Outsourcing IT Departments (Essay Sample)

Outsourcing IT Departments Author name Institutional affiliation Course number and name Instructor name Assignment due date Outsourcing IT Departments Outsourcing has become an increasingly popular concept in business administration as managers explore new methods of reducing costs, maximizing profits, and increasing competitiveness. According to Akkermans et al. (2019), outsourcing is a business operation in which job functions or services are contracted to third parties on an ongoing basis. Common activities and activities in IT departments include application management, network administration, system engineering, helpdesk support, IT security, and IT procurements. IT managers occasionally outsource some or all of their internal functions to reduce costs, save time, and improve professionalism. Additionally, IT managers outsource departmental functions to minimize risks, especially when launching new products or services. The successful planning and implementation of outsourcing programs in IT departments requires expertise and careful planning because of potentially high initial contract fees, exorbitant management costs, and hidden knowledge transfer and quality control costs. Initial Contract Fees The average cost of outsourcing IT support is between $90.00 and $160.00 per user per month in the United States (Suharmono et al., 2022). Costs for outsourcing Break-fix and co-managed IT services are $150 and 105 per user per month, respectively (Suharmono et al., 2022). An IT department that outsources three IT functions will spend approximately $300 per user per month. The high initial cost of outsourcing IT functions discourages managers from hiring third-party contractors. Small and medium-sized IT companies experience difficulties raising the initial capital to launch and maintain outsourcing contracts. Nonetheless, IT managers in small and medium-sized companies can negotiate with developers and contractors to get better deals on their outsourcing packages. Moreover, IT managers can seek external funding to start and maintain outsourcing contracts. Management Costs Access to the Internet and modern technological developments allow managers to work with global developers and contractors. Working with global contractors attracts additional management costs, including coordination charges, recruitment bargains, and quality assurance expenses. Recent statistics indicate that small companies spend $15-$20 per hour managing and coordinating outsourced teams’ activities (O'Brady et al., 2024). IT managers can reduce management costs by leveraging new technologies and negotiating with developers to get better offers. Knowledge Transfer and Quality Control Costs Knowledge transfer and quality control costs are the hidden expenses IT managers should think about when planning and implementing outsourcing projects. In most instances, developers and third-party contractors will take days, if not months, before they familiarize themselves with a new company’s programs, systems, and technologies. An experienced system developer will spend 2-3 days learning and operating a customized helpdesk support system (Gonzбlez et al., 2022). An IT department will be charged more if its systems are complex, advanced, or unique. Still, an IT department will spend more money to monitor third-party contractors’ services and deliverables for quality and timeliness. Only experienced and dedicated IT should use outsourcing programs because of associated risks like high initial fees to providers, overpriced management payments, and veiled quality control and knowledge transfer outlays. Outsourcing provides opportunities for reducing costs and boosting competitive...