IT Business Outsourcing involves contracting of specific processes as well as tasks of IT business to a third party or who can provide the service (Gewirtz, 2007). These days a lot of variation can be seen in the business environment, the reason for which is the impact of external factors like changes in the preference of customer. These changes have increased the business pressures in order of performance improvement and competition. Business firms, now days are really facing a lot of pressure to continue reviewing their performance in order to cope up with the current market. Innovation and creativity are the two things which are really very important and highly stress on the improvement of the market position. Hence, to cope with this complex environment, IT business process outsourcing has been as one of the solution in order to improve performance.
Outsourcing a process to any proficient company which have ample amount of professional awareness as well as experience can improve the operational efficiency of the business. However all these are based on the amount pf professionalism shown by the company.
However, such improvements depend on the levels of professionalism displayed by the third party entity. This means the major emphasis should be given to the level of expertise, time and finances. A third part must have all these qualities to apply as an outsourcer.
Essential requirement for a business when deciding for outsourcing is adequate information on the assessment of risk otherwise this feature has the ability to hamper your brand image (Sullivan, 2006). Outsourcing should be a result of the organizations decision making capability.
Different viewpoints should be taken into consideration with all the important entities like major as well as minor stake holders. External as well as internal environment should also be taken into consideration. Decision should be made on such criteria where you are confirm that the outsourcer have adequate amount of highly professional employee strength and support structures.
The objective of this problem study is to find out various variables that a business organization must have to consider when deciding for outsourcing like what are the various risk associated with the business, what type of change management is needed and who all are included in the decision making process, etc.
In order to take the correct decision, few objectives are needed to be prepared for better management. Following are some important objectives which should be adopted by every organization thinking for outsourcing.
1. First objective which is very essential is to find out all the most important variables which a business should consider while deciding about the outsourcing of their information processes. It is very important there are lots of factors which can affect the business while outsourcing like finance, employees, amount of profit, geographical location etc. Hence, the main task is to identify the main factors that a business organization should consider.
2. Second objective is to verify if the assessment of risk is making impact on the procedure of decision making when looking for outsourcing the information process. This is very important as without risk assessment, how to know what are the different risks associated with the outsourcing business (Harris, 2008). It gives a clear idea that these are the risk and in order to go for outsourcing you need to cope up with all these.
3. Third thing which is needed to be kept in mind is to verify if the requirement for change management extensively effect the decision about the outsourcing of information processes (Mead, 2005). Change management is basically an organized approach to deal with various changes, from the point of view of organization as well as individual.
4. Fourth objective is to evaluate all the entities required for decision making by a business. These entities are mainly the stakeholders in the organization. It’s very important to involve only those stakeholders who are needed for decision making.
At the time of deciding whether to outsource or not, one thing you should always keep in mind that is do whatever you can do yourself and outsource the remaining. There are many processes that are executed in a company, all of which are not equally important. Except the core process, all other processes are not so relevant. They are just acceptable.
Outsourcing IT business process should essentially be the decision of business firm and not an individual’s decision like the top management only. Around 20 industries are taken as the number of participants to complete this survey and the location for study is south East Asia, basically India and Philippines.
First necessary step for an organization is to decide whether the outsourcing decision will fit their organizational model and if yes, then why. Even though functioning in same line of business, one company can have ample reason for outsourcing while on the same line; another one can found that reasoning not worth. Making decision is not a very hard process, however, determining whether to outsource or not, what process to be outsourced and what are the objective to be accomplished are some of the important factors to be taken seriously. First variable to be analyzed is the understanding of the core-competencies of the organization because this understanding will help decide what to make and what to buy or outsource.
To analyze the quantitative side, all related costs should be evaluated that arise from different task like production, goods delivery or the in-house service. As outsourcing relates to future costs, investigation must be done comparing all the future costs. Now, to analyze the qualitative factor, some issues that should be kept in mind are: Is there some cultural match among company and the outsourcer, can you be willing to share data openly, reliability of the outsourcer, who among both of you has better skills and practices, technology is largely known or not and how hard is this to recruit for the function? One more important thing is that the outsourced process should be core to outsourcer. Outsourcing should provide benefits like cost reduction, flexibility, targeted expertise, benchmark quality and efficiency profits. If these variables are not resulting in positive, then the outsourcer is not the correct one.
As outsourcing is very critical for growth of a firm, thus a strong evaluation panel should be setup which should consist of most competent and appreciated employees who will help in deciding on the outsourcing and outsourcer (Wijers, 2009). Decision for outsourcing is entirely dependent on a formula called QCDV which stand for the quality, expenditure or cost involved, delivery at right time, and at last value. in fact, quality as well as the delivery is the most important component for deciding outsourcing as they openly influence your customer as well as businesses reputation and hence sales. In addition, the panel should also judge current regulations, governing bodies and standards of the firm which is associated with the production as well as completion of task in timely manner, that are associated with producing a product or completing a task in a timely manner.
The main aspect for evaluation must be the financial saving which outsourcing should provide to the firm. Outsourcing’s main objective should be to save capital. The outsourcer must recognize the firm’s expectations in terms of cost reduction as well as overall performance. Hence, the panel should develop an analysis standard on cost/performance which the outsourcer should have to go through each quarter. This will allow the company to check how much capital as well as expenses are used in the process and if the process is saving money or not.