Impact of IT Outsourcing on Small Medium-sized Enterprises (SMEs)

The assignment content discusses how IT outsourcing has impacted internal processes of an organization, highlighting benefits such as reduced operation costs, risk, and focus on core functions, while also improving efficiency and productivity. The objectives for this research project are outlined, including assessing literatures on theoretical aspects of IT outsourcing, understanding functions and technologies outsourced by SMEs, identifying factors contributing to IT needs, critical factors in outsourcing, areas or functions that could be outsourced, and issues faced by small businesses in the UK.

Running head: IT OUTSOURCING
dissertation
To investigate the impact of IT outsourcing on Technology based SMEs in UK

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Abstract
Small business in United Kingdom (UK) are highly engaged in the Information Technology (IT)
outsourcing due to its huge advantages. However, very less number of academic research and
studies are done in this phenomenon and aspect. One of the main uncertain build of IT
outsourcing involves the cultural variation. A system of proposals was mainly tested through
case studies and analysis of three Small scale enterprises that were based in England to get to
know about the depth of particular changes and challenges for all micro firms and small
companies who were engaged in the IT outsourcing. The cultural differences played a significant
part in result of these projects (Agarwal, et al., 2006). Outsourcing the Information technology is
considered as a well formed and executed part of the UK based small scale enterprises.
Outsourcing of the information technology development and support is a widespread and critical
part of globalized United Kingdom as well as other countries’ economies. In United Kingdom,
many national small scale enterprises such as Southern Business Technologies consistently
outsource their IT services to their outsourcing vendors which is getting services and goods from
the outside suppliers. It is thought and considered that Information technology outsourcing is
encouraged through cost cutting in the Information Technology department (Al-Qarim, 2003).
However, the latest drifts suggest that the concept of outsourcing involves improving the usage
of all internal service and resource satisfaction. According to authors Loh & Venkatraman
(1992), outsourcing the functions of IT to the providers of external services is one through
acquiring strategic, technological and economic advantages. In this paper, it has been proposed
that main and core drivers and reasons for outsourcing the IT is being matured and developed
from being completely cost driven to strategic business practices. The main reasons and cause to
outsource include: technological, economic and strategic benefits, core business activities and

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competitive pressures (Agarwal, et al., 2006). The thesis considers reasons to outsource from
perspective of UK and relationship between service quality and satisfaction from the perspective
of outsourcer. According to Dahlberg & Nyrhinen (2006), service quality and satisfaction are the
significant factors to outsource and each of it have proposed various factors which contribute
towards decision to change vendor, continue with an outsourcing contract and to back source
(Ang, 1998). The main thrust behind this paper involves to develop over the existing research
through identification of the problems and issues that are specific to the UK outsourcer by giving
an evaluation of present academic literature and review on outsourcing of Information
technology relating to the major frameworks and also investigating the preset attitude in UK
corporate culture for outsourcing which includes offshoring portion of the business of company
(Applegate, et al., 1991). This thesis makes use of the exploratory research for determining the
suitable design of research, methods of data collection and selecting the subjects for this research
paper. The study which is collected from the data using various sources such as questionnaires,
surveys, interviews, exploratory research and literature are combined for the analysis (Apte, et
al., 1997). Many hypothesis are formulated and then tested and checked as opposed to the
collected data by making use of quantitative methods like causal method which was employed
for investigation of relationship between satisfaction and productivity of Small Scale and
Medium scale enterprises in UK and outsourcing variables. The hypothesis of the research are on
the basis of various personnel in the company having varying criteria in the outsourcing context
for success and aggregate satisfaction through outsourcing is associated with successful
perception (Applegate, 1991). Outsourcing satisfaction is related and associated to the
outsourcing which is seen as fruitful and also working well. However various parties of the
organization may be disgruntled with arrangement. Few of the components and elements that

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may affect the intensity of satisfaction with the outsourcing are quality of services, the
association developed and formed between vendor and outsourcing company, and cost to switch
the vendors. The thesis also proposes that core reason behind outsourcing the IT services is
shifted to various factors like managing the resources to cost considerations (Ang, 1998).

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Table of Contents
Abstract............................................................................................................................................1
Introduction......................................................................................................................................5
Research Aim...............................................................................................................................8
Research Question........................................................................................................................8
Objectives of Research.................................................................................................................8
Achieving above objectives.........................................................................................................9
The Organization or Structure of the Dissertation...........................................................................9
Review of literature.......................................................................................................................10
Methodology..................................................................................................................................23
Research Philosophy..................................................................................................................23
Research Approach....................................................................................................................24
Research Design/Strategy..........................................................................................................24
Data Collection Method.................................................................................................................25
Sampling method...........................................................................................................................26
Accessibility Issues....................................................................................................................27
Data Analysis and Results.............................................................................................................28
Questionnaire.............................................................................................................................28
Discussion......................................................................................................................................46
Conclusions....................................................................................................................................49
Cost and Benefit Analysis of One Company.............................................................................50
Objective Achievement..............................................................................................................53
Recommendations..........................................................................................................................53
Future Work...................................................................................................................................55
References......................................................................................................................................57
Appendix........................................................................................................................................62
Appendix B................................................................................................................................72

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Introduction
The current paper is focused on investigating the impact of information technology outsourcing
on the technology small medium enterprises. Outsourcing of IT projects are growing and
enhancing since late nineties and thus it is relatively a new area of the academic research. After
the reserve of big multinational companies, the latest entry into the IT outsourcing involves small
and medium enterprises. Chang and de Burca (2015) on the basis of revised model of Leavitt’s
diamond by Davis and Olson’s developed a concept based framework and system which outlines
main elements and components of small business who are undertaking IT outsourcing.
In this research paper three firms were selected who outsourced their IT infrastructure their in-
depth interview was conducted with their senior managers and employees. The current paper is
concerned with investigating the IT outsourcing for small businesses (SMEs) in UK. The small
to medium-sized enterprises are the integral part of the economy of a country (Aron, et al.,
2005). These SMEs help the country in generating employment for most of the population and

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also contributes to the gross domestic product (Premkumar and Roberts, 1999). It has become
important that the issues associated with the SMEs are handled effectively to ensure that they
keep contributing to the growth of the economy (Scase, 1997). However, the latest drifts suggest
that the concept of outsourcing involves improving the usage of all internal service and resource
satisfaction (Aubert, et al., 1999). The emergence of information technology can be considered
as one of the enablers that has supported the SMEs to a greater extent. Technologies have helped
these businesses in automating most of their operational activities and also look forward to
upcoming opportunities in the market. A study conducted in 1997 led to the understanding that
the 95 percent of the SMEs active in the OECD economies were generating around 60 percent of
the employment (OECD, 1997). The SMEs are found to be more flexible and ready to adopt new
changes in the environment or the market. They have also countered global competition in many
situations (Aubert, et al., 2008). The use of the information technology to outsource the
monotonous activities is expected to bring more opportunities for the SMEs to grow further. This
aspect will be investigated in the current paper. The emergence of the technologies has made it
easier for the organization to outsource their activities (Quinn and Hilmer, 1994). The SMEs that
are working in the remote locations or the one functioning in the industrial areas, now both of
them have access to similar market opportunities. A preliminary assessment of the literatures
related to the small businesses has led to the understanding that they face challenges at multiple
levels. The SMEs regularly face scarcity of resources at various levels such as expertise in
information technology, availability of time, presence of adequate finance, and others (Blili and
Raymond, 1993; Paraskevas and Buhalis, 2002). Now the technologies around the world have
significantly developed and are also being adopted by the small businesses in handling various
activities. However, despite the presence of the myriad technologies, it has become challenging

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to select the right technology for them that can facilitate in their business improvement (Bahli
and Rivard, 2005). Only the presence of the technologies in the market is not going to suffice in
fulfilling the business needs, the small businesses are required to enough expertise to handle
those technologies to facilitate in the business activities (Baxendale, 2004). It has been found that
due to limited access to human resources, the small businesses cannot afford to divert its
resources to the other functional or support activities other than their core activities that are
bringing in direct revenue. This is the point where outsourcing of the technologies is witnessed
among SMEs. The main thrust behind this paper involves to develop over the existing research
through identification of the problems and issues that are specific to the UK outsourcer by giving
an evaluation of present academic literature and review on outsourcing of Information
technology relating to the major frameworks and also investigating the preset attitude in UK
corporate culture for outsourcing which includes offshoring portion of the business of company
(Bardhan et al., 2006). This thesis makes use of the exploratory research for determining the
suitable design of research, methods of data collection and selecting the subjects for this research
paper. In addition to the above, the small businesses find it challenging to identify and
implement right technologies for them or the suppliers. Moreover, there are various
environmental vulnerabilities that keep grappling these businesses (Quinn, 2000). The point
where the small businesses find it challenging to come up with the right technologies that can
assist them in handling their business effectively is where they look towards outsourcing. The
current paper will look into the same considering the primary and secondary research
methodology. A total of 100 candidates were selected as the respondents for this research paper.
The system and framework of methods that are taken to test and examine the propositions are

