Describe The True Cost of Outsourcing IT Departments (Essay Sample)

The True Cost of Outsourcing IT Departments
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The True Cost of Outsourcing IT Departments
Outsourcing IT is hiring people or vendor outside the firm to perform internet and computer related work. The work includes database management, programming, applications development and network security services. The modern business entities and institutions are outsourcing information system department to run specific IT services. However, outsourcing IT leads to challenging in asset management and security risk. The paper focuses on the three real cost which increases the expense of outsourcing IT department.
The process of developing outsourcing contract requires finance and Technical team. The organization must identify the accredited vendor with a particular system that meets the objective of the firm (Mehta, & Mehta, 2017). During the hiring process, the company needs a technical team to evaluate the ability of the IT to execute the functions of the organisation and achieve the desired outcome. The management, therefore, incur the cost of validation and verification. Moreover, the firm incurs opportunity costs such as travel and conferences during the selection of the information technology vendor. They make up the hidden cost of outsourcing.
Security is a primary concern for a business firm. Outsourcing IT department exposes the company to security risk (Bahli, & Rivard, 2017). IT department controls system application and telecommunication. The ability to access servers and account of the firm may lead to financial risk. Additionally, the cost of outsourcing IT security programs and implementation is relatively high. It creates additional expenses to monitor and secure IT services operated by outsourced IT department. Unexpected changes also lead to extra costs. Unlike in-house IT department, additional services to adjust for the changes in the IT operation increases the vendor charges. The need for modification to improve the system is one of the hidden cost. The additional charges not included in the contract has a significant impact on the total finance allocated for the IT services.
The cost of transition and integrating the outsource Information technology department is often hidden. Kaipia and Turkulainen (2017), observe that integration in the outsourcing contract is contingent. Many firms assume that the cost has no significant impact on the overall expenses of outsourcing. The transition cost that adds to the total cost of outsourcing is the cost of documenting the outsourcing deal, integration of new interface to create a platform for the IT department. Besides, the company also incur legal fees for a third-party contract. The legal fees and technical cost are essential to facilitate the process of transferring the responsibility to the IT vendor. The firm also incurs expenses for ramping up entire IT department to resonat...