Information System Outsourcing: Benefits and Challenges Report

This report provides a comprehensive overview of information system (IS) outsourcing, exploring its advantages and disadvantages. The report begins with an abstract summarizing the key aspects of IS outsourcing, emphasizing its growing trend in the IT industry. It then delves into the benefits, including expert technical support, focus on core processes, risk sharing, and cost reduction. Challenges such as data confidentiality risks, synchronization issues, hidden costs, and consumer focus are also discussed. The report further outlines mitigation strategies, such as service level agreements, careful vendor selection, and early risk assessment, to address the challenges. The conclusion highlights the strategic importance of IS outsourcing for business development, despite the inherent problems, emphasizing the need for a well-planned approach for successful implementation. The report is based on research conducted for the MITS4001 Business Information Systems Research Study, July 2018.

INFORMATION
SYSTEM
OUTSOURCING
:

Abstract— Outsourcing has become a trend for the IT
industry. Many of the organizations are using the IT
outsourcing for maintaining the flexibility in the business.
Apart from that it can be said with the proper use of the
information outsourcing, there is a chance that the
development of the business in the IT industry can be
implemented in a proper way [1]. However, there are certain
advantages and the challenges regarding the use of the
outsourcing in the information technology industry. The main
objective of this paper is to understand different challenges
and the advantages of the IT outsourcing for the organization.
Keywords—Outsourcing, advantages, disadvantages
I. INTRODUCTION (HEADING 1)
Outsourcing in the information technology is the
trending concept in the organization where the two
organizations exchanges the workload. In this situation, one
service providing organization delivers the work to the third
party organization so that the third part organization can do
the work on behalf of the respective organization. In this
case, the client organization will pay the third party
organization for the service. The IT service can be different
like implementation of the new system in the organization
or solving some IT related problems [4]. The service may
be exclusive of the client company that includes the
innovation of the new IT related solutions.
The main objective of this paper is to evaluate the
different aspects of the information system outsourcing.
Apart from that the benefits of the outsourcing along with
the challenges of the outsourcing is described in this paper.
II. DISCUSSION
It has been seen that there are certain advantages and
challenges regarding the outsourcing in the organization.
The advantages can be helpful for the organization for the
further expansion of the business. On the other hand, the
challenges can be crucial for the organizations to carry on
the practice of outsourcing.
A. Benefit
There are certain benefits of using the outsourcing.
Some of the benefits of outsourcing are as follows-
1. Expert technical support and swiftness: One of the
main advantage of the outsourcing of the of the
information system is that the tasks are compiled
by the technical experts [2]. It has been seen that
most of the tasks are outsourced to the vendors
who are experts in that respective filed. In that
case, it can be expected that the IT solution that can
be achieved from the third party organization will
be in excellent quality.
2. Focus on the core process of the organization: In
the service based organization works related to the
technical supports or the other supporting
technology are outsourced to the third party
organization [5]. In that case, the client
organization can able to focus on the main
functions of the organization rather than focusing
of the solution for the supportive technical
problems. This will eventually improve the quality
of the organizational outcome.
3. Sharing of the risks: Another advantage of the
outsourcing of the organization is the sharing of the
risks between the organizations[3]. Outsourcing
means shifting certain tasks to the third party
organization. In this case the client organization is
shifting certain responsibilities to the other
organization. This will help the client organization
to mitigate the possible risks in the organization. In
case, the failure of the outsources project occurs, it
is the responsibility of the third party organization
to manage that risk.
4. Reduction of the operational and recruitment cost:
The reduction of the operational and recruitment
cost can be done through the implementation of
then outsourcing in the organization. It has been
seen that as the tasks are shifted to the third party
organization.
B. Challenges
1. Exposing of the confidential data: There is
a risks in the managing of the confidential
data that can be breached for the
outsourcing of the IT tasks to the third
party organization. Apart from that the
commercialization of the data and
information can be possible for the
development organizations during the
course of outsourcing.
2. Synchronization between the objects:
Another challenge regarding the
outsourcing of the IT tasks is maintaining
the synchronization between the different
deliverables from the different
outsourcing source [8]. It can become
problematic for the organization to
compose all the deliverables for the final
service or the product. Apart from that
there is a chance that the outsourcing of
the products may not maintain the right
quality.
3. Hidden cost: There is a problem regarding
the outsourcing regarding the hidden cost
imposed by the third party organization. It
can be possible that the hidden cost is not
mentioned in the negotiation process
between two companies. In that case, the
client organization has to pay more for the
development of the project which can

affect the revenue of that respective
organization.
4. Focus of the consumers: The focus of the
consumers can be neglected in the
outsourcing process [7]. In the
outsourcing process there is a need for the
expertise solution in the outsourcing
process. In that case the business value
from the customer perspective can be
neglected in the outsources process.
C. Mitigation of the challenges regarding outsourcing of
the organization:
There are certain steps those can be used for the mitigation
of them outsourcing costs in the organization. It can be said
service level agreement between the organizations can
drastically reduce the sot of the organization [1]. On the
other hand the selection of the outsourcing company is
needed to be done on the basis of the evaluation of the past
work by the organization. This will help to maintain the
quality of the final outcome from outsourced project. The
reduction of the operational and recruitment cost can be
done through the implementation of then outsourcing in the
organization [8]. It has been seen that as the tasks are shifted
to the third party organization.
Apart from that the accessing of the risks at early
stage can mitigate the risks in a significant way. Getting
feedback directly from the client will help the organization
to maintain the quality. Apart from that in this process the
application and the implementation of the requirements can
be done in a proper way. The flow of communication
between the client organization and third party organization
should be maintained in a proper way. This will maintain
the negotiation process. Apart from that the delivery of the
requirements can be done in a proper way through the
implementation of proper communication flow in the
process [2]. For avoiding the breaching of the data the
agreement regarding maintaining the confidentiality of the
data and information of the users should be done between
two organizations. In this case the third party organizations
can sig NDA for not disclosing the data to the public. In
case, if geo-location is the problem, organization can go for
in house trouble shooting.
III. CONCLUSION
The discussion is regarding the use of the
outsourcing in the organization. In this context, the
advantages and the disadvantages of the outsourcing process
are discussed. It can be said, though there are different
problems regarding the outsourcing of the IT task to the
third part organization, the strategic implementation of the
outsourcing will be helpful for the development of the
business for the organization. There are certain problems
occurred during the implementation phase. However, those
problems can be mitigated through the strategic
implementation of the outsourced plan in the organization.

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