Evaluating the Impact of IT Outsourcing in an Organization

Abstract:   ABSTRACT Date: 16th June 2009 Authors: ODUOSE GODSPOWER ONORIODE (810822-T139) NJINKO POLYCARP NGANSI (791005-5735) Title: Evaluating the impact of IT Outsourcing in an Organization. Introduction: The continuous advancement of technology has increase the intensity of competition between organizations whose operations or core competence is based on information technology. Consequently this has force them to decide to either outsource or insource in order to survive the competition. Purpose: The purpose of this thesis is to describe and analyze the reason for IT outsourcing, the factors to consider before outsourcing, how to manage a successful IT outsourcing and the impact of IT outsourcing on an organization which consists of the advantages (benefits) and disadvantages (risks) of IT outsourcing. Research question: What are the impacts of IT outsourcing taking into consideration the reasons and factors for its successful implementation? Method: This thesis combines description with exploration and analysis. We used both primary data and secondary data. Due to time constraint and the importance of detail information for this research, we adopted a semi-structured interview which allows the respondent to give their thoughts and detail insight on some of the questions. Taken into consideration the time allotted to the interview in the research schedule, we were still able to work with articles, books, news release and website materials as secondary data sources. Conclusion: From the theoretical framework, a lot of emphasis was placed on cost saving or reduction as the reason for IT outsourcing but the empirical study and analysis indicate that the reasons for IT outsourcing is now shifting from cost saving or reduction to organization need to have access to advance technology and expertise although cost saving is still an important reason why organization adopt IT outsourcing. Moreover, from the theoretical framework and empirical study of this thesis we could deduced that in order to implement a successful IT outsourcing the organization needs to consider some major factors such as identifying the need to outsource (why outsource IT?), what IT activities or infrastructure to outsource, identify the various steps and processes (such as contracts) involve in IT outsourcing, identify potential risks and possible outcome, criteria for choosing the appropriate IT outsourcing vendor and evaluate the down time and time required to find the most appropriate IT outsourcing vendor. We observed that organizations which spent more time in planning the IT outsourcing experience more success rate compared to those who spent less time. Furthermore, from the theoretical framework and empirical study, we found that IT outsourcing has a major impact on an organization and its impact is dependent on how the factors for its success is managed. Although there are a lot of notable benefits of IT outsourcing but IT outsourcing also entails risks such as the hidden cost, security and confidentiality issues, service quality issues and system or operation disruptions just to name a few. In an attempt to mitigate risk, a company engaging in an IT outsourcing will try to protect its core activities and outsource non-core activities for security and confidentiality reasons. Though companies vary with respect to their operations, they will be optimistic to experience benefits that will outweighs any potential risks or cost in an IT outsourcing since the main objective of any company is to maximize profit and minimize cost.