Information Systems Outsourcing Essay Example | Topics and Well Written Essays - 1500 words

Information Systems Outsourcing - Essay Example Outsourcing may be defined as the transfer of operational responsibility of either business processes or information system and other infrastructure management of an organization to an external service provider to achieve strategic goals, reduce costs, improve customer satisfaction and provide other efficiency and effectiveness improvements. This field has been in constant focus in last few years due to various social and financial issues involved with it. A number of organizations have sub-contracted all or part of their information systems / information technology function to specialist consultancies / contractors. According to Forbes Over 90% of Fortune 500 companies have outsourced at least one major business function. Encouraged by the projections of phenomenal cost savings, many Fortune 500 firms are jumping on to the "outsourcing bandwagon" (Lacity and Hirschheim 1993b). A survey of U.S. CEOs shows that 42% of communication firms, 40% of computer manufacturers, and 37% of semiconductor companies rely on outsourcing from foreign firms. These same CEOs expect the figures on outsourcing to exceed 50% before the mid-1990s (Bettis et al. 1992). Though the process of outsourcing is often considered as a non core business process it may range from low grade high volume and repetitive mechanical processes to a more sophisticated and high-tech development outsourcing. Outsourcing, in general, can be categorized as business processing outsourcing, platform IT outsourcing, application outsourcing and systems and network infrastructure outsourcing Information System outsourcing and processing services spending were approximately $200 billion in 2004, representing an 8.8% compounded annual growth rate (IDC). Information system outsourcing has been fueled by rapid technological change throughout all industries which results in more expense to upgrade systems, more time to install and increase complexity. For smaller companies which have information system and information technology department for just business support, maintaining and managing a good IT/IS department is not viable option, it is practically impossible to have a best team which can take on the market competition but IT/IS is major factor today that decide the success and failure of an organization. This lead to the outsourcing of major IT/IS outsourcings. Entire IT department or some IT/IS services are outsourced. The emerging pervasive nature of the Internet has effectively helped the communication between different parties involved in outsourcing process and has been the major facilitator of outsourcing in recent years. Easy and immediate access to information enables various parties involved in outsourcing to estimate the success of effort and control the entire process flow. Insufficient labor availability in developed countries, especially for those with IT expertise, has also led many companies in developed countries to outsource their business process and functional needs to the countries where cheap and high skilled human resource is available. Outsourcing decisions, in past, were primarily based on anticipated cost savings without the consideration of technology and security, but in