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Outlook Outsourcing of Technology, Term Paper Example

Pages: 4

Words: 1214

Term Paper

In an article by Corbett (2004) found several trends and reasons why outsourcing will be a continue trend into the future. The average business today that is manufacturing goods are outsourcing or subcontracting their goods over 80% of the time and large conglomerates are sourcing over half of their IT infrastructure(Corbett,2004). The continued trend in the new millennium is “Outsourcings of Technology for a variety of reasons such as benefit of saving money, benefit of controlled expenses, small business can compete with bigger companies, and business can concentrate on core operations. The benefit of controlled expenses allows the organization to further build their infrastructure and ensure they do not over extend their working capital. The small and large companies choose outsourcing their information technology (IT) systems because the advance technology is growing so fast many companies need IT outsourcing support to keep up with the new technology. The business management teams can no longer afford to view outsourcing as a trend that will eventually change. According to Corbett (2004), the organization executive leadership must change their perceptions of outsourcing as a tactical instead IT outsourcing is a business necessity.

The business IT outsourcing helps businesses control capital cost which can be converted from a fixed cost to a variable cost which allows the business to invest their time wisely on other projects. In addition, IT outsourcing helps the company avoid extremely expensive expenditures. The primary goal of IT outsourcing is to optimize business and performance which allows a business to reduce the overall cost of IT services(Corbett,2004). The increasing cost of IT services/new technology, cost of living and salaries of IT workers is changing the IT outsourcing market.  The advent of the IT business cloud has changed the landscape of IT Outsourcing because organizations can have platforms that are easily accessible for the end users. The ender users are demanding faster services that are available 24/7 which the cloud allows the business to deliver.

Benefits of Outsourcing

One of the benefits of IT Outsourcing is increasing efficiency in other departments such as marketing, research and development and operations. The IT department has a major advantage because they can control the cost structure of the IT Outsourcing that could be a competitive advantage. The IT Outsourcing needs of a company are so customer driven that most companies can lose loyally customers with inadequate technology. The reduce labor cost is a benefits because traditional IT departments constantly need new technology hires for short and long term projects that are expensive. The IT Outsourcing can be less expensive but it allows the company to focus on how to best utilize human resources where they are needed the most. All businesses have limited time to devote to different departmental needs however, the IT Outsourcing can help organizations focus on the peripheral task. In addition, the managers can better set their priorities.

The IT outsourcing has additional benefits for organizations that are cost conscious and they need free revenues to build their business or build a new business infrastructure. The best example is the business is opening new call centers in the Southeastern part of the United States however, the new cost puts a strain on the company’s bottom line earnings. However, new competitors are providing the same service at half the market price. As result, the company decides to move the call center to a new destination in India. The company now has enough revenue to build the call center infrastructure while staying competitive. The company has many advantages of moving the call center to India because they can now entrust the call center functions to external vendors. The offshore call center India location can be handle inventory management, payroll and some market services. The most visible benefit is the cost savings that the outsourcing brings the company and the call center operates at a lower cost. The wages in the western countries and India allows the business to operation at a fraction of the cost. The company no longer needs to invest large amount of revenues in recruiting, training and expensive resources.

There are other benefits to IT outsourcing such as the time zone advantage with customers. The company has a large volume of customers in California however, the call center needs to extend its hours to accommodate the gap in time. The customers need 24/7 IT support because their operations during the early morning core hours. The company was spending an enormous amount hiring and recruiting IT staff to cover the early and late hours of the California customer. The cost benefits outweighed the company handling their own IT services in-house and the services response time improved which delivers a quality service to the California customers.

IT Outsourcing Outlook

The IT outsourcing outlook is promising because the business can become more focused on their customers while adapting quickly to new technology.  The healthcare industry is an example of IT outsourcing needing to adapt quickly to the new ICD-10 changes. The industry was not prepared for the ICD-10 change in October 2015, however, the hospitals and clinics turned to IT outsourcing. The industry saved costs by allowing the IT outsourcing vendors to make the necessary technical standardization changes need for healthcare systems(Overby,2015).

The trend of IT outsourcing will continue to be one the primary resources for a business to bring in more profit, increase productivity and save revenue from outsourcing activities. The trends for the future will continue because outsourcing can save revenues such as British Airways saving 23 million by sending 1000 jobs to India in the first year (Corbett,2004). The cost benefits trends will continue in the new technology age because they can use the save revenues on organization needs such as training and hiring more employees.

Cost of IT Outsourcing

The monumental paradigm shifts of the United States companies sending jobs to offshore locations will continue as a business trend. The perception is businesses are money hungry to save every possible revenue for the bottom line, consequently the in-house IT outsourcing has become an expensive proposition.  The IT demand for qualified technology workers has risen through the roof because the industry has not kept up with the IT demands. The salaries for qualified IT workers is going up exponentially as well as the continued updating of certifications. In addition, the IT manager has a limited budget for IT departments which frequently has internal problems with the quality of IT services internally.

Conclusion

The IT outsourcing is a continue trend that will be continue well into the future. The advancement of new technology requires companies to respond with IT services much quick and faster with the same amount of quality.  The benefits cost is the number one reason whey businesses outsource IT services because it provides the company with the opportunity improve other business units. The organization benefits from controlled expenses which helps the company improve their infrastructure and free up additional working capital. The small and large companies both have no choice but to outsource because advance technology is driving the demand for IT outsourcing.

References

Corbett, M. (2004). The outsourcing revolution. Retrieved from http://www.economist.com/media/globalexecutive/outsourcing_revolution_e_02.pdf

Overby, S. (2015, Jan).10 outsourcing trends to watch in 2015. Retrieved from http://www.cio.com/article/2864429/outsourcing/10-outsourcing-trends-to-watch-in-2015.html

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