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described in this paper and the means are also discussed by which the research paper was
undertaken. The methods which were used in the research are also classified and outlined.
Research Aim
To investigate the impact of IT outsourcing on Technology based SMEs in UK
Research Question
The main research question framed for this research project is:
 What can be the strategic planning involved for small business manager/owner which leads to
the outsourcing decisions?
 What is the impact of company size over the decision of IT outsourcing and its outcome?
 How does the small company be able to manage and control the cultural differences and
variations in IT outsourcing?
Objectives of Research
Based on the brief provided above, there were certain project objectives that had been developed.
The objectives were based on SMART criteria and deliverables for each of the objectives and
they are discussed in the next section. These project objectives are given below:
- The first objective was to assess the literatures written by other researchers regarding the
theoretical aspects of the IT outsourcing.
- The second objective was to understand the features that were to be present in the technologies
that can be suitable adoption for SMEs.
- The third objective was to understand the factors that contributed to SMEs in outsourcing their
IT needs.
- The fourth objective was to understand the factors that were critical while outsourcing the IT
needs.

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- The fifth objective was to come up with the areas or functions that could be outsourced in the
small businesses.
- The sixth objective was to investigate the issues that were faced by the small businesses in UK in
outsourcing activities.
- The seventh objective was to conduct cost-benefit analysis of the research on the participating
stakeholders.
- The eighth objective was to conduct primary research and understand the orientation of small
business heads regarding IT outsourcing.
Achieving above objectives
The current subsection is concerned with understanding the activities that were covered to ensure
that each of the activities was complete. Along with that, the final deliverables for each of the
objectives were also stated. Each objective was detailed considering S (specific), M
(measurable), A (achievable), R (realistic), T (time bound) criteria.
The detailed explanation of the objectives based on the SMART criteria is shown in the
Appendix B
Key Success Criteria
The key success criteria for the study will be the detailed understanding of whether the IT
outsourcing assist tech companies in any manner. The second success criteria would be the
successful data collection for the study.
The Organization or Structure of the Dissertation
Chapter 1 gives an outline of research and methodology

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Chapter 2 gives the literature review or background of the Outsourcing on the basis of relevant
theses, journal articles and research literature. This chapter summarized many research theories
related to the relationship quality, satisfaction and service quality.
Chapter 3 gives the overall research theory, scale development ad methodologies for conducting
the research project.
Chapter 4 gives an overall qualitative and quantitative approach for analyzing the data and
background for the organization under study.
Chapter 5 gives statistical and data analysis associated with quantitative research and analysis of
survey data gathered and also present theoretical background for analyzing the data.
Chapter 6 consist of the summary of research, recommendation and conclusions of the authors,
its limitation and recommendations of future research.
Review of literature
According to the paper that was written by the Lee 1999 reveals that there is sustainable
evidence that is align to the information technology outsourcing and it is considered to be
significant in order to generate the information that is related to the practitioners.
The literature that is associated to the academics states that academic play a crucial role in
disseminates the learning process. Evidentially, this has been found that there are so many
researchers that have highlighted the experience of IT outsourcing experience in the outlets of
academics ((Cross, 1995). According to the Huber in 1993, there are so many researchers that
have conducted their research in order to abstract the information from the various practices.
However, research that is linked to the ITO is the epic indicator of how the information system
can be evaluated and how the practices are determined. The aim of the ITO research is to

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evaluate so far that how the studying and the practices can formulate the significant concept that
are related to the phenomena. That’s the basic need that why long-term organization decide to
outsource and this is from the point of view of the client and supplier.
The research paper that was edited and published nearly in the 1991 witness that the large
established organizations generally outsources their technologies. This has been evaluated from
the multiple case studies that the company must take meticulous care of their of their information
technology outsourcing. There is tremendous quantitative approach or research has been
generated in order to analysis that what the need of the organization to outsource their
technology and what benefits or advantages they can generate from it (Loh and Venkatraman,
1992a). If the organization is not able to generate the benefit from outsourcing technique or
practices then this act will defamed the company (Lacity and Hirschheim, 1993; Willcocks and
Fitzgerald, 1993). During the span of 1994 to 2000, at least 79 academic studies are conducted
that has given the aesthetic pleasure to practices that has been conducted so far(Dibbern et al.,
2004). During the beginning of the 2009, it has been evidently found that there are utmost 357
papers that are generally published on ITO. In-fact the 18 years of researches has provided the
good understanding of the continuous practice. By analyzing the research paper the individual is
able to enhance their knowledge that why the particular firm outsource their technology. The
basic reason for conducting the outsourcing is that the organization wants to gain the competitive
advantage in terms of technology advancement. The company attains the practices so as to
reduce the entire cost, make the goods more valuable in the eyes of the customers, focuses on the
strategic work and help us in accessing the various resources (Applegate and Montealegre, 1991;
Huber, 1993). The research paper has also answered the question that is related to what firm
accurately outscource. This has been eventually found that most of the companies outsource

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overall IT portfolio (Dibbern et al., 2004). The individual also able to erase the confusion that is
linked to that what are the key procedures for outsourcing and the procedure is really formal. The
outcomes that are generated from IT sourcing are the satisfaction; performance and expectation
of the companies (Dibbern et al., 2004).If the company outsource the IT technology better than
they are able to generate the favorable or desirable outcomes. The company doesn’t make use of
better technology outsourcing or better Information Technology Outsourcing then all the
strategies of the company will be futile. According to the studies of Cullen et al., 2005a; Feeny
and Willcocks, 1998; Teng et al., 1995; Willcocks and Lacity, 2006 this has been concluded that
good strategy, better procedure and the readiness of the client are the key factors that must be
evaluated in the initial stages for the victory or the success. Better relationship management is
the crucial factor for the growth of the organization. Recently, this has been found that most of
the researchers are able to conclude their studies that are align to offshore outsourcing.
Additionally the offshore outsourcing play a vital role in seizing the market share as well as
augmenting the profit or revenue of an organization (Rottman and Lacity, 2006). The off shore
outsourcing generally resolve the queries that are related to the macroeconomic issues that are
prevailing these days extensively. It also addresses the capability or the ability of the suppliers
in various developing nations. There are specific users and supplier of these practices that
enables the success of the organization. From the user perception, that so many offshore IT
outsourcing generally poses some sophisticated challenges when compared with the domestic IT
Outsourcing (Rottman and Lacity, 2006). The complexiblity of the issues are so much typical in
handling and managing according to the studies of the Carmel and Abbott (2007).Meanwhile so
many researches are conducted in order to eradicated these queries or issues that are coming on
the way of IT outsourcing. Afterwards there are so many studies that is done in order to build up

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the base for various standards and definition that can be applied across the various segments of
ITO studies. There is fabulous example that has been coded in the research paper of Lacity and
Willcocks, 1998 and it states that how the outcomes that are tremendously derived from ITO can
be measured as the cost expectation. Thus there are several qualitative and quantitative articles of
valuable grounded coding technique are evaluated, developed and published in order to make the
outsourcing technique more crucial Jeyaraj et al. (2006). There are various researches that have
examined empirically the variables used in these studies. This report evaluates the usage of two
variable that are dependent and independent variables. The study demands the qualitative as well
as quantitative approach in order to neglect the chances of errors (Al-Qirim, 2003). The names of
the various articles are coded in order to address our report. The articles are as follows such as
“Technical expertise for the new IT” ” (Kishore et al., 2003),” and ‘‘Access to a larger group of
highly schooled professionals”(Sobol and Apte, 1995). The paper of “Outsourcing as the Game
of Losers “, the researcher just overviewed the various layoff data and various financial data of
almost 13 companies that consists of the latest IT outsourcing contracts. In his studies he
evaluated that strategy is not the optimal means of extracting the outsourcing. Eventually the
statistics reveal that the real reasons of why the companies opt for outsourcing. The reason
behind this complex question is really simple. Actually the companies are generally outsourcing
the technology in order to perform the best. The publication that was developed in 2004 by
Strassmann evaluated that another analysis that was related to the statistics reveals that the
analysis has performed over 324 companies and they all has arisen to the same conclusion. The
conclusion that was identical for the couple of years that is beginning from the 1995 to 2002. The
conclusion reveals that “Outsourcing is the game of losers”. Loh and Venkatraman (1992a) is
one of the crucial articles that highlights the various determinants that are align to the

