STRATEGIC MANAGEMENT

Strategic management

Strategic management

Introduction

Information systems outsourcing is a business strategy which involves the contracting out of processes to other external parties, more experienced in the area. It can be used by any industry looking to gain a competitive advantage.

Outsourcing strategies need to be selected in terms of a company's core and non-core competencies and which would produce more profit should be determined.

Reasons for the growth of outsourcing include globalization, production technology, and changing customer needs.

There are numerous benefits of outsourcing, including cost control, access to skilled workers, strategic focus, financial reasons, improved growth, improved MIS control, access to technology, and management reasons.

The pitfalls of outsourcing include upheaval of personnel, coordination costs, lack of flexibility and control, and encouragement of competition and opportunism.

An example of a successful outsourcing venture is the one between First Fidelity Bank and EDS; while an outsourcing failure occurred for Ryder Truck International.

Outsourcing is likely to continue to grow into the future and impact most global corporations. If a set of strategies are followed, it is possible to have successful outsourcing relationships and improve a company. A company can grow and prosper and gain a competitive edge in an industry.

Research Hypothesis Statement

Taking into consideration the factors which a company will consider before contracting out its information systems as well as the problems which can arise from outsourcing, is outsourcing a useful business venture which will give a company a significant competitive advantage in an industry? INTRODUCTION Information systems outsourcing, or the contracting out of IS procedures to more specialized firms, is a business strategy which many organizations in a variety of industries see as a beneficial one.

Before a company decides to make the leap into an outsourcing relationship however, it should determine what it considers its core competencies and which of these competencies would be most profitable to outsource.

As with all business strategies, IS outsourcing has numerous benefits and pitfalls. If the relationship between the organization and the outsourcing vendor is well maintained, it is possible for any outsourcing venture to be successful. The key, however, is not simply to enter into an outsourcing contract because of limited cash flow, which is tempting to most organizations. In order to truly be successful, a company should enter an outsourcing agreement with a strategic plan for what it wants to achieve.

Organizations are continuously aiming at attaining, as well as maintaining, a competitive advantage in an industry. By outsourcing and with a certain set of guidelines, it can be proven that it is possible to gain competitive advantage through outsourcing.

Outsourcing

Outsourcing is the contracting out of tasks and services usually performed in-house, to an external vendor. Palvia (1995) offers this definition of information systems (IS) outsourcing - "IS outsourcing is the transfer of part or all of an organization's information system, data processing, hardware, software, communication network and systems personnel to an external party." Jenster & Stener Pederson (2000) agree that it is "the market procurement of formerly in-house produced goods and services from legally independent supplier ...