourcing are a mirage; they exist only on one side of the equation of creating greater value for the company hiring outsource providers. The other side of the equation is the massive amount of effort it takes for any outsourcing relationship to work correctly. There are literally hundreds or even thousands of hours waiting to be spent by senior management, all other departments and worst of all, the customers who are often not given the necessary information they need.