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Outsourcing technology - Essay Example

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Outsourcing technology

Outsourcing IT cn help with this process, s illustrted by the prolifertion of ppliction service providers (SPs) in the pst five yers. Clerly, the growth of the Internet hs creted forces tht re driving compnies to outsource (Jones, 2000), including highly competitive globl mrkets nd the rise of e-business. These trends compel compnies to reorgnize nd utilize more outsourcing to gin higher e-business cpcity, mke predictble cost forecsts nd cost reductions, ttin well-defined nd consistent service levels, cquire needed skills nd expertise, gin ccess to best prctices, nd focus on core competencies.
The Gol: optiml outsourcing Trditionl outsourcing focuses on chieving higher performnce, greter flexibility, nd reduced costs. Outsourcing IT offers the possibility of imposing control on the process, llows the conversion of fixed costs into vrible costs, cretes the opportunity for incresed profitbility, nd fosters innovtive cpbilities nd expnded flexibility (Quinn, 2000). IT hs been identified s one of the most costly components of business (Brthelemy, 2001), so options for reducing costs re certinly worth considering.
For number of resons, outsourcing IT cnnot be pproched like trditionl mke-or-buy decisions. To begin with, IT is not homogeneous becuse it is integrted with wide vriety of systems nd ctivities. dditionlly, djustments to stndrdized pplictions tht ccommodte the needs of business unit or function re often prohibitively expensive. Furthermore, estimting IT needs more thn three yers in dvnce is difficult, due to the rpid innovtion. Consequently, contrct extending beyond three yers my hinder the doption of new technologies. Unfortuntely, vendors expert t providing technology nd legcy systems tody re often not the best t providing tomorrow's new or emerging technologies (DiRomuldo et l., 1998), nd the qulity nd effectiveness of n informtion system re difficult to guge (Yost et l., 2002). The rpid pce of technologicl innovtion, the decresing costs of computing resources, nd rpid chnge in the underlying economics mke it extremely difficult to evlute the long-term costs of outsourcing. nd cost is not the only considertion.
In US, ppulr discussin f th grwing mrkt in utsurcing infrmtin tchnlgy (IT) hs bn spurrd by dcisins f svrl lrg cmpnis nd th ustrlin gvrnmnt t utsurc IT prtins. Th srvics in ustrlin IT utsurcing mk up t 38 prcnt f th ttl IT mrkt. Rsrch grup Grtnr rprtd tht th ustrlin IT srvics mrkt is wrth US$5.5 billin (Hubr, 2002).
Th utsurcing in th cuntry is still ky drivr f th IT srvics sctr s wll s mngd srvics in rs such s strg, Intrnt srvics, nd scurity. vr th lst fw yrs, utsurcing hs bn n f th singl lrgst cntributrs t th lcl srvics sctr, ld by th Fdrl Gvrnmnt's driv t utsurc th mjrity f its gncis' nd dprtmnts' prvisin f IT rquirmnts. Hwvr, mny f th Fdrl Gvrnmnt's "clustr" cntrcts hv bn criticizd fr cst blwuts nd r nw bing rviwd.
Th gvrnmnt my stipult shrtr cntrct rrngmnts, nd pt fr mr slctiv, smllr dls. Th rcntly ngtitd Fr Trd grmnt btwn th U.S. n ustrli (USFT) will incrs pprtunitis fr U.S. IT srvic prvidrs. It is prdictd tht th USFT my pn th wy fr mr U.S. srvic prvidrs t prtnr nd prvid srvics t th ustrlin Fdrl Gvrnmnt (Fny et al.,1993).
By fr, th biggst plyrs in this mrkt sgmnt r IBMGS, DS, CSC, nd HP s wll s th big ccunting nd cnsulting firms. Cllctivly ths cmpnis ccunt fr 65 prcnt f th ttl utsurcing mrkt. Th fdrl gvrnmnt ccunts fr 47 prcnt f ll public sctr IT spnding.
Whn utsurcing, US cmpnis im t rch th ...Show more

Summary

Outsourcing IT cn provide mjor cost nd time sving dvntges over rnge of projects from smll things such s repir of hrdwre or network mintennce to ongoing mngement of ll IT issues for multiple sites nd users. This re is in fst-growing mode due to the complexity nd necessity of informtion technology…
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