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outsourcing of the IT. This has been generally cited for almost 341 times. In order to make the
research true this has found that there is usage of 55 data of the U.S firm in order to address the
research. This data is absolute indicator of the high business structure of the cost, poor
performance of the company in terms of the reduce profit and high annual cost. This data of high
business of U.S is also the portrait of huge level of the debt that company need to pay and also
the poor performance that evaluates the huge-scale of IT outsourcing in the client firms. From
Thirteen years later, Hall and Liedtka (2005) the similar findings was recommended. The
decisions of the large-scale IT outsourcing firms solely depend on the financial factors of the
company. The 51 firms of large scale IT outsourcing with aggregate 1261 control firms make the
usage of the secondary data in order to reach to the conclusion or result. The authors of various
researches outsourcing of the IT is the tool for the “financial losers”. This has been evident from
the 51 firms that have vitally experienced the significant losses, able to generate less cash than
control firms and gradually there are high operating expenses. Mojsilovic et al. (2007). The
studies that are conducted in 2007 concluded that the companies that drastically generates the
low profits and they have the low earning per share need to outsource the IT technology from
various firms to perform the best. Additionally when the finding is done on the basis of the size
of the firms then the findings concluded by various researchers was the mixed. The results that
has been extracted was that 11 relationship was found evident in the ITO literature and size
concerned with the factor that size of the client firms doesn’t matter (e.g., Grover et al., 1994),
and two states that firms are more likely to outsource (e.g., Nam et al., 1996), and three reveals
that small firms are more into outsourcing the IT technology (e.g., Ang and Straub,
1998).Basically the studies that are categorized on the basis of the size of the department of IT
evaluates in generating the result which is mixed. The two authors evaluates that the larger

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firms need to outsource more whereas the small IT firms need to outsource more likely and this
has been concluded by two researchers . The two researchers found that there is no relationship
between the firm size and the outsourcing of IT (e.g., Miranda and Kim, 2006). The researches
that is performed academically has overlook the major factors of the several outsourcing decision
e.g., Cullen et al.,2005b; Lacity and Willcocks, 2000; Whitten and Leidner, 2006). After that the
firm decide to make their IT function back into their houses and also they tried to renew the
contract of the outsourcing Whitten and Leidner (2006). This is evident that outsourcing are the
key areas namely for the economic growth and development of the organization or the
individual. However through the evaluation of various statistics and the studies this has
concluded that economic growth of an organization and IT outsourcing go hand-in-hand. The
users that have come back claimed that the low variables are used. In the literature review of ITO
academic, there are 34 papers that are published on the management of the risk. It also evaluates
the ITO risk. Out of 34, 18 considered to be conceptual . Then the conceptual paper generally
evaluates the risk that is related to ITO risks (e.g., Jurison, 1995; Earl, 1996; Sakthivel, 2007).
Then they decided to develop the ITO models related to management of the risk. The papers
related to the ITO addresses so many specific risk and it also brief that how the risk will be
crucially managed. The paper of (Aubert et al., 1999; Bahli and Rivard, 2005; Currie and
Willcocks, 1998; Willcocks and Lacity, 1999; Willcocks et al., 1999) in trhis it meantioned the
types of outsourcing that are considered to be beneficial in handling the risk that is associated to
the outsourcing. The typeo f outsourcing that is discussed above is the offshore outsourcing. The
offshore outsourcing is considered to be vulnerable in handling so many queries related to the
management of the risk (Iacovou and Nakatsu, 2008) and they also make use of the services that
are application based (Kern et al., 2002a,b,c).The measurement that is align to the management

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of the risk is addressed in this journal that is specified studied (e.g., Bahli and Rivard, 2005;
Whitten and Wakefield, 2006). The most popular paper that has been founded and that is related
to the risk associated to the ITO is done by Earl (1996).The paper Earl also discuss the various
aspects that make it complex and sophisticated. This is generally found that due to the weak
management, staff that is inexperienced, uncertainty of the business, technology that got
outdated, uncertainty academic , inefficient learning of the organization, cost that are to be
hidden. All these determinants cause the failure of the organization. There are so many factors
such as ineffective focus, technology is not divisible properly, danger of the eternal system. This
paper is considered to be valuable as well as unique as it holds the customers are solely
accountable for the outsourcing success. Moreover, as the organization started working on the
outsourcing of the IT , a company must be aware of the keys factors that are accountable for
managing the IT services firstly”.
(Jurison, 1995; Kern et al., 2002a; Lacity and Rottman, 2008) in reviewing the paper particularly
the literature review the tables are being found that verifies in assuming the risk that is related to
the IT outsourcing. There are so many research papers that are designed in order to neglect the
mitigation of the risk that commonly arises when the outsourcing of the It is being performed.
When the mitigation of the risk is eradicated this must augment the likelihood of the success of
the ITO. This has been found in general that there are so many mitigation practices that are
related to the risk. This practice generally includes mitigation practices that are adversely
required in order to minimize the risk that can be arise because of the mitigation of the risk. In
this paper there is the portrait of the ITO risk that states that “Generally in this sector supplier has
too much power over their users. “If the adequate outsourcing activity is performed within the
nations then the country will also seize the economic growth and the development “.

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Additionally, it outsourcing help the customers in increasing their productivity (Lacity and
Willcocks, 1998).There are so many outsourcing standards that are related to the IT services and
for this there is enormous suppliers who are ready to supply or deliver the services and product
on time (Apte et al., 1997; De Loof, 1995; Lacity and Hirschheim, 1993).The one paper also
specifies the assets that are highly incorporated in insourcing (Watjatrakul, 2005).The academics
paper have discussed so many practices that are specific that helps in eleiminating the certain
risk that generally pertains in the various segments of outsourcing such as outsourcing that is
offshore and the provision that is application based (Kern et al., 2002a,b; Sakthivel, 2007). Kern
et al. (2002a) addressees the various areas that is directly or indirectly related to the strategies of
the mitigation of the risk. It also guides about the specific risk that can be terminated which arose
in operating different types of outsourcing. . Sakthivel (2007) examines the risk control tool or
mechanism that is essential for the development of the off shore system. As there is advancement
in the technology of outsourcing or models emerges across the nations, then the early adopters
will faces the crucial problems and there chance of facing the risk increases.
Early in the 1980, the outsourcing is commonly refers to the conditions in which the organization
seized their share by making the purchase of their manufacturing of the physical inputs Bhagwati
et al. (2004) but by the 2000 outsourcing was explained best by considering this definition that
“Outsourcing that is generally related to services which are done professionally is the biggest
indicator of the advance type of the trade.’ (Bhagwati et al., p.2 2004). Gregory
Mankiw, past Chairman of the USA President’s Council of Economic Advisers, describes that
the offshore outsourcing are the essential components of the outsourcing of the IT. The
outsourcing is described as the transferring of the services and the goods that is generally done
by selling the IT asset of an organization to the suppliers that are named as the third party. This

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activity or the It outsourcing can be performed by doing the contracting. The suppliers that are
generally considered will be vendors that deal with hardware or contractor. The firm related to
the consulting firm can also become the supplier of the IT outsourcing. The book Offshore
Outsourcing by Robinson & Kalakota (2004) presents the aesthetic description of the term
“offshore outsourcing”. This book define the term by saying that it is the fusion of research,
delegation of the administration, or the technical support and process to the third party in order to
minimize the cost or in order to provide the location that is generally low cost. There are so
many instances that make our understanding better in terms of the offshore outsourcing. The best
example that is being used in the book is related to the San-Francisco it is totally based on the
firm Technology that is Embarcadero and it is the best supplier of the application Life-cycle
management solutions and the database in U.S.A. The Embarcadero generally lie on the software
that Aztec and the another firm have their headquarter in California. This software is solely
dependent on the development of the offshore outsourcing. The development center is basically
located in Bangalore that is in India. This center basically deals in formulation of new integrated
products that are fruitful for an organization. Even there is deep analysis of the product life cycle
of the new products that generally starts from development and ends at maintainece of the
product. This is currently found that this type of acrivity generally take place in India. The
software which is commonly known as Aztec’s help in establishing the target market or it also
assist in positioning the product in the market. There are so many definitions that are been
extensively provided to the individual by so many authors but the definition that is being
followed in order to enhance their knowledge is ).Offshoring refers to the acquisition of
intermediate inputs by companies (or governments) from locations outside the consumer country.
“It is the crossing of international borders that distinguishes it from outsourcing in general’

