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Quick response. When tasks are done internally, businesses have better and faster responsiveness to their customers since they are closer to the customer in comparism to outsourcing whereby communication might be delayed due to circumstances Control. Companies have better control of their services Lower production costs. They could benefit from lower costs and taxes Disadvantages of Outsourcing. Studies have shown that companies who are not well informed in the outsourcing process usually find themselves in potential trouble which could ultimately leads to a huge loss.
Below are some potential drawbacks in outsourcing: Loss of know-how.
It is understood that in the 1980s many US businesses who outsourced substantially to Asian manufacturers to reduce manufacturing costs only to see this manufacturers emerge later as their most difficult competitors. Loss of Managerial control. The management and control of the tasks outsourced either full or partial will be automatically turned to the provider. This happens because it is harder to manage the outsourcing service provider as compare to managing one's own employees
Loss of control. Critics of IT outsourcing argue that no outside vendor can match the responsiveness and service levels offered by an in-house function, largely because the outsider is not subject to the same management direction and control as employees. In addition, concerns exist with outside vendors about confidentiality of data, strategic applications and provisions for disaster recovery. Longer resolution time. Typically, any problem with a server that company controls will take significantly longer to resolve when relying on an outside company to solve it.
Before being outsourced, staff would have been able to go to the server room or at least access it using Remote Desktop and act quickly and directly using your knowledge and experience.
When the support for the server is outsource, company are constrained and possibly unable to control the server in the manner that is most appropriate to the problem at hand. If performance is merely degraded, company may not be given permission to do anything about the application until a time that is convenient for the outsourcer but inconvenient for company and their staff.
Stifled innovation. Innovation, new technologies and ideas will present a challenge as contract may not contain a provision to develop the infrastructure using existing technology in a manner that will enable staff to be part of the future within the organization. The kind of research & development activity that would have been done during an internal undertaking at no visible cost to the project is not always possible within an IT outsourcing arrangement. Projects under an outsourced arrangement typically are done to a tight cost model.
Affects employee morale. Outsourcing often results in layoffs or the transfer of existing employees to the IT vendor. Such displacement can set morale into a tailspin and cause even talented staff to fear for their employment security Less flexibility. The outsourcing vendor provides the level of IT services specified in the contract using the technological platform it deems appropriate. Unless specifically spelled out in the contract, a company may lose the flexibility of moving to new computing platforms.
Outsourcing may also result into the possible loss of flexibility in reacting to changing business conditions, lack of internal and external customer focus and sharing cost savings. Loss of internally generated talent is yet another problem associated with the outsourcing as it may hamper the growth of an employee by depriving him from the experience he would have gained by handling the business issue himself then by passing it over to some other external party. Firms could be held hostage.
IT professionals argue that outsourcing allows the user to become a "hostage" of the vendor--the company may lose technical staff and be locked into the vendor's proprietary software and hardware. In a long-term contract, the customer has more leverage in negotiations, but the vendor has more leverage after outsourcing is under way. Quality Problems. The outsourcing company will be motivated by profit. Since the contract will fix the price, the only way for them to increase profit will be to decrease expenses. As long as they meet the conditions of the contract, company must pay.
In addition, company will lose the ability to rapidly respond to changes in the business environment. The contract will be very specific and you will pay extra for changes. Costs may go up. Many managers assume that outsourcing vendors are inherently more efficient due to economies of scale. (The economies-of-scale theory says large companies can achieve lower average costs than small companies due to mass production and labour specialization efficiencies. ) In the outsourcing arena, however, this model may not always apply.
For example, small companies may have lower costs than large companies by employing older technology, offering below-market wages and maintaining tight controls and procedures. When vendors submit bids that indicate savings, managers should always consider whether they can achieve similar results themselves. If the vendor is not inherently more efficient, perhaps the company can reduce its own IT expenses through data centre consolidation and resource optimization. Subcontractors. Companies that outsource often are unpleasantly surprised to find that their vendors aren't working on their projects, someone else is.
Outsourcing vendors in search of hard-to-find technical skills often subcontract portions of their computer system work to small, unknown companies, all without the knowledge of their clients. These subcontracts can cause problems, including viruses brought in by subcontractors, poor communications, high costs and low-quality service. Conclusion In reaching the decision whether to outsource or insource, it is important that senior management, project teams and possibly the board of directors have a look at advantages of outsourcing and outsourcing for the growth organisation as well as the disadvantages.
Outsourcing as seen from the above advantages and disadvantages could be the best strategic decision that could as well cost the company a huge loss if not studied properly. Before an organisation outsources its IT functions, it is very important that it prepares a sound full cost estimate for all existing internal computer systems so that it can determine whether the outsourcing is cost effective.
The IT manager is the main person responsible for outsourcing IT function within an organisation, the manager must be able to clearly identify its long term IT strategic directions and long term information needs and this must be define within its business objectives. It is also important that manager identify internal and external stakeholders and the impact that outsourcing may have on stakeholders. Outsourcing should not be seen as a solution in resolving problem service area within the organisation rather as a means to manage business effectively and focus more on core functions.
It is of vital important that senior manager undertakes the service of consultant if they are new in the outsourcing market who can help in sourcing of reputable vendors and that they evaluate all information before committing themselves to outsourcing. Also, a study carried out by PA consulting in the area of customer services shows that 66 percent of the respondents were disappointed with the results of their outsourcing, and 49 percent said they only realised part of the benefits they had expected from outsourcing, 17 percent said no benefits from outsourcing and only 26 percent really benefit from outsourcing.
Once the organisations have understood and addressed its long term IT strategic directions, it can then go on to decide which IT service areas should be outsourced and this should be based on the basis of costs and benefits analysis and it is justified on cost effectiveness and must be based on sound business decision.
Enhancing Customer Responsiveness with In-House Task Management. (2020, Jun 02). Retrieved from https://studymoose.com/employee-morale-10251-new-essay
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