Outsourcing Pros And Con Essay

1157 words - 5 pages

OutsourcingThe reliance on outsourcing as a means of providing information technology (IT) services has been growing steadily over the past decade. It was recently estimated that IT outsourcing would reach US$ 156 billion in 2004 (Lacity & Willcocks, 2000). The facts that firms are increasingly turning to external suppliers in order to meet their IT needs does not mean that outsourcing is a panacea or that it is without problems. While it may help clients achieve major benefits such as cost savings, increased flexibility, higher quality services and access to new technology ( McFarlan & Nolan, activities 1995).IT outsourcing is broadly defined as a process undertaken by an organization to contract out or sell the organization's IT assets, staff and or to a third party supplier who in exchange provides and manages IT assets and services for monetary return over an agreed period of time ( Kern et al.,2002). In this contractual relationship the outside vendor assumes responsibility of one or more IT functions, but alternative functions may require alternative processes.Quinn, 1992 "outsourcing gained wide spread acceptance because firms must constantly seek to lower their cost structures, respond with great flexibility to changing market conditions and market uncertainty in general"Pros and cons of outsourcingOutsourcing is a strategically important activity that enables an enterprise to achieve both short and long term benefits.In outsourcing, cost benefit appears to be a compelling argument of contracting out services previously performed internally (Anderson & weitz, 1986)Its efficient. Outsourcing provides seasonal labour without the overhead of permanent hires, which is particularly helpful to firms dealing with a staff shortage. Firms with enough people to handle busy season but that worry about a glut of unused hours the rest of the may see a benefit too.(Shamis et al., 2005).Allows firm to handle more work. Many firms are selective about accepting new work during busy season, and most have had to turn away profitable client at times. Outsourcing arrangement can accommodate new engagements that come up in cases like this.It usually offers lower labor costs. When firms outsource they normally do so to get lower labor rate by having the job done where the cost of labor is cheap.( Murray, 2005).Outsourcing adds flexibility to client operations, it free up capacity and allows clients to focus on their core competencies, such as investment and relationship management.Clients benefit from the offshore location, without having to incur the expense of setting up, or maintaining the necessary infrastructure. And clients gain from the proven track record and expertise of regulated, highly regarded offshore providers who can provide tailored solutions to their middle and back office requirements.( Henderson, 2005).Outsourcing continues to be a popular business strategy, although companies are now gaining more experience with the realities of...

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