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(Kirkegaard, p.4 2005). Offshore outsourcing has the liberal concepts as compared to the onshore
outsourcing. Offshore outsourcing helps in several ways but the onshore outsourcing are limited
to the extent. The studies reveal that the offshore have the far-implications and there are so many
assumptions that are provided in it. There are tremendous authors that had mentioned so many
assumtions in their research paper and the definition of the offshore outsourcing assume that
offshore outsourcing are best for the developing countries because it helps in saving the cost. In
this there is also the probability of shifting the actual location of production to generally
countries that offer low cost in such a way that they are transparent and accountable to the clients
(Kirkegaard, 2005 ;Chakraborty & Remington, 2005). The free trade is the optimal resource in
order to make the offshore outsourcing successful in the countries. This has been found that
outsourcing is considered to be best worldwide. This research was conducted by Authors such as
Intriligator (2001). The research that is generally conducted that draws the attention of the
individual on the topic that is related to the success or failure of the offshore outsourcing. What
are the beliefs of the people in the value of economy of the market? What are the policies for
trade liberalization? What should be the corrective measure that is required to do the offshore
outsourcing? There is an urgent need for the emergence of the off-shore outsourcing software.
The software that is followed is the SAP software. This software is required in order to make its
usage corporately and it also develops the optimal system which is extensively required for
standardizing the application that is related to the software. There is an urgent need to establish
the landscape that is required to conduct the IT outsourcing properly. (Levina & Ross, 2003).
According to the studies that are conducted so far has determine that the outsourcing are
constraint to the projects that are generally of huge in size. Because every single individual is
carrying the myth that the outsourcing is quite cheap as compared to another tools. This fact is

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actually the myth because there are developers who have vital knowledge of performing the
task . This is quite cheap but people doesn’t aware of this fact that an organization or a company
need to incur the extra cost or additional cost which makes it cost higher. The cost includes the
transportation cost and several additional costs that are prove to be huge from the company’s
point of view. So the general public is not aware of this fact. Thus the management and the travel
cost make it quite high in order to make use of the outsourcing agreement. This paper covers that
IT jobs mostly covers the high, medium and low occupation people. Gradually the offshore
outsourcing noted that it target the people that are generally low skilled for this type of the
occupation jobs (Ross & Bamber 2000; Aubert, Patry & Rivard, 1998; Gottschalk & Solli-
Saether, 2006). This has been certified by so many consultancies such as Design Group CDA
(2005). They showed there interest into promoting the outsourcing so that it can be best
sustained. The advantages of the outsourcing are as follows:
It reduces the operating cost of performing the task.
It also clears the goal of an organization.
It acts as an aid in providing the access to the world class.
It makes use of the intrinsic resources for several purposes.
It brings those resources which are not used further internally.
It generally augments the re-engineering advantages.
It also handles so many functions at one time which are quite difficult for the person to manage
at a single time.
It controls all the activities.

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It also makes the funds available in order to make the process smooth.
It just distributes the risk that is associated to the outsourcing.
There are so many evidence that have been collected on the offshore outsourcing has been
reflected tremendously in the organization bottom line. The case study results guides that the
aggregate the cost is being delivered to the organization and in this survey it has conducted that
there was an average of 12.1% but later studies suggest that there is 50% of the best performing
the contracts. Then the average declined to the 17.9%. During the various case studies this has
been conducted that the total-cost model will be preferred in order to achieve the favorable as
well as desirable outcomes. The outcomes that are derived from this helps in alliance the
contract. The studies also guide that this particular tool is economical viable. There are several
economic arguments that are been discussed or address in the case study that specifies that the
cost ranges from the 20% to 60% (Greene, 2006). The prices of the tool are less and this helps in
attracting the companies to invest in the outsourcing and to increase their market share in broader
terms.
Thus this makes the company in attaining the core competency and even attaining the
competitive advantage. Consultancy companies such as McKinsey Global Institute have
informed the benefits of the offshore outsourcing. The offshore outsourcing is those that help in
forming the trade that proves to be beneficial for the company. The economy will boost properly
when they make optimal use of it. The company can earn huge profit from it (Baily & Farrell,
2004). The number of studies has also evaluated that the IT outsourcing can also impact the IT
environment (Seddon, Willcocks & Cullen, 2002).There is also one paper that evaluates the
major reasons that forces the company to outsource their technology (Olson, 2006).The paper
also evaluate the successful factors that are needed to be considered when the companies make

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use of the IT outsourcing. Mostly there are 31 studies that are considered to vital in determining
that whether the relationship is direct or not. The relationship generally occurs between the
outsourcing and the ability of the companies to outsource. In this globalization era outsourcing is
vital for every organization if they don’t want to defame the company (Barthelemy and Greyer,
2004).

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Methodology
Research Philosophy
The Impact of the outsourcing IT infrastructure by SMEs of UK on their productivity is
completely based on the external objectivity and are not associated to the researcher. Thus it will
be assessed through the objective methods instead of being interpreted through intuition,
sensation and reflection (Barthelemy and Greyer, 2005). Thus, this research will adopt and
accept a positivist approach and design as the credible data may be only derived by observing the
quantitative phenomenal analysis. The philosophy of social interpretivism is not at all used in
this research paper which aims to reflect over and also study the inner and deeper feelings of the
participants because of the research objectives and aims to assess the impact of the outsourcing
of IT infrastructure by SMEs of UK on their productivity (Beulen, 2003). Details related to the

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effectiveness are assessed by making use of objective means like reduced cost and increased
application of candidates, thus are evaluated by using a positivist approach.
Research Approach
Because of the positivist aspect of the research, it may adopt or accept a deductive approach
which represents and portrays the common and simple view of relationship between research and
theory and outcomes are created through the logical reasoning (Bhalla, et al., 2008). The findings
from the data will be compared with the present literature for ascertaining whether they concur
with already published field of IT outsourcing.
Research Design/Strategy
This study would adopt a case study strategy in answering the research question. Robson (2002)
asserts that the case study strategy would be useful if the aim of the study is to gain a rich
understanding of the research perspective and the process being endorsed (Borman, 2006).
Therefore as this study aims to understand the impact of IT outsourcing by Small and Medium
scaled Enterprises in United Kingdom, and also any benefits associated with it, a case study
would be most effective.
Two separate and parallel approaches were utilized in this study, and are outlined in the table 1
below.
Table 1: Research Strategy
STRATEGY AIM SAMPLE TYPE OF
QUESTIONS
METHOD OF
ANALYSIS
Questionnaire
(Quantitative)
Quantify the
perception of
100 respondents
who applied to
Closed Ended
Questions:
Descriptive
analysis and

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respondents
working in
Small and
Medium
enterprises
regarding
effectiveness of
outsourcing IT
infrastructure.
the survey
monkey
questionnaire
through online
system.
Rating Scale and
Nominal Data.
quantitative
analysis (using
pie charts, Bar
diagrams and
SPSS software).
Semi Structured
Interviews
(Qualitative)
To assess the
advantages
linked with the
associated
impact of
Outsourcing IT
infrastructure by
SMEs in UK.
100 respondents
who applied to
the survey
monkey
questionnaire
through online
system.
Structured
questionnaires
and Open Ended
Questions
Content analysis
(Descriptive
Analysis)
Data Collection Method
Primary and Secondary method of Data Collection
The current research paper has the option to conduct primary as well as secondary research. The
primary research refers to the collection of primary data from the primary resources with the help
of survey, observation, and others. On the other hands, the secondary research refers to the

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collection of data from the secondary sources such as private and governmental agencies. Both
the approaches have their own merits and demerits (Carmel and Abbott, 2007). On one hand
where primary research is time consuming and costly, on the other hand, the secondary research
limits the options of data for the researcher. The current paper will consider primary research
which will be taken further with the help of questionnaire preparation and survey. The secondary
sources will be used to understand the previous researches done related to the similar topic. A
detailed literature review will be conducted to understand the works being done by the other
researchers. This will assist in forming appropriate ground for further research (Carmel and
Agarwal, 2002). While collecting the data which is analyzed by making use of quantitative
means and methods, Easterby-Smith et al (2008) opinionates that a researcher in his study may
collect both the primary as well as secondary data for his study. Also he claims that although all
these means owns their demerits and merits, collecting their own data provides a control on the
sample structure as well as the data which is attained from every respondent. Also, it gives high
confidence regarding data which is collected to match the objectives of research. Therefore, the
researcher decided to collect the primary data from its 100 respondents working in Small and
medium enterprise of any industry who have outsourced their IT services to other countries by
using the questionnaires which were distributed to every respondent individually (Carmel and
Tjia, 2005). The data through semi-structured interview was collected by writing their answers in
a documented form and recording their answers for future references.
Sampling method
Sampling Method
On the basis of the objectives of the research and the problems which were to be investigated and
examined, it would have been appropriate if the employees working in IT department of the
companies were interviewed. Due to the resource limitations and time constraint in this research,

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a sample of non-probability population was chosen. According to saunders et al (2007), a non-
probability method of sapling is used while adoption of strategy of case study and survey
method. The samples of people working who were selected to take part in the quantitative
research are too less for constituting a sample of working population in SMEs within UK or
London (Choudhary and Sabherwal, 2003). Therefore, the amount of employees working in the
SMEs based out in UK who participated in qualitative research was not sufficient to constitute a
major portion of IT department who outsourced their services within the UK companies at small
scale. Thus this research focused over the quantitative facts as against the theories which were
represented in literature review.
Accessibility Issues
The capability for gathering the primary data at the time of this study was based on getting the
access to appropriate source in the organization/corporation (Cullen, et al., 2005). The level up to
which the source is completely accurate relies upon the research designs, related objectives and
research question. Thus the researcher being a friend of employee in the SME favorably got the
access to reach the employees of different small and medium scale organizations in UK.

