IT Services and Outsourcing

IT Services and Outsourcing

Introduction

Outsourcing is one of the fastest emerging concepts in the international business arena. Companies having headquarters in developed countries tend to outsource their services to other firms, operational at a distant place. Outsourcing also commonly referred to as global sourcing or off shoring by industry professionals (Uzzi, 2007). Sourcing refers to a number of procurement practices aimed at finding, evaluating and engaging suppliers of goods and services.

Although there are numerous advantages of outsourcing IT services, one cannot neglect the threats that outsourcing of technology-based services pose on the overall operations and functions of the international firms (Radin, Calkins, 2006). This paper highlights the significance of outsourcing of services within the Information Technology (IT) sector. This paper also highlights the challenges facing the management of global IT services firms in connection with streamlining of IT operations at a global level. This paper also provides answers to question as to why IT firms tend to outsource their services to other developing countries?

Discussion

Outsourcing

When organizations deal with outsourcing projects, clearly defined boundaries become instrumental to defining the "out." According to (Pietrobelli, Rabellotti, 2007), the boundary separates the outside from the inside. Furthermore, boundaries also define the area of responsibility and the scope of interest, which is important for an outsourcing project, so there is no ambiguity about the responsibilities of the vendor and the client. Boundaries are unique for outsourcing projects because outsourcing occupies a unique position along the continuum of inside-outside relationships common to the operations of most businesses.

This practice is becoming increasingly common and driven by global competition, increased need for flexibility, access to global resources and substantial financial gains. Moreover, the internet and availability of electronic communication infrastructures makes this global distribution feasible to organize and manage (Domberger, 2008). Outsourcing is now almost an automatic expectation to respond to competition but the choice of where to obtain the goods and services is not a static decision; rather, it is subject to continual reevaluation.

Since outsourcing is by no means a perfect science, the boundary between what is sensible to outsource and what capability is better kept in-house is constantly being tested. In these circumstances, where outsourcing is a relatively new science and is nowhere close to being perfected, it is relatively easy to misjudge where the boundary should be drawn (Coe, Dicken, Hess, 2008). In addition to knowing the boundaries of the outsourcing project, organizations should consider outsourcing as an arrangement in which they rely on intermediate markets to provide specialized capabilities as well as create value along their supply chain, and not just as a cost-saving technique.

With the advent of information technology and globalization, countries have come to realize and appreciate the theory of interdependence and reliance on each other. This concept is a consequence of the notion of peaceful co-existence. This similar concept of interdependence and inter-reliance applies in the case of multinational corporations (MNCs). These multinational firms, in order to reach out to a much larger customer base, need to expand their businesses ...