IT Outsourcing Evolution-Past, Present, and Future



Class: CS551

Instructor: Dr.Lee

Student: Wei Shao

IT Outsourcing Evolution-Past, Present, and Future

Summary:

This article talks about IT Outsourcing from past, Present, and future. IT outsourcing have been started since 1960s, it more focused on hardware at that time. Because computers were large and expensive, most companies relied on service bureaus, systems houses, and other professional firms to provide facilities management services. In early IT era, the hardware occupied more percentage than software. That was a reason why IT outsourcing focused on hardware on that time. With the time pass, the IT outsourcing have been changed too. In the 1980s, IT focused to vertical integration. In the 1900s, IT outsourcing had been changed, not only for contract programming and specific processing services, but for network and telecommunication management, distributed systems integration, application development, and systems operation. We can see from technology development, IT outsourcing from hardware pass to software and even more. Why does need IT outsourcing? It can bring significant results to IT companies: cost reduction, effective use of human resources, higher capacity on demand, and better access to advantage technologies. Of course, to make IT outsourcing success, you can’t depend on one side, the partnership is very important. We call the IT outsourcing that is partner-based outsourcing. Today’s IT outsourcing involves a much more services than 30 years ago, with an increasing number of IT functions being transferred to IT service providers. In the partner-based outsourcing, it has been divided into two stages. First stage of IT outsourcing evolution as driven by client self interest, sharp by a hierarchical relationship and dictated by a win-lose strategy. Second stage of IT outsourcing, marking the beginning of the partnership concept, organization begin to realize the strategic advantage not just in owning IT, but also in using it in specific ways.

For the future of outsourcing, among the ideas for outsourcing in the era of e-commerce is the ASP, a company that offers the deployment and management of applications via the Internet or a private network based on monthly or per-user fees. Asps achieve cost efficiency by retaining goods and services for specialized organizations and maximizing expertise for specialized organizations and maximizing expertise and economies of scale.

Critique:

IT outsourcing is billed as a way for companies to trim costs and focus on core business operations. IT outsourcing has been generated business by sending more technology work to low-cost facilities around the computer companies or IT fields.

Strength of IT outsourcing:

• IT Outsourcing can reduce costs.

• Effective use of human resources

• Higher capacity on demand

• Better access to advantage technologies.

• Client site can gain access to the skills when they are required

• Outsourcing can allow a client organization to focus on its core business.

Weakness of IT outsourcing:

• Privacy and confidentiality are often cited as a major barrier to outsourcing IT functions.

• Entering a long-term contract with a mainframe computer vendor may cause lack of flexibility for service providers. (e.g. when changing business or technological circumstances bring a need to migrate to an alternative solution).

• If the system failure can shut down critical operations and result in a major loss of client productivity and may cause serious problems.( e.g Client site is a hospital).

Questions:

1. Is the language an issue in communication? This might bring some difficulty to services providers when they try to support client site for technical skills.

2. How does services provider to handle the function privacy?

3. Was the time different a hurdle for communication? Some clients might be in other countries.

Reference:

1. Tom Worthington. Outsourcing and contracting out of IT products and services.

27 July 1997.



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