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Data Analysis and Results
Questionnaire
Which gender identifies you?
1. Male
2. Female
Which gender identifies you?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Male 32 32.0 32.0 32.0
Female 68 68.0 68.0 100.0
Total 100 100.0 100.0
In the research conducted, the questionnaire was distributed to total of 100 individuals
who were working at higher positons in Small and medium scale enterprises based in
United Kingdom. Every Individual filled the questionnaire sent to them via online mode
using survey monkey while few of them were directly given the questionnaire by visiting
the company site. Out of the 100 participants in the survey, majority of them were female
candidates and rest of them were male candidates. As the data is generate through SPSS
software, it was identified that 32 percent of men population filled the questionnaire and
made his active participation in this research while 68 percent of the female made their
active participation in this research by filling up the survey forms. This indicates that
more of female participants made their contribution in this research as compared to the
male population.

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Which department your organization is into?
1. Security
2. IT
3. Human Resource
4. Finance
5. Management
Which department your organization is into?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid IT 13 13.0 13.0 13.0
Finance 59 59.0 59.0 72.0
Management 28 28.0 28.0 100.0
Total 100 100.0 100.0
The next question involved in the questionnaire was regarding the department in which the
organization was into. The researcher visited various organizations at Small and Medium level in
United Kingdom which served in different professions. Thus it was necessary to differentiate the
departments and know about the profession of each of the company visited. Out of the 100
workers or employees, 13 percent of the people said that their company was into IT sector which
meant that Services outsourced were nearly the core activities of the company as their domain
was totally into IT. An IT company usually outsource their customer care services, billing

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operations, Human Resource Departmental activities and other activities to the vendors either in
offshore location or to any other vendor located at their domestic location. Out of rest of the
participants of the research study, 59 percent of people said that their company was into Finance
department. Any financial institution usually outsource their Web designing services, Human
Resource services, Marketing services, and Billing operations to other vendors either in offshore
location or to any other vendor located at their domestic location. Out of the rest of the
participants, 28 percent of people said that their company was into Management and
administration services. These companies usually outsource their IT services only in case their
other departments need specific attention and care and well devoted efforts. The companies were
at small and medium scale level and thus their departments were striving hard to grow and
generate more revenue than their present revenue. Thus companies serving at the management,
Finance and IT sector outsourced their IT Services at 28 percent, 59 percent and 13 percent
respectively.

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What IT services are outsourced by your organization?
1. IT monitoring and security
2. Database Management
3. Connectivity
4. Help Desk Support and Application Management
What IT services are outsourced by your organization?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid IT monitoring and
security
14 14.0 14.0 14.0
Database Management 21 21.0 21.0 35.0
Connectivity 12 12.0 12.0 47.0
Help Desk Support and
Application
Management
53 53.0 53.0 100.0
Total 100 100.0 100.0
The next question involved in the survey was regarding the IT servicing that was outsourced in
their company. As the companies were serving in various departments and all were at a small

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and medium level of their operation, the different companies’ outsourced different department as
per their budget and convenience along with the priority and importance of their core functions.
Out of the total participants, 14 percent people said that their company was outsourcing services
related to IT monitoring and security. The whole of the security and monitoring of the computer
systems and confidential data was being monitored and controlled by a third party appointed by
the company. This saved the time of the company to focus on other significant operations. Out of
the rest of the Participants, 21 percent people said that their company outsourced the services
related to database management. All the data were collected, gathered, stored, compiled,
processed and loaded by a third party agency which helped in easing out the process inside the
company and also saved a lot of time to focus over the core activities. Out of the rest of the
participants, the 12 percent people said that their company outsourced the connectivity services
to the external vendors at either offshore location or any domestic vendor in United Kingdom.
Connectivity relates to the idea that all the connections, calls and all the types of networking
operations are outsourced to a third party agency who will be taking care of the networking
operations for the company. Maximum number of the participants outsourced the services of
Help Desk Support and Application Management. This is the most commonly outsourced
services by maximum number of companies as these services are not considered as core
operations of the company. These operations are often outsourced to either call centers or
Business process outsourcing institutions.

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IT OUTSOURCING
What are the drivers behind the IT outsourcing in SME in UK?
1. Access to specialized vendors
2. Faster reaction to technology
3. Risk Reduction
4. Strategic Focus
5. Cost Reduction

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What are the drivers behind the IT outsourcing in SME in UK?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Faster reaction to
technology
23 23.0 23.0 23.0
Strategic Focus 44 44.0 44.0 67.0
Cost Reduction 33 33.0 33.0 100.0
Total 100 100.0 100.0
The next question in the questionnaire distributed was regarding the factors that helped in driving
the IT outsourcing in the small and medium scale enterprises in United Kingdom. The main
factors involved in encouraging the step of outsourcing the IT services includes Reduction of
cost, strategic focus and faster reaction to the technology. Outsourcing of It services definitely
helps in lowering the cost along with giving the specialized and expert services without any error
as well as with no cost incurred to train the already employed personnel in house. Strategic focus
is also one of the significant factor to outsource the IT related services by Small and medium
scaled companies. All these companies are operating at a growing phase of their life cycle and
thus they must continuously focus on their strategic vison and mission in order to succeed faster
in the globalized economy where the competition is at its peak. If they will outsource their IT
services to be handled by experts of third party agency, they will be able to spend much time in
modifying the existing and formulating the new policies that will specifically concentrate to
improve and enhance their strategic focus and goals. The factor that helps in driving up the step
of IT outsourcing by Small and medium scaled enterprises involves faster and quicker reaction to

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the technology upgradation. This includes the use of upgraded technology for better outputs and
results which will ultimately improve the productivity of the company and also will help in
generating higher revenues. Out of the total participants, 23 percent of the people said that their
company was outsourcing the It services only due to quicker and faster reaction to the upgraded
technology. Nearly 44 percent of the people involved in the research study said that their
company outsourced the IT services only due to strategic focus and rest of the participants said
that their company outsourced the IT services because of lowering their cost in the organization.

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What are the challenges faced while outsourcing the IT services
1. Loss of control
2. Cross Cultural issues
3. Security issues
4. Lack of proper cost benefit analysis
5. Contract management
What are the challenges faced while outsourcing the IT services
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Cross Cultural issues 9 9.0 9.0 9.0
Lack of proper cost
benefit analysis
48 48.0 48.0 57.0
Contract management 43 43.0 43.0 100.0
Total 100 100.0 100.0
Many companies outsource their services related to Information Services and they face a lot of
challenges in the duration due to the fact that many factors come on the way of outsourcing and
they hinder this step of outsourcing by creating various kinds of issues. This happens because of
the fact that companies do not pre-engage themselves into planning the proper methodology to
be followed while outsourcing and they also do not take into consideration the cost and benefit
analysis. The companies give their contracts of outsourcing to the vendors which sometimes goes

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IT OUTSOURCING
into the hands of mismanaged and inefficient employees who do not manage the contract of
outsourcing properly. Hence this generates hindrances unnecessarily and also lead to delayed and
inefficient services. Another challenge faced by the companies while outsourcing involves lack
of proper cost and benefit analysis which may lead to excessive incurring of cost and less
benefits derived from it. Initially the company must engage in analyzing the most suitable vendor
required for its services to be outsourced and they must also make enough comparison to bring
about the most feasible and economic vendor for outsourcing. Another challenge faced by the
company includes the cross cultural issues in another country or offshore outsourcing. It includes
the cultural based issues such as language issues, ego matters, terms and policies adopted,
intensity of leniency, or even workforce diversity issues. These must be well managed by the
corporates as these cannot be considered as trivial issues which can be easily avoided. Thus in
order to manage the cultural based issues the companies must prior look into the factors that
affect the cultures and are involved in managing the outsourcing of IT services. The company
involved must have a look at the culture of the country where the services are being outsourced
in order to be familiar with the culture of the nation. Out of all the participants of the research
paper, only 9 percent people agreed that cross cultural issues area the challenges which are faced
by their company while outsourcing the IT services. Out of rest of the participants, 43%
individuals said that the main challenge which is faced by their company while outsourcing the It
services is Contract management. The maximum number of respondents to the questionnaire, i.e.
48 percent said that the lack of proper analysis of the cost and benefit leads to hindrances in
outsourcing the IT services. This indicates that this is the main reason behind the unsuccessful
outsourcing of the IT services.

