Discuss the concerns and issues related to outsourcing.

Question

What will be an ideal response?

Answer 1

When a company decides to outsource IT functions, it takes an important step that can affect the firm’s resources, operations, and profitability. Mission-critical IT systems should be outsourced only if the result is a cost-attractive, reliable business solution that fits the company’s long-term business strategy and involves an acceptable level of risk. Moving IT work overseas raises even more issues, including potential concerns about control, culture, communication, and security.?In addition to long-term strategic consequences, outsourcing also can raise some concerns. For example, a company must turn over sensitive data to an external service provider and trust the provider to maintain security, confidentiality, and quality. Also, before outsourcing, a company must carefully review issues relating to insurance, potential liability, licensing and information ownership, warranties, and disaster recovery.?Most important, a company considering outsourcing must realize that the solution can be only as good as the outsourcing firm that provides the service. A dynamic economy can give rise to business failures and uncertainty about the future. In this climate, it is especially important to review the history and financial condition of an outsourcing firm before making a commitment.?Mergers and acquisitions also can affect outsourcing clients. Even with large, financially healthy firms, a merger or acquisition can have some impact on clients and customers. If stability is important, an outsourcing client should consider these issues.?Outsourcing can be especially attractive to a company whose volume fluctuates widely, such as a defense contractor. In other situations, a company might decide to outsource application development tasks to an IT consulting firm if the company lacks the time or expertise to handle the work on its own. Outsourcing relieves a company of the responsibility of adding IT staff in busy times and downsizing when the workload lightens. A major disadvantage of outsourcing is that it raises employee concerns about job security. Talented IT people usually prefer positions where the firm is committed to in-house IT development — if they do not feel secure, they might decide to work directly for the service provider.