Function Outsourcing it Function Outsourcing the Advancements

Function Outsourcing

IT Function Outsourcing

The advancements in the field of information technology have paved way for digitization of operations and automation of functions. In the recent decade it has become a need which is the source of cost reduction, efficient operation and competitive advantage as well. This is the reason; almost every organization is seriously considering the option of introducing IT in its operations. Since information technology is the combination of computer technology and communication technology, it has specialised body of knowledge and people with specialised skills are required in the field. Many organizations have developed an altogether new department of IT to look after the routine operations, maintenance of IT hardware and software and perform support functions whenever required.

Keeping in view the vast scale at which IT operations are conducted and the standardized software tools coming in the market to meet the requirements of many organizations in general, IT experts have formed IT organizations which perform IT function of the organizations on their behalf. It is known as outsourcing and this paper will cast light upon various aspects of IT outsourcing.

Determining Factors to the Decision of Outsourcing

The most important factor behind outsourcing is the lack of specialised skills in every organization. As mentioned earlier, not every organization possess the required level of expertise and resources to manage its IT functions. Hence, outsourcing is an ideal situation in which the organizations free themselves from the responsibilities of maintaining infrastructure, upgrading the tools, and providing the support services. Examples include, web hosting and email hosting to third party, making contracts for design, implement and support the IT network, data backup, ensure security and perform routine maintenance functions. The organizations do not hire any IT expert themselves rather the IT organization maintains their desk there. It is also possible that the IT team is available on call and quick support is provided on telephone. Depending upon the nature of agreement between the two organizations, the duration, level and fee of support can be determined.

Discouraging Factors of Outsourcing

Despite promised advantages offered by IT companies, many organizations do not adopt this option and establish their own IT department. This is mainly because of data security concerns. Public sector organizations particularly do not rely on any service provider and tend to have their own infrastructure. They hire expertise and incur high cost of maintenance of their network.

In this era where the world has become global village, adherence to network security is of prime importance (Hudson, 2006). Outsourcing means, the organizations store all their data at the servers of IT organization and they may access it whenever they want.

Another discouraging factor about outsourcing is the relationship between the two firms. Since IT firms are not too old in the field that old large organizations consider them to be their partners. It is also expected that IT boom can dwindle anytime and the dependence to third party may lead to unfavourable outcomes.

Risks associated with Outsourcing the IT function

There is a strong risk of data misuse associated with outsourcing IT functions (Tho, 2005). Another risk includes leakage of corporate secrets. Quite recently, the initiatives of privacy impact assessment (PIA) are enjoying much value. It determines that the data provided by the clients to the organization must be used for the purpose for which it is acquired by the same organization. Using it for any other purpose, though legitimate one, may also be considered a misuse of data and threat to the privacy of client.

Benefits associated with outsourcing

The biggest benefit associated with outsourcing lies in its cost-benefit analysis (Corbett, 2004). The organizations save the cost of establishing their own IT department and training their resources upon the required skills up to the expert level. IT organizations are expert in IT function and since they serve many organizations, they well cater for the risks which are not known to a single organization. In order to improve their image, the IT organizations keep on doing research and development so that continuous improvements can take place.

Costs in an Outsourcing Agreement

As mentioned earlier, the types of agreement determines the cost factor of outsourcing an IT functions. It is quite possible that organizations outsource only the partial functions to the third party. For example, many organizations outsource their call centre operations. Perhaps this is the most vibrant area where they need maintenance. There are many organizations that outsource their server management and maintenance, while it is also in practice that management of each and every computer and communication equipment used in the organization is outsourced to the IT organization. The cost of outsourcing varies from option to option.

IT organizations charge a fixed amount when they make agreements to manage IT functions. There can be a portion of variable cost as well. This variable cost is dependent upon the frequency of service and support required by the organization. For example, the fixed amount is charged for routine and scheduled maintenance of servers and variables charges are incurred whenever on-call visit is required in case of any issue arsing in performing IT functions.

It is most likely that the management while considering the decision of outsourcing their IT function performs careful cost-benefit analysis and only that portion is outsourced whose management is difficult for the organization itself. It is to save cost and ensure smooth operations. The research shows the outsourcing saves around 15% of the cost (Mclvor, Wall and Humphreys, 2009).

Implications to the organizational structure by using an outsourced IT department

By outsourcing IT function, the organizations develop relationships with some other organization to serve it. These relationships can either be on equal basis or client-service provider relationship as well. In any case, the change in organizational structure is evident. It is because, the organization close their own IT department and hire third party services whose employees are not on the payroll of this very organization. As mentioned earlier, the IT experts may maintain their desk in the client organization to provide ready services whenever they are required, they are still not the part of this very organization. In the organizational hierarchy and structure, IT department does not exist, though organization cannot sustain without performing this function.