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IT OUTSOURCING
Effects of IT outsourcing on Non-financial performance in organization
1. Employee Specialization
2. Specialized vendor access
3. Fast Reaction to change in technology
Effects of IT outsourcing on Non-financial performance in organization
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Specialized vendor
access
48 48.0 48.0 48.0
Fast Reaction to change
in technology
52 52.0 52.0 100.0
Total 100 100.0 100.0
The net question involved in the questionnaire was regarding the Impact of IT Outsourcing over
the Non-Financial performance in the organization at small and medium scale of operations. IT
outsourcing generally gives the benefits like lower cost and higher revenue for the organization
which are considered as financial aspect of the company being impacted through outsourcing the
IT services. However, many of the Non-Financial performance factors of the small and medium
sized companies also get impacted due to the outsourcing of IT such as Employee Specialization,
Specialized vendor access and Fast reaction to the change in technology. As the company
outsource its non-core activities, the company can focus more on the employee training and

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development which can lead to employee specialization. The factor that helps in driving up the
step of IT outsourcing by Small and medium scaled enterprises involves faster and quicker
reaction to the technology upgradation. This includes the use of upgraded technology for better
outputs and results which will ultimately improve the productivity of the company and also will
help in generating higher revenues. Out of the total participants, 52 percent of the people said
that their company was outsourcing the It services only due to quicker and faster reaction to the
upgraded technology. Due to specialized vendor access the company can get the best and
expertized services that may help in delivering the best solution. It can reduce the rate of errors
also as well as faster and quality delivery of services. The employee specialization and the
employee training and development can also be achieved through outsourcing the It services to
only those employees who are expert in that service and thus increasing their level of
Knowledge, skills and ability.

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How have the perspective towards customers changed by outsourcing the IT services?
1. Service availability
2. Customer satisfaction
3. Customer loyalty
How have the perspective towards customers changed by outsourcing the
IT services?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Customer
satisfaction
48 48.0 48.0 48.0
Customer loyalty 52 52.0 52.0 100.0
Total 100 100.0 100.0
After outsourcing the IT services, the perspective towards the customers gets totally changed as
more time is available after outsourcing the IT services for different benefits like service
availability, customer satisfaction and customer loyalty. Companies can easily focus more on the
services that are available due to more sufficient time and resources available and they can also
provide a lot of satisfaction to the customers because many benefits and choices will be available
to the customers due to better options available. Thus this will automatically enhance their
loyalty towards the customers. Outsourcing the IT services or any other non-core services will
provide much experience to companies to increase their customer base and engage itself in

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promoting their business. Also it will help in expanding the business. Out of the participants of
the research paper, 48 percent that the customers of their company were highly satisfied with the
services provided by the company after outsourcing the IT Services. Out of the rest of the
respondents, 52 percent people said that there was high degree of loyalty towards the customer
by the companies due to enhanced level of services by the company who outsourced their IT
services. Almost No one said that their service availability got better.

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How have IT outsourcing impacted the Internal Processes of the Organization?
1. Reduced Operation Cost
2. Reduced Operation Risk
3. Focus on Core Functions
4. Efficiency and Productivity
How have IT outsourcing impacted the Internal Processes of the
Organization?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Reduced Operation
Risk
6 6.0 6.0 6.0
Focus on Core
Functions
41 41.0 41.0 47.0
Efficiency and
Productivity
53 53.0 53.0 100.0
Total 100 100.0 100.0
Many a times, the company experience expertise and swiftness after outsourcing the It services
and the tasks are usually outsourced to the vendors who are specialized in a particular field. The
vendors to which the It services are outsourced are also having particular technical expertise and
equipment. Effectively all these tasks gets completed with high quality and better productivity.

45
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The companies concentrate over the core processes instead of the secondary activities or
supporting activities. Sharing of risk is also one of the benefit while outsourcing the IT services.
One of the crucial component to determine the result of campaign involves analyzing the risk.
Outsourcing few of the elements of the business process aids the companies to move few
responsibilities to outsourced vendor. As the outsourced vendor is known to be a specialist or an
expert, they can easily plan the factors to mitigate the risk better. Outsourcing of IT services by
small and medium scale enterprise helps in lowering the requirement for hiring in-house
individuals and therefore the cost for operations and recruitment also gets minimized to a much
higher extent. This can be considered as one of the main benefit to outsource the IT service
offshore.

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What are the main factors you consider in selecting an outsourcing vendor?
How has outsourcing contributed to the performance of your organization?
Discussion
Outsourcing is not considered as a new concept. The business process like advertising and
printing or fleet management is contracted for decades to the external suppliers. However, the
Outsourcing of IT services by is a totally new concept, in spite of the argument that it is very
similar to the 1960 based computer bureau services (Davnport, 2005). The main difference
between the earlier and present period include: the main role of information which the
technology plays in all the business faces. The 1960 and 1970 based bureau mainly processes the
simple functions of billing: the distributed and networking systems developed the computer
environment which are both brittle and complex, end-user computing and advent of integrated
applications (De Loof, 1995). The early bureau or system used to practice huge processors with
the dumb terminals which is the main reason behind Information technology being central to
every operation of business. The 1960 and 1970 system performed all the backend operations. A
decision for outsourcing the information technology course implies a heavy reliance over the
service quality given by outsourcer (Dibbern, et al., 2004). Many successful, sophisticated and
large companies follow the outsourcing path through spectacular success. Many people have
identified a tough way for outsourcing which a complex process and fought with difficulty and
many hindrances. Few of the companies withdrew all their services from the outsourcing and
made efforts to bring back their systems in house. Also they identified that moving back the
process cannot be termed as a simple process as still they lack the resources and skills.
Outsourcing is considered as a spectacular and remarkable success if it is done and practiced for
correct reasons, is followed with real expectations, follows the due actions and steps along with

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clear understanding of the benefits and advantages which may likely to emerge (Diromualdo and
Gurbaxani, 1998).
What Has Gone Wrong In Outsourcing
Few of the outsourcing preparations were really unsuccessful and ineffective for various reasons
which includes failed attempts to take any strategic approach, lack of necessary and relevant
experience, absence of good methods, Micro Management, failing to know about the IT Role,
Ignoring the Interrelationships, the people component and factors, and cost driven (Domberger et
al., 2000). Many CEOs were unsuccessful to approach the concept of outsourcing being a
strategic decision. Closely all the proofs regarding significance to ensure an outsourcing decision
is made through strategic perspective and linked with clear objectives ad goals. The pioneers also
lacked methods, framework, and experience for the outsourcing (Earl, 1996). The methods for
resource management, performance agreements, risk management, service level agreements and
contracts grew and emerged from the trial and error. At present there is huge number of the
experienced enterprises and consultants to help in steering the novice near the dangers. Many of
the early outsourcers did not have the testable or formal means to deliver the services. At present
the companies like Microsoft and Fujitsu have heavily invested to introduce the formal methods
like Library for IT infrastructure for the best practice to manage the IT services (Farag and
Krishnan, 2003). Many innovators try to over manage their service providers. The organizations
also fail to understand the capability of the vendors when they transfer tier IT services to them
without considering its impact over the company. Many organizations do not understand the
information technology which no longer only provide the support to the mission critical
processes of business. Many dependencies in between the different business processes are woven
very tightly. Many innovators also give insufficient consideration to the issues of people. The

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another major factor regarding unsuccessful accomplishment of mission to outsource IT services
by Small Scale Businesses in United Kingdom are choosing the cheapest supplier, irrespective of
competence (Cullen, et al., 2005b). However various parties of the organization may be
disgruntled with arrangement. Few of the components and elements that may affect the intensity
of satisfaction with the outsourcing are quality of services, the association developed and formed
between vendor and outsourcing company, and cost to switch the vendors. The thesis also
proposes that core reason behind outsourcing the IT services is shifted to various factors like
managing the resources to cost considerations. Outsourcing is all about the improvisation of
efficiency and effectiveness. Revenue savings and growth can emerge downwards in business.
Many innovators accepted a narrow scenario of reducing the cost on the basis of mostly
uncertain IT budget which confuses the marginal, fixed, variable, indirect and direct cost and
was also a beginner to forecast the effects over the revenue (Feeny, et al., 2005). There are many
other reasons which are main reason behind the inefficient outcomes of Outsourcing the IT
services like failure to give appreciation to the fact that IT services may be slow, long haul,
confrontational practices of management, insufficient service level agreement and inflexible
contracts. There are various reasons for a business to choose for outsourcing the partial or
complete IT operations. These involve savings of cost especially from managing ad owning of IT
estate as well as employing the staff for doing so (Feeny, et al., 1998). However, in this case,
cost cannot be considered as the sole reason for this. Information technology cannot be called as
the main activity in a Small and Medium Enterprises, thus Outsourcing may help in relieving the
pressure. Furthermore, Outsourcing may also provide the access to all the latest techniques and
processes in industry. It can also bring efficiency in operations and improve the speed of the firm

