Tuesday, October 18, 2011
Research on IT outsourcing
Outsourcing has been a very hot topic lately in the news, especially the outsourcing of jobs. When looking at the information technology community outsourcing has been both an aid as well as a hindrance. This paper will explore the positives as well as the negatives both the outsourcing of jobs and products have had on information technology in the United States.
There are many factors that influence a company to outsource its services or products, but within the information technology field not only does money influence a decision but factors such as reputation, infrastructure of the country, IT outsourcing can be dependent on several factors across multiple levels. “At the level of the economy, temporal effects of trends and cycles may motivate firms to rationalize the management of the IT infrastructure through arrangements like outsourcing. At an industry level, competitive pressures may induce firms to
establish "partnership-based" relationships with key IT vendors (LOH & VENKATRAMAN, 1992) .”
When American companies seek cheap labor for their products they usually look toward China and India. “India has always been a major player in information technology (IT); they even make their own supercomputers for predicting monsoons. It wasn't until the Y2K bug emerged that the need for legions of cheap programmers really arose, however, and American companies began to see the potential for outsourcing overseas. After Y2K the IT service industry exploded, with American companies outsourcing everything from data entry to customer service to India and other Asian countries (Wikipedia, 2011) .” When companies decide to outsource, there is not only a business component but there has to be a look at the geography of the country as well as other sources of export.
Countries who used to reject the idea of ever letting technology be a source in economic growth are welcoming it whole heartedly. This outsourcing of jobs is helping the global economy. This is giving countries overseas a reason to provide exports that only required manual labor. These products require an education and in order to provide pristine quality products, companies who choose to outsource must give their foreign employees the proper education and training to produce this type of work (Carmel & Tjia, 2005) .
Now that outsourcing products has become more prevalent, consumers have switched their concern from money to product quality and customer service. “A detailed survey was conducted among project managers/project leaders (leads) of a leading midsize Indian IT services company to evaluate the relationship of the determinants on the attributes of quality. Out of six determinants, the research reveals requirements uncertainty has significant association with all the attributes of quality. While process maturity and trained personnel have moderate association, communication and control, knowledge transfer and integration and technical infrastructure have relatively low association on software quality attributes in the case of off shoring. It is concluded that the complexities in off shoring necessitates proper capturing of requirements. In addition high level of process maturity and availability of trained personnel to the project will help vendors to achieve software quality (Kannabiran & Sankaran., 2011) .”
A primary positive of outsourcing information technology is money. With the establishment of labor unions in the United States and minimum wage, companies are almost forced to either drive up prices, cut jobs, or outsource. The Yankee Group estimated that all Fortune 500 firms would evaluate outsourcing, that a fifth of them would sign outsourcing deals during the 1990s, and that the outsourcing market would increase from $29 billion in 1990 to $49.5 billion in 1994 (LOH & VENKATRAMAN, 1992) .
Continuing with the point of view from the consumer, does outsourcing still a lot competitiveness? Because these companies are outsourcing to countries that may produce poorly made products, consumers are left with the choice of buying the cheaper but questionable quality or the more expensive product whose prices has been driven up due to legal fees, steeper employee wages and larger insurance quotes. “According to RBV, organizations may only internalize sources of competitive advantage if they have more expectations of their future value than competitors have. Thus IT functions are more likely to be outsourced if they are not considered to be core competencies of the firms, in other words, if IT offers an opportunity for sustained competitive advantage, the firm should adopt internalization strategy. This view supports previous discussion of (strategic importance) as one of IT outsourcing motives (hawari, Awwad, & hawari., 2011) .”
A factor that holds some baring on sourcing as well is surprisingly the social factor. Outsourcing is a big risk and if the company wishing to outsource does not have a great social bond with the company overseas then the transaction is most likely to fail. “Most researches in IT outsourcing has also appeared to lean toward the relational governance focusing the effect of the relationship quality on IT outsourcing success. Accordingly, activities will only be outsourced if the relationship offers rents (value) generated from interorganizational Knowledge sharing, complementary resource or effective governance. Such rent creation requires relation-specific investments and activities are only outsourced if these investments are likely to yield a satisfactory return for all firms involved (hawari, Awwad, & hawari., 2011) .”
An new interesting development has recently been added to the ever complicated process of outsourcing, sustainability. Consumers are craving “green” products and so, developers must do their best to meet those demands. Global IT outsourcing is well established as a business practice towards reducing costs and improving performance. Sustainability issues related to carbon footprint and greenhouse gases are increasingly important for all organizations. Responsible and economic energy management is a critical business capability and environmental responsibility in global outsourcing. Design/methodology/approach - Drawing on empirical work undertaken in the UK and North America together with content analysis of public data from leading Global IT outsourcing providers (Babin & Nicholson., 2011) .
When looking at findings, there has been growing environmental maturity in Global IT outsourcing firms, as measured against external recognized standards such as the Global Reporting Initiative, the Carbon Disclosure Project, the UN Global Compact and the ISO environmental and social responsibility standards. Practical implications - In the context of social, economic and political discussions regarding sustainability, practical and theoretical understanding of Global IT Outsourcing providers and the impact of environmental issues in outsourcing. Social implications - Consumers, governments and society at large demonstrate increasing expectations for sustainability from all organizations. Outsourcers can provide improved sustainability capability to their buyers in this important area.
In conclusion, outsourcing of information technology could be a very useful tool to both consumers and developers. If given time to become more progressive, outsourced information technology products could have similar if not better quality than products made in America. Because labor and parts are so cheap, developers have room to make changes such as sustainability. All it takes is time and better training of workers and patience for consumers to see that, outsourcing is here to stay so why not let it benefit you?
Bibliography
Babin, R., & Nicholson., B. (2011). How green is my outsourcer? Measuring sustainability in global IT outsourcing. Strategic Outsourcing: an International Journal. , 47. This source helped me find out ways that outsourcing is beneficial Proquest Library Research.
Carmel, E., & Tjia, P. (2005). Offshoring information technology: sourcing and outsourcing to a global workforce. Cambridge: Cambridge University Press. This source told me why countries choose to outsouce
hawari, M. A., Awwad, M. S., & hawari., M. A. (2011). Toward A Model of Drivers for IT Outsourcing in a Developing Country: Jordan Public Sector Case Study. The Business Review, Cambridge , 106,7. This source told me how developed outsourcing is Proquest Library Research
Kannabiran, G., & Sankaran., K. (2011). Determinants of software quality in offshore development - An empirical study of an Indian vendor. Information and Software Technology , 1199. This source told me about the quality of outsourced products Google Scholar.com
LOH, L., & VENKATRAMAN, N. (1992). Determinants of Information Technology. Journal of Management Information Systems , 7-24 Google Scholar.com
Wikipedia. (2011, June). Information Technology outsourcing. Retrieved September 29, 2011, from wikipedia.org: http://en.wikipedia.org/wiki/Information_technology_outsourcing This is where I started my research and learned where exactly companies choose to outsource to.
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