Information Technology Outsourcing: Risks and Benefits

Essay by jumanirohanUniversity, Master'sA+, July 2009

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ABSTRACTOffshore outsourcing has grown vertiginously in recent years. The nature of offshoring is changing significantly, and the strategies and options that organisations can pursue are becoming more diverse and varied. It is beginning to be perceived more than just a necessary organisational resource acquisition venture. This essay describes some of the key themes and issues in relation with offshore outsourcing. It critically evaluates the use of, and the issues related to offshore outsourcing; and the main reasons which make firms to adopt Information Technology Outsourcing. It equally analyses the potential risks and benefits that IS clients are facing while adopting offshore outsourcing. Additionally, examples are used to support and reflect upon the risks and benefits mentioned in the essay. Finally, conclusion suggests that the range of offshore outsourcing must be widened and that the offshoring cannot be exclusively done based upon cost savings; other potential risks must also be taken into consideration.

Keywords: Outsourcing, Offshore Outsourcing, Information Technology, Risks and Benefits.

INTRODUCTION"Outsourcing, a management practice strongly consolidated within the area of Information Systems, is currently going through a stage of unstoppable growth." (Gonzalez, Gasco & Llopis, 2008) An extensive range of fact and figures confirms the status of Information Technology (IT) or Information Systems (IS) outsourcing as growing global phenomenon in the new millennium. The value of the world outsourcing market estimated by Forrester is $ 120 billion and is expected to grow from $ 180.5 billion in 2003 to $ 253.1 billion in 2008. (, 12th March 2009) Although numerical estimates and figures may vary across sources, the magnitude and expected growth of outsourcing in coming years cannot be denied.

2nd October 1989, Eastman Kodak signed a deal that forever changed the landscape of IT outsourcing. In an agreement worth nearly $250 million, Kodak deliberately and strategically handed...