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to market new services and products. The quality of the services may also be improved by
outsourcing particular operations like billing and customer care in small companies in UK.
Conclusions
There is no equality in service providers. Cultural fit and appropriateness as broadly varying
cultures may cause confrontation, which is a commitment towards consistent improvement in
business. Other factors like human resource transition skills and strong transition experience,
clear vision and mission of role to leverage the business, appropriate encouragement to increase
the business are also significant while outsourcing the IT services (Fisher, et al., 2008). There is
a need to understand the reason that why the outsourcing company needs business and their goals
and objectives behind outsourcing of IT services (Jarvenpaa, et al., 2008). There is high
importance and significance of methods as any formal method must be there in two broad areas
of System development and service and operational level management. Rarely there is an issue
which majorly adheres to development of formal systems and methodologies. Many individuals
will lack all formal methods and ways for the critical segment of managing the infrastructure
which helps in running the business.
Common Mistakes in Outsourcing
The most common errors in outsourcing involve unsuccessful determination of objectives, goals
and motives to outsource, concentration over reduction of cost instead of other advantages like
value added, low standard of corporate governance of program being outsources over time,
inadequate and irrelevant hiring of staff for managing the contract and relationship, mistreated
communication with customers, staff and stakeholders, insufficient incentive models which
demotivate both corporate entity and individuals over both the sides (Grover, et al., 1994).

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Cost and Benefit Analysis of One Company
The Costs of Outsourcing in one of the selected SME
Many researchers give high attention over expenses of outsourcing. All the people who are new
to this filed are often surprised and shocked for identifying that a lot individuals argue that
saving the cost is not considered as a significant reason to outsource. An excessively tight
concentration over cost along with the negligible margins of profits for outsourcer may hinder
the flexibility of business. Outsourcing projects expenses will get increased in prior years as the
staffs get transitioned, aged hardware gets replaced, roper methods and procedure implemented
and entropic systems stabilized (Grover, et al., 1994). Further expenses will be there to acquire
proper management of system and tools for network management and initial expense of the
contract management. The cost may get stabilized in the long term and then lower the
comparison with their outcome which they have received without outsourcing. Efficiency of
economy is more linked with Practices of Information technology as compared to intrinsic
economies of scale. Outsourcing may lead to the investment in tools for system management,
process, plans and architecture of enterprise which may cause savings (Gopal, et al., 2002).
The Benefits of Outsourcing in one of the selected SME
There are many advantages of outsourcing which are discussed below:
Improvements that cannot be achieved by average IT units
One thing which is forced by outsourcing of IT services over the Organization is defining the
outputs and results that are required, formal processes and service levels for defining change and
requirements. Outsourcing is considered to be a significant tool to bring about the often needed
change in culture.

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IT OUTSOURCING
Improved business processes
Introducing method and thoroughness in processes of information technology follows the
processes of business. Outsourcers of business motivate the budget development which are
managed by business and project expenditure which are controlled by business (Gokhale, 2007).
Also they motivate formal proposals for information technology investment and support the
skills to manage the resultant change. Outsource effectively manage the Information technology
by providing the appropriate reports and information which ensure issues, progress and
expenditure that are controllable and visible.
Better cost management controls
Though many people dispute over the fact that outsourcing of IT services helps in reducing the
cost which fails to take into consideration what the cost for IT can rise up to without outsourcing
and the burdens which the ineffective IT puts over the business. Also it is obvious that generally
outsourcing brings along with it a high and tough regime for cost management which includes:
Tough control and monitoring over the expenditure: Normally the provider of service will face a
tough regime for expense control as compared to an internal unit (Grover, et al., 1994).
High and Greater visibility on real cost of Information technology
Outsourcing helps in unveiling all the latent and hidden cost of Information Technology.
Economies of scale is attained through shared tools, infrastructure, specialist skills and utilities.
Requests and need for any extra IT staff are closely debated, and its approval is restrained to the
task or project in question. The provider of services needs to justify all its IT staff. Outsourcing
helps in unveiling the costs of IT which was not there in old-style management reporting. All the
cost for maintenance, supplies and manpower are reported and identified.

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IT OUTSOURCING
Quality of service
The changing aspects of outsourced environment are very different and varied from the one in
internal environment (Gokhale, 2007). The outsourcing company is a completely different
economic entity having profit at risk. Provider of risk will make efforts in delivering quality
which may positively adopt a developed, rigorous or testable method for service delivery like
ITIL method. Provider of service will give the quality in results, partly through implementation
of improved definitions and meanings of change control, requirements and outputs and having
staff of high intelligent quotient and level of education and skills which easily found in various
IT departments. The access to the particular expert knowledge and skills such as Information
technology and medicines has specialists. Also they can be the change control specialists,
network designers, strategic planners and data architects (Goo, et al., 2009). Only huge IT
retailers employ all these types of experts. Outsourcing may act like a powerful equipment or
machine of change and dynamism and it must be considered as a benefit.
Access to the quality of management that are not found in IT departments
Outsourcing brings in discipline to measure and define the levels of services. Stated otherwise,
 The services that are to be delivered must be defined,
 Measurement and evaluation of these services are also defined
 Data is reported and collected
 Availability of trends for planning
 Efficiency and effectiveness comes through common platform for management.
Auditing the most intrinsic IT retailers will unveil few defined services for being delivered and
lesser measurement of their success while delivering the service (Gopal, et al 2002). The formal

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methodologies is not there. The most common debate in IT domain is that all the current and
latest ones are evaluated and being rejected because of lack of flexibility. Outsourcing brings in
the discipline, rigor method to manage the services of information technology.
Objective Achievement
Overall it can be stated that the research has achieved most of its objectives. The focus was to
investigate the outsourcing of IT in the tech SMEs. The paper conducted primary research and
the results have helped in understanding that the IT outsourcing is mostly done in the case of
help desk. Here, one thing can be stated that as the sample size was small, therefore it would be
difficult to solely rely on the result. If the sample size would have been larger, then may be the
research had given concrete understanding.
Recommendations
The quality of relationships to outsource in between all the levels of organization and perception
in the staff in which the outsourcing of IT services is working are considered as significant
factors for failure or success of outsourcing (Goapl, et al., 2003). The satisfaction by small scale
industries was closely associated with perception that whether outsourcing is properly and
prosperously working or not. Both the implicit ad explicit knowledge, skills are the significant
factors for a relationship and association but it is also important that the small and medium scale
industries manage the internal IT knowledge of the company. The IT based business units should
add the value and efforts to process and identify themselves avoided by the IT vendors or
outsourcing partners. The researcher motivates the further investigation in the role and part of
Information technology department in modern virtual companies (Goo, et al., 2009). The
business units in the company varies from each other with respect to their expectations or
prospects of outsourcing that indicates that all companies needs various sets of skills which
includes those on the basis of relationship management and administration between the

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IT OUTSOURCING
outsourcing partners and internal business units. Additional set of skills regarding knowledge
management, setting of standards, procedures and process management and monitoring are also
needed. Nowadays, the companies are looking the concept of IT outsourcing as a commodity
which can easily be outsourced to lowest bidder. The main driver of outsourcing is considered to
be the cost, however the success cannot be measured and qualified. Before or at the time of
project of IT outsourcing, the company who seeks to outsource should: be unambiguous and
clear regarding its causes to outsource whether it is selective or entirely outsourcing (Gokhale,
2007). Be unambiguous or clear regarding the goals of outsourcing, be unambiguous and clear
with vendor to whom the company have outsourced the IT services with respect to the
expectations to outsource. Understand the effect of isolating the provision of service which must
be observed as part of vertical IT service chain. Develop a varying skill set (on the basis of
relationship management in between the internal units of business as well as the outsourcing
partners, knowledge management, setting of standards, managing procedures and processes,
monitoring) and manage the internal knowledge (Galliers and Leidner, 2009). Implicit and
explicit knowledge are considered as a significant factor and element in relationship as is
demonstrated and portrayed by this thesis and also ae the crucial factors to whether the project of
outsourcing succeeds or not. For the vendor of outsourcing contract to be satisfying mutually in
an ongoing relationship, it is highly crucial that all the expectations of the company who is
outsourcing its IT services must be properly understood and well defined by the vendor (Florin,
et al., 2005). The satisfaction of the customer occurs by making sure its communication,
timeliness and reliability while making the deal with a partner vendor for outsourcing. If a
company has already planned to outsource its IT services, then it must take into consideration the

