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This paper discusses the decision-making process for any organization regarding outsourcing issues. Outsourcing is the process in which a company invites external personnel, agents or companies to work on their projects. So, it is very important for the management to select the appropriate company. If they make a wide-the-mark decision and choose such a company that is incapable to finish the project, then the outsourcing company would have to bear all the losses concerning the uncompleted project. So for any company; decision-making is a very critical process as far as outsourcing IT operations is concerned.
Economic globalization around the world has created a need for corporations to subcontract, not only the fabrication of merchandise to external parties but also to benefit from off-shore outsourcing amenities or infrastructure. In short, IT outsourcing; is defined as providing a variety of ever-changing IT products and services to others who are unable to produce these themselves.
However, the question that these companies need to answer, before taking any major step is- whether standard financial investment information and criteria are all that is needed to effectively evaluate IT outsourcing decisions? A generalized opinion to this question is straight away ‘no’, as there are a few major steps implicated as a company decides its extent of outsourcing. No matter what the size of the company is, each conglomerate has to answer three questions as to when to outsource? Who to outsource to? Thirdly, what methods to use in outsourcing? Secondly, a company needs to have strong management to conduct the decision making process; as it might happen that the outsourced companies in which the corporations have invested their shareholder’s money, may go bankrupt or under while leaving the outsourcing companies to pick up the pieces together with being liable and responsible, as well as answerable to their shareholders for making the wrong decisions.
Organizations worldwide have effectively outsourced their IT operations to many external parties. However, it would be totally wrong to say that standard financial information and criteria are the only requirements to evaluate the effectiveness of IT outsourcing decisions; there are a number of other strategies and criteria that are important when making decisions. One such strategy is the need to establish IT outsourcing criteria. A company no matter what its size is needed to comprehend its objectives, and decide how to manage them along with the supporting technologies available to them. Establishing an outsourcing approach facilitates the management to form sound expectations, and measures the company’s cost and benefits as far as outsourcing is concerned, using established criteria (John & Campell, 2002). Another issue is the selection of a correct service provider together with noting the provider’s financial and operational well-being. For any company wanting to outsource its services, it is very important for it to select a well-reputed service provider their decision would have a direct effect on the company’s reputation and goodwill.
Outsourcing has a few advantages and disadvantages for a corporation; If the outsourcing company is an operating company, then outsourcing can be advantageous for a company, for it would provide the company with a chance to cut costs. A company trying to choose an outsourcing company should be very tactful and vigilant about for the type of service provider selected reflects the company’s image. For overseas companies, outsourcing is the best option as finding the requisite skilled labor force is not as easy as it seems (Guide for Managing information technology (IT) as an investment and measuring performance, 2006). Outsourcing is beneficial for the investors as well as for the company for it means cutting costs while multiplying the investors’ and the company’s input if the contract goes succeeds. Before outsourcing a company needs to perform a complete financial analysis of the market because the company is trying out something that is completely new to it.
A company in debt cannot avail of the opportunity of outsourcing as it is unable to find investors to fund its ventures. However, on the other hand, a company that has the essential capital available to it means that it would be always in the condition to support its ventures, hence such companies are considered as non-risky firms, and investors prefer to invest in these companies. Last but not least, comes up the performance measurement criteria for taking effective outsourcing decisions. A company can do so by scrutinizing its data so that the company is able to come up with an estimate of how much money it can earn if they decide to outsource against not outsourcing their services at all. Outsourcing IT services is an attractive option for many companies, and the above arguments prove the standpoint that the standard financial investment information and criteria are not all that is needed to effectively evaluate IT outsourcing decisions.
Bibliography
Guide for Managing information technology (IT) as an investment and measuring performance. (2006). Web.
John, G., & Campell, H. (2002). How do CFO’s make capital budgeting and capital structure decisions?
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