Benefits and Challenges of Information System Outsourcing

This study explores the benefits and challenges of information system outsourcing, including scalability, disaster recovery, expertise, time and cost savings, and the risks of less control, security, compatibility, and coordination.

Running head: INFORMATION SYSTEM OUTSOURCING
INFORMATION SYSTEM OUTSOURCING
Name of the Student
Name of the Organization
Author Note

1INFORMATION SYSTEM OUTSOURCING
Abstract
The main aim of study is to describe all the benefits of information system outsourcing as
well as all the different challenges which are seen to be mostly associated with the outsourcing.
Outsourcing services of IT is seen to be becoming very much easier as well as much more
rewarding as all the vendors belonging the third party are now seen to be offering a large number
of services which are very much scalable for all the requirements of the company without any
massive investments in the infrastructure. Centers of data can be taken as an example which has
the capability of offering computing of cloud, convergence and also several technologies of
hyper convergence, analytics of database, recovery plans for disaster and some other services
which are very much valuable. All of these services will be giving all the companies which are
mainly small as well as the medium sized with the capability of competing with all of the larger
companies. All of these services of the third party will be also providing all the large companies
with several resources and planning which will be strategic. There are a huge number of risks as
well as several concerns about any provider belonging to the third party. A starting risks mainly
makes sure about working with the right company which is the one offering with several services
of IT which the company actually requires. All other concerns will be involving a lack of control
which will be a direct one of the information technology, the data center location or some other
provider of service and also a huge range of several activities which the vendor which is outside
can be offering really. The study will be comprising all of the risks or the challenges and also the
benefits of the outsourcing information system.

2INFORMATION SYSTEM OUTSOURCING
Introduction
Due to the faster growth in all the advancements in technology in the last few decades, it
has been observed that Information Technology and Systems are becoming a driving engine of
several modern organizations. It has also been noticed that within some of the last few decades,
outsourcing of information system has become a commonplace [1]. The outsourcing of
information system is basically a practice to turn over only a part or rather all of the IS
functionalities of the organization to all the providers of service which are external. Using all the
functions of information outsourcing, a number of organizations will be able to focus on all the
strategies of business and increment the efficiency of the business. It has been observed that
there are a number of benefits as well as huge number of challenges which are seen to be
associated with IS outsourcing.
Benefits of outsourcing
All the main advantages of utilizing IS outsourcing are:
Scalability- Most of the companies which are mainly in-house often plans for all of their needs
of information technology as well as several factors in a very little factor of growth [2].
Whenever any particular company is seen to be growing, there remains a huge number of
problems which are to be addressed. All full new software, servers as well as devices of storage
will be required among some other concerns of information technology. Full new networks may
be needed and all of the new systems are needed to be very much compatible with all the recent
systems. All of the new data are very much required for meshing up with all the old data.

3INFORMATION SYSTEM OUTSOURCING
Better recovery of disaster- Several centers of data are seen to be equipped in a better way for
obtaining the information technology to be upward and run mainly in real time as they have a
number of plans within the place. Centers of data are seen to be routinely working upon the
recovery of disaster as they mainly do it for a huge number of clients. Planning will be mainly
involving figuring out about which particular data or applications are very much critical. It will
also be involving the appropriate architecture of hardware in proper place and also some backups
which will be fully ready of several important items [3]. Some of the outside vendors must also
possess a particular software which can properly reload all the applications which are older, data
as well as connections of network.
Source: [3]
Expertise of information technology- All the vendors who are outsourced possess with several
technical expertise and also a number of services of IT which are sophisticated mainly for
explaining all the IT options of the company, reviewing about what will be best suited of those
several options and also discussing the process by which center of data will be meeting all of
their several goals. They also possess a particular team of IT in place for handling all the
hardware, network, storage, internet and some concerns of IT [4]. Possessing with the expertise