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long term and everlasting implications that may come out because of the outsourcing instead of
considering only the short term factors like cost saving.
The study has helped understand that the help desk support and the application management lead
to increased number of outsourcing from the organization. The reason is that hiring customer
executive just to support the customer is considered less feasible cost wise small companies and
therefore outsourcing seems feasible. Therefore, it can be recommended that the help desk can be
outsourced.
Future Work
As this research paper consisted of a small sample thus the findings are constrained to this
research paper about the small and medium scale enterprises only and in United Kingdom. But
this paper is showing that all the changes in these trends and patterns of business process ad
shifts of the globalization may cause more and more increase in outsourcing services and
practices in future. The current research paper recognized the restraining factors of management
that may help in setting up the foundation stone for the future research to consist of the cross
cultural ethics based attitude as well as the managerial behavior to opt for the services of It
outsourcing. As the companies chosen consisted of the workforce diversity and a lot of
hierarchical and subsidiaries of the company, this current study will provide the aid to the
researchers in the subsequent time period to take it as an empirical evidence for exploring the
ethics of management regarding the IT outsourcing. Also the researchers from the field of
marketing can also take into consideration its benefits while conducting the research over the
behavior of customers as they are the main or core focus for all the profit making organizations
whether small or large scale companies. Opting for the services of outsourcing can cause some of
the issues to satisfy the customers about thus tis piece of information will be significant in the

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given aspect as well. This research conducted by the researcher will be called as a management
literature by the researchers in the subsequent future when they take out the investigation over
the progress of Small and Medium Scale Enterprises at the time of economic downturns. Many
of the students may benefit and have advantage from this research as it helps in discussing the
functions of the many models that operate in business and also recommend the other model for
the future researchers in order to analyze the impact and influence over the consumers and
business. Moreover, after analyzing the findings related to this research which portrays that it
will be advantageous for the Small and Medium scale enterprise management in United
Kingdom to understand the mindset and perception off the vendors and contract employees, they
may develop and formulate their strategies to make sure that a proper and accurate balance is
sustained in order to prosper and progress efficiently and effectively

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IT OUTSOURCING
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Appendix
Questionnaire
Which gender identifies you?
1. Male
2. Female
Which gender identifies you?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Male 32 32.0 32.0 32.0
Female 68 68.0 68.0 100.0
Total 100 100.0 100.0

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Which department your organization is into?
1. Security
2. IT
3. Human Resource
4. Finance
5. Management

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Which department your organization is into?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid IT 13 13.0 13.0 13.0
Finance 59 59.0 59.0 72.0
Management 28 28.0 28.0 100.0
Total 100 100.0 100.0
What IT services are outsourced by your organization?
1. IT monitoring and security
2. Database Management
3. Connectivity
4. Help Desk Support and Application Management

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What IT services are outsourced by your organization?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid IT monitoring and
security
14 14.0 14.0 14.0
Database Management 21 21.0 21.0 35.0
Connectivity 8 8.0 8.0 43.0
Help Desk Support and
Application
Management
53 53.0 53.0 96.0
5 4 4.0 4.0 100.0
Total 100 100.0 100.0

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What are the drivers behind the IT outsourcing in SME in UK?
1. Access to specialized vendors
2. Faster reaction to technology
3. Risk Reduction
4. Strategic Focus
5. Cost Reduction

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What are the drivers behind the IT outsourcing in SME in UK?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Faster reaction to
technology
23 23.0 23.0 23.0
Strategic Focus 44 44.0 44.0 67.0
Cost Reduction 33 33.0 33.0 100.0
Total 100 100.0 100.0
What are the challenges faced while outsourcing the IT services
1. Loss of control

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2. Cross Cultural issues
3. Security issues
4. Lack of proper cost benefit analysis
5. Contract management
What are the challenges faced while outsourcing the IT services
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Cross Cultural issues 9 9.0 9.0 9.0
Lack of proper cost
benefit analysis
48 48.0 48.0 57.0
Contract management 43 43.0 43.0 100.0
Total 100 100.0 100.0

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Effects of IT outsourcing on Non-financial performance in organization
1. Employee Specialization
2. Specialized vendor access
3. Fast Reaction to change in technology

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Effects of IT outsourcing on Non-financial performance in organization
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Specialized vendor
access
48 48.0 48.0 48.0
Fast Reaction to change
in technology
52 52.0 52.0 100.0
Total 100 100.0 100.0
How have the perspective towards customers changed by outsourcing the IT services?
1. Service availability

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2. Customer satisfaction
3. Customer loyalty
How have the perspective towards customers changed by outsourcing the
IT services?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Customer
satisfaction
48 48.0 48.0 48.0
Customer loyalty 52 52.0 52.0 100.0
Total 100 100.0 100.0

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How have IT outsourcing impacted the Internal Processes of the Organization?
1. Reduced Operation Cost
2. Reduced Operation Risk
3. Focus on Core Functions
4. Efficiency and Productivity
How have IT outsourcing impacted the Internal Processes of the
Organization?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Reduced Operation
Risk
6 6.0 6.0 6.0
Focus on Core
Functions
41 41.0 41.0 47.0
Efficiency and
Productivity
53 53.0 53.0 100.0
Total 100 100.0 100.0

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What are the main factors you consider in selecting an outsourcing vendor?
How has outsourcing contributed to the performance of your organization?
Appendix B
2.1 Objective 1
The first objective is to assess the literatures written by other researchers regarding the
theoretical aspects of the IT outsourcing.
S: To assess literatures related to the research topic
M: To assess minimum ten papers.
A: It is doable
R: It will help understand the progress made in this field by other researchers.

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T: One month will be spent behind this.
Given below is the list of activities that were accomplished to achieve the objective stated above:
 Journals and Online articles were studied
 Information was compiled together
Given below is the list of deliverables that are expected to be achieved after completion of the
activities stated above:
• Chapter on IT outsourcing was developed from this activity.
• It was included in the literature review section.
2.2 Objective 2
The second objective is to understand the functions and technologies that are outsourced by
SMEs.
S: Assess functions that have been outsourced in the past
M: To assess minimum three aspects
A: it is doable
R: It will help understand the functions that have been outsourced with greater positive impact.
T: Two weeks were to be spent
Given below is the list of activities that were accomplished to achieve the objective stated above:

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Various functions were assessed
Given below is the list of deliverables that were expected to be achieved after completion of the
activities stated above:
Theoretical chapter on technologies and functions that were suitably adopted for SMEs.
2.3 Objective 3
The third objective was to understand the factors that contributed to SMEs in outsourcing their
IT needs.
S: identifying factors
M: minimum five factors
A: it is doable
R: It will help achieve the aim of this paper directly.
T: One week was to be spent.
Given below is the list of activities that were accomplished to achieve the objective stated above:
Assess the IT needs of SMEs using primary research
Understand the factors contributing to IT needs from theoretical perspectives and empirical
research.
Given below is the list of deliverables that were expected to be achieved after completion of the
activities stated above:

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Chapter on results and analysis
2.4 Objective 4
The fourth objective was to understand the factors that were critical while outsourcing the IT
needs.
S: identify important factors
M: at least three factors
A: it is doable
R: it is associated with the research aim
T: at least two months were to be spent
Given below is the list of activities that were accomplished to achieve the objective stated above:
Understanding the critical factors by assessing literatures
Understanding the critical factors by conducting empirical research.
Given below is the list of deliverables that were expected to be achieved after completion of the
activities stated above:
A section in chapter on literature review and a section in results and analysis.
2.5 Objective 5
The fifth objective was to come up with the areas or functions that could be outsourced in the
small businesses.
S: identifying functions to outsource

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M: at least three functions
A: it is doable
R: it is associated with the aim of the paper
T: primary research was expected to help achieve, so three months.
Given below is the list of activities that was accomplished to achieve the objective stated above:
Understanding the various core and non-core activities in SMEs.
Identifying possibility of outsourcing non-critical activities.
Conducting empirical research to understand the orientation of the researchers.
Given below is the list of deliverables that were expected to be achieved after completion of the
activities stated above:
A section in chapter on literature review and a section in results and analysis.
2.6 Objective 6
The sixth objective was to investigate the issues that were faced by the small businesses in UK in
outsourcing activities.
S: identifying issues
M: at least six issues
A: it is doable
R: it is associated with the research aim
T: three weeks were to be spent