Unit 3 Assignment 1 IT Sourcing

1 IT Sourcing

IT industry initially was product based but eventually it has become services led. Businesses are no longer content with stand-alone IT activities. They need IT strategies based on business and market space. IT sourcing and its business strategy is helping the organizations achieve their business goals.

Using the IT sourcing, the businesses can select suitable sourcing model to deliver the IT activities in alignment with the business goals. IT sourcing can be categorized into IT outsourcing and IT insourcing. IT outsourcing in which the organizations outsource IT activities to a service provider has been in high demand. At the same time companies keep important functions in-house or insource them.

Below framework provides

2005). IT outsourcing allows client to get the job done for a less price. They can cut their costs on technology and don’t have to hire and train IT staff. The relaxed laws such as labour laws in foreign countries also helps in reducing the costs. Additionally, client doesn’t have to pay for other costs such as health insurance and vacation pay.

• Core focus: Businesses with not their core competency as Information Technology need to focus on what they do best. With limit on the resources, IT outsourcing will help organizations in focusing them on the core activities. Schneiderjans et al. (2005) explains that IT outsourcing helps businesses in identifying their core competencies and supports in strategic planning.

• Outside expertise and technology: “A professional services company will have a pool of skilled people available to its customers. These skills are available to you when needed” (Aalders 2002). As compared to in-house resources, client can get services from a wide variety of technically skilled people. Latest technology can be acquired by the client for their systems with the help service

With less restrictive laws in countries where service is outsourced, data security is a major challenge. Insourcing brings better data security if there are better security standards set in home country (Sikula Sr et al. 2010). As per Deloitte 2014 survey, data privacy and security will have the major impact on decision for companies to insource.

• Better communication: When an IT function is offshored, distance and cultural differences affect the quality of service. Companies receive complaints about services when they outsource them. They understand that product or service quality is more important to customer than its cost. It is easier to communicate with person nearby rather than far away which results in better understanding. (Sikula Sr et al. 2010).

• Improved control: Outsourcing an important function can result in loss of control of client over technology decisions (Deloitte 2013). Companies try and keep their vital IT functions in-house. They understand that these functions are important to their success and hence keeping these IT functions in-house will provide better control. True innovation results from IT professionals being tightly aligned with the company’s strategy, and that is difficult to pull off when IT people work for a different company (Davenport 2015).

1.2.2 Risks of IT