4INFORMATION SYSTEM OUTSOURCING
as well as resources mainly means both better performance as well as service at much affordable
prices.
Increasing time for the development of the business- Outsourcing IS mainly means that a
particular company requires spending very less amount of time by hiring all the IT staffs which
are internal, less time in installation and also less time for maintenance [5]. All of these time
savings as well as money will be enabling a particular business for mainly focusing upon all of
its main services as well as products, marketing and some other parts of the operations of
business.
Lowering of cost- Outsourcing is mostly noticed to be normally done on a particularly fixed and
on a free basis monthly [6]. This helps a lot in saving on all the outlays of capital for the
resources of IT and also hiring IT staffs.
Challenges associated with outsourcing
There are some of the main concerns which are seen to be associated with the
outsourcing of IT which each and every company must always review and these are:
Less control- Whenever it will be noticed that a company is outsourcing all of its technology of
information, it is just placing its main trust in a particular external or third part and will be
mainly relying upon their specific expertise, their services as well as resources. Ideally, it has
been seen that transaction mainly works out. But it also happens that sometimes company may
not be satisfied with the vendor belonging to the third part and it requires to do some more than
just starting up from the scratch [7]. It is very much needed for coordinating with what the
vendor which is outside has already done with some new plans of information technology and
this may be including building of IT in-house or rather utilizing some other vendor.

5INFORMATION SYSTEM OUTSOURCING
Security- Several services of cloud computing are responsible for sharing their particular
resources with some other tenants [8]. This particular sharing will be helping a lot in saving on
all the costs and in making IT very much scalable, but it actually does not mean at all that some
other companies will be utilizing some of the common devices as well as services. This will be
helping a lot in creating several concerns related to security which are needed to be addresses
especially if the company is seen to possess a number of requirements of strict compliance.
Compatibility- Compatibility of the services of IT can be a huge issue especially if a particular
company is seen to be keeping some of its information technology in-house and the outsourcing
is just the part of the entire information system [9].
Coordination lack in between all the business goals and the goals of IT- All the vendors of
outsourcing do not always have a particular day to day understanding of the business of the
company [10]. They are capable of understanding all the IT and also the issues related to the
general business sector but they do not always work directly with all of its employees as well as
customers. There is a great need for having a discussion related the lack of coordination.
Other risks will be involving huge damage to the center of data, several international issues for
the companies which possess several offices abroad and some other concerns.
Conclusion
It can be concluded that as there are a huge number of benefits which are offered by the
information system outsourcing, there are a number of risks which are associated with the
outsourcing as well which are needed to be taken care of. As it has been observed that IS
outsourcing has become maximum of a common place, all the different risks as well as

6INFORMATION SYSTEM OUTSOURCING
challenges are needed to be taken care of so that any particular organization will be able to gain
more of all the benefits of IS outsourcing.

7INFORMATION SYSTEM OUTSOURCING
References
[1] N. Gorla and T.M. Somers. The impact of IT outsourcing on information systems
success. Information & Management, 51(3), pp.320-335, 2014.
[2] C. Samantra, S. Datta and S.S. Mahapatra. Risk assessment in IT outsourcing using fuzzy
decision-making approach: An Indian perspective. Expert Systems with Applications, 41(8),
pp.4010-4022, 2014.
[3] X. Zhao, L. Xue and A.B. Whinston. Managing interdependent information security risks:
Cyberinsurance, managed security services, and risk pooling arrangements. Journal of
Management Information Systems, 30(1), pp.123-152, 2013.
[4] J. Viitanen and R. Kingston. Smart cities and green growth: outsourcing democratic and
environmental resilience to the global technology sector. Environment and Planning A, 46(4),
pp.803-819, 2014.
[5] M. Brecht and T. Nowey. A closer look at information security costs. In The economics of
information security and privacy (pp. 3-24). Springer, Berlin, Heidelberg, 2013.
[6] S. Patil and W. Wongsurawat. Information technology (IT) outsourcing by business process
outsourcing/information technology enabled services (BPO/ITES) firms in India: A strategic
gamble. Journal of Enterprise Information Management, 28(1), pp.60-76, 2015.
[7] T. Bayrak. A decision framework for SME Information Technology (IT) managers: Factors
for evaluating whether to outsource internal applications to Application Service
Providers. Technology in Society, 35(1), pp.14-21, 2013.
[8] S. Ali and S.U. Khan. Critical success factors for software outsourcing partnership (SOP): a
systematic literature review. In 2014 IEEE 9th International Conference on Global Software
Engineering (pp. 153-162). IEEE, 2014.
[9] R.A. Noe, J.R. Hollenbeck, B. Gerhart and P.M. Wright. Human resource management:
Gaining a competitive advantage. New York, NY: McGraw-Hill Education, 2017.
[10] S. Liu. Effects of control on the performance of information systems projects: the
moderating role of complexity risk. Journal of Operations Management, 36, pp.46-62, 2015.