Top Information Technology (IT) Outsourcing Mistakes, Assessment Example

In management, and especially in information systems management, it is very common for an organization to delegate some of their required duties to external parties that provide specialized services for a profit. This is referred to as outsourcing in management. For example, a business organization may not have specialized experience in information system security against the world’s latest computer viruses and malware. This organization would then outsource this task to an information system security firm to provide such security services for them. (McBeth, 2015)

In business, foreign direct investments or (FDI) refers to the outsourcing of enterprises to countries abroad. This gives a business the opportunity for global expansion while at the same time building business relationships with their foreign investees. There are two types of FDI strategies. The first if referred to as green field FDI. In green field FDI, a business establishes new factories or plants in a foreign country to attract business abroad. An example of this is demonstrated by McDonalds, a US based business that builds restaurants all around the globe. The second FDI strategy is referred to as brown field investments. In brown field FDI, an enterprise outsources abroad through the merger or acquisition of other foreign companies. FDI is a financial method of outsourcing and is especially attractive for under-developed nations because it helps support their domestic markets. (Investopedia, 2015)

Information technology outsourcing is similar to FDI but more on the level of information systems technology in particular; as opposed to financial investment. ITO for short, information technology outsourcing is the process of a business outsourcing computer based services such as programing or cyber security for other business that do not specialize in such. Beyond the reasons of lack of programming, cyber security, or IT knowledge, businesses will choose to outsource IT services to save money. Often, it is cheaper for a business to purchase IT services from an external service provider as opposed to hiring a team of IT specialist and having to pay their usually high salary requirements. (McBeth, 2015)

A very common foreign destination for outsourcing IT services is India, especially for the US. This would be because it is relatively cheap for the US to outsource IT services from India as the programming of highly technical software for cyber security and IT services tends to be laborious. This also gives US organizations, including Federal Government entities, more time to focus on their own business and financial activities. It simply saves them time and money, an imperative motive for any organization. (McBeth, 2015)

The National Association of Software and Service Companies or (NASSCOM) reports that nearly 80 percent of US and European companies select India as their primary destination for IT service outsourcing. This also includes nearly half of the companies listed on the Fortune 500. This is because India currently holds the title for being equipped with the biggest pool on the globe for technical and computerized professional skills. With a population of about 1.2 billion as of 2015, India produces about 3 million university graduates to their professional work force on an annual basis. To add to this vast amount of educated professionals being produced by the economy of India, the nation is the largest English spoken nation on the globe. More people in India speak English than even both the US and the United Kingdom combined. (India, 2015)