Outsourcing (Essay Sample)

True Costs of Outsourcing IT Departments
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True Costs of Outsourcing IT Departments
Outsourcing is common practice in the business world aimed at reducing costs and taking advantage of talents and know-how of external experts. The process mentioned above is popular among small, medium, and large organizations. In information technology, outsourcing is vital as it enables the organizations to enjoy the delivery of quality IT services to their valued clients. The reasons behind IT subcontracting are to enable firms to reduce their costs and seek technical knowledge. Despite the numerous merits of outsourcing, there are true costs involved in overseeing the process to fruition. The mentioned costs are security breach financial losses, employees and assets redundancy, internal transition, retained organization, and currency fluctuations. It is imperative for organizations to take these costs into consideration before opting for subcontracting. The paper seeks to discuss the true costs of IT outsourcing.
As mentioned in the introduction, outsourcing not only comes with benefits but also attracts costs. Security is an essential component in the IT department, outsourcing would expose the systems security to the third party who may not comply with the set standards aimed at protecting the classified data of the organization. A point to note is that the subcontractors may leak vital information to outsiders leading to risk and massive financial losses (Solli-Saether & Gottschalk, 2010). For instance, outsiders may access free services from the company which ought not to be the case.
Another true cost associated with outsourcing is the redundancy of staff and assets. Since subcontracting entails seeking the services from third parties, the existing employees would have no task to perform leading to staff layoffs. As a result, the organization would have to compensate the affected workers, which is an additional cost. Besides, the external experts in most cases prefer to use their sophisticated technology which renders the organization’s assets inappropriate (McIvor, 2005). This means the firm incurs additional costs of procuring new machines coupled with the costs of repairing and maintain their obsolete assets.
Retained organization is also a true cost to firms opting for outsourcing. It involves the transfer of employees’ roles and responsibilities to the experts while paying full packages to the affected staffs. This is a marginal cost to the firm because it pays wages both to the experts and the affected workers. For instance, company x may transfer 50% of data management services to the experts, and reserve the remaining percentage to the department, but pay the departmental staff their full salaries (Solli-Saether & Gottschalk, 2010). The mentioned cost cannot be avoided because of the legally binding contract between the employer and the employees.
Currency fluctuation is a hidden cost incurred when offshoring. The unstable exchange rates have been noted to affect the experts’ p...