IT Outsourcing in the Face of Global and Technology Challenges

IT Outsourcing in the Face of Global and Technology Challenges

Abdul Jaleel K. Shittu (Universiti Utara, Malaysia) and Nafisat Afolake Adedokun-Shittu (Universiti Utara, Malaysia)
Copyright: © 2015 |Pages: 10
DOI: 10.4018/978-1-4666-5888-2.ch080

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Outsourcing is complex, time-consuming, and at times even a career-killer. There is no single approach to outsourcing that will guarantee success. Every situation is unique in one way or another (Pepple, 2011). This complexity seems responsible for numerous project failures recorded. Therefore, one must understand the seven deadly sins underlying most failed outsourcing efforts, of which is outsourcing activities that should not be outsourced (Barthélemy, 2003). Though ITO has experienced a rapid growth since early 1990s in developed countries, this growth did not come by without any challenge. The continous drive for greater efficiencies and cost reductions has forced several organisations to increasingly specialise in a limited number of key areas, thereby outsourcing the potential problematic and challenging areas. A critical analysis of these challenges redirects this research to Refocusing, Re-analysing, Re-engineering and Re-assessing (4Rs). The sluggish and nose-diving economic growth of some developed countries, which has cumulated into industrial layouts at an accelerating speed, has brought several transnational corporations (TNCs) to be increasingly “refocusing, re-analysing, re-assessing and probably re-engineer their operations (Shittu, et al., 2012, Jing & Jian, 2010). These 4Rs measures are equally applicable to public and private information technology outsourcing practises.

Previous studies had shown that some developing countries such as India, China and Mexico are experiencing economic buoyancy due to effect of ITO (Jiang, 2009; Shittu & Adedokun-Shittu, 2011). Across organizations, ITO has been identified as one of the best practices for the management paradigm shift (Lin et al., 2011; Shittu et al., 2011; Ahlan & Shittu, 2006). It is one the matured business strategies used for more competence in the new organization system (Archstone, 2011).

ITO can equally minimize the costs and increase efficiency and flexibility of organizational business operations. However, vendors need to focus on services level target but equally the cost, security, arrangement and of course quality of service (Anderson, 2011). This means that vendors need to view ITO from wider perspectives such as Business operation, and Logistics system. This holistic view of ITO can be achieved through a strategic outsourcing where companies outsource everything except those core activities in which they could achieve a unique competitive edge (Franceschini et al., 2003). Either the outsourcing activities are executed by the client ”Capacity Outsourcing” or the outsourcing activities are no longer pursued by the client ”Non-capacity Outsourcing” the ability of the organisation to correctly apply 4Rs would determine the outcome of outsourcing arrangements (Fill & Visser, 2000).

Key Terms in this Chapter

Re-Assessing: Finding new reality as reality is what organisation takes to be true, especially when it is back-up with data and performance reports. ”Reality is what we take to be true. What we take to be true is what we believe. What we believe is based upon our perceptions. What we percieved depends upon what we look for.what we look for depends upon what we think. What we think depends upon what we percieve. What we percieve determines what we believe. What we believe determines what we take to be true. What we take to be true is our reality” (As Zukav, 1980 AU45: The in-text citation "As Zukav, 1980" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. : 328).

Eco-Sourcing: Is the process of seeking expert skils not only in the best geographical location but in a manner that promote a sustainanble and friendly ecosystem. Either internally or externally to the organization. In this arrangement, the priority is giving to ecosystem, green technology, etc not just the cost and technology infrastructure.

Re-Analysing: Looking into the existing structure in order to identify the causes of failure or potential failure as well as identifying the crictical elements when the new outsourcing arrangement is made.

Re-Engineering: “Reengineering is what we called creative destruction. That is the breaking down of old unmanageable ways to free resources for new progressive and higher uses. Reduction in cost and time and quality in output and worklife were the yardstick in determining factors in re-engineering. Therefore re-engineering outsourcing parctices is to do away from organizations inefficiencies by freeing underutilized resources (primarily people and capital) to be recombined to create higher value-added products and services.

In-Sourcing: Is a constrast of outsourcing, thereby the organisation decided to develop, execute and implement certain activities or application internally. This could be a strategic approach i.e a long term solution or tactical solution (short time). In another word Insourcing is the process of retaining a business (Information Technology) function internally, whether distributed across the organisation in various business units or maintained centrally in a share service center (Cook, 1999 AU44: The in-text citation "Cook, 1999" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ).

Shared-Service Outsourcing: A service oriented approach in providing a unified business solution and effective administrative management internally (insourcing) accross an organisation wide. According to Dell and Tsaplina (2004) , they positioned that Shared Service Centers are generally composed of three parts, i.e Centre of Expertise (COE), Centre of Scale (COS) and Human Resource (HR). In some other studies, Centre of Scale is refered to as data center outsourcing (DCO). In these centers organisation policies were explicitly defined, also the needed skills were sorted. Da Rold and Erba (2000) AU46: The in-text citation "Da Rold and Erba (2000)" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. believe that Economies of scale are expected to greatly benefit data center outsourcing (DCO) vendors. By providing services from large data centers, outsourcers are expected to be able to pass on savings to any client via low-cost MIPS.

Refocusing: Ability of the company in making decision to reduce or increase the scope of its outsourcing activities in order to concentrate on the core business.

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