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Outsourcing It Essay

1003 words - 5 pages

Outsourcing Yet Another Service: IT
Ryan S. Pavlak BRIT (R)(MR)
Independence University

Outsourcing Yet Another Service: IT
In the world today saving the ever so precious dollar bill is the most important thing to almost every business. The outsourcing if information technology services is just another way for a company to potentially save money. Information technology services is not the first service to be outsourced and it is surely not the last. The reason it seems so beneficial is typically because of how mismanaged the internal information technology services, like what was taught earlier in this course. But is it really beneficial to outsource information technology services ...view middle of the document...

Large and small companies are both utilizing the growing outsourcing IT market, but one may be benefiting greater than the other.
Cons to outsourcing
When it comes to IT, managers often have a hard time calculating the cost of many of their functions. This is no different when it comes to outsourcing. In a survey that was performed by MIT Sloan Management Review out of 50 companies that were outsourcing their IT department, 14% were deemed a failure (Barthelemy, 2001). This is due to a few hidden cost of IT outsourcing. Vendor search and contracting, transitioning to the vendor, managing the effort, and transitioning after the outsourcing are four specific ways managers miss costs of an IT outsourcing.
Vendor Search and Contracting
Prior to selecting which firm a company wants to use for its outsourced IT department. This cost is usually significantly underestimated. Considering the service is the same for both large and small scale organizations; the cost to research, negotiated, draw up contracts, and have legal sign off on the contracts a company typically spends half a million dollars (Barthelemy, 2001). This is where large corporations have a significant advantage over small companies, at half a million dollars most small companies would have already spent their potential savings.
Transitioning to the Vendor
Once a vendor for the outsourcing is selected it is necessary for the vendor to learn your business in order to be helpful and functional. This extra cost of running two IT departments is difficult for managers to calculate. MIT Sloan Management Review found, “The average transition period when the organization actually incurred a cost was about a year. For 70% of the companies, the period was longer than 10 months” (Barthelemy, 2001). The key to transition to the vendor is knowing what you expect the vendor to do for your organization and informing them about it.
Managing the Effort
There are a few different areas where managing the effort can cost a company money. Monitoring to see that IT vendor fulfilled their contractual obligations, bargaining with IT vendors, and negotiating any needed contract changes...

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