Thursday, February 12, 2009

Information Technology - Outsourcing

Information Technology - Outsourcing

Information Technology Outsourcing is a very old concept and the entire fun in outsourcing the process is to save on cost and time at the same time obtain superior quality product at the end. Outsourcing has revolutionized many business models in US markets and has gained maximum advantage at the same has also promised maximum advantage.

Outsourcing is more than a simple purchase decision based upon economic or financial criteria. It is a strategic decision that encompasses the transfer of service delivery of selected activities to a third party and the establishment of a long-term relationship that can create new sources of value for an organization. Key to the understanding of outsourcing is that while service delivery has been transferred, accountability has not. Additionally, outsourced service delivery is, or should be, transparent to the users of the service and the customers of the organization.
Many types of IT services can be outsourced, the most prevalent being data centre operation, desktop support, help desk services, network management, software development and support, disaster recovery and, more recently, web hosting and application management. An organization can choose to outsource only selected IT services or opt to outsource all of its IT services.

One challenge in outsourcing is bridging the gap between the standard of service the organization expects from its service provider and the services actually delivered. The following are common problems contributing to the gap. First, the organization may be accustomed to a certain standard and style of performance that was provided by its internal IT department prior to outsourcing. This same standard and style may not, however, be continued by the service provider. The degree of difference can be a point of contention, at least in the short term, until both parties grow accustomed to the new operating environment.

Sometimes, unexpected situations leave an organization no other choice than to terminate an outsourcing contract. Such a decision could be justified by the closing of a unit, a change in the organization’s business mission or strategy, poor service quality or insolvency of the service provider. Terminating a contract can involve high costs, particularly if the contract did not contain any opting-out provisions. Switching service providers or even going back to an in-house solution also involves high costs. Organizations may feel trapped in their outsourcing deals and perpetuate bad relationships to avoid switching or termination costs. These lock-in situations are
more likely when there are few providers competing to deliver these services.
Outsourcing in times of recession has shown a strong setback due to the non-availability of funds, non-liquidated assets and so on. Inspite of a bad period outsourcing has shown a strong performance is expected to improve in the near future.

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