Question

In today’s world, IT organizations are finding alternative ways of delivering value to their customers, and to achieve these objectives there has been advocates of IT Outsourcing, you are an IT Manager of newly setup Savings and Loans Company, SAVELOAN Inc, and you have been tasked by your management to do a presentation to the Board of Directors who are not very sure of the way to go in accepting the sourcing options that will make them competitive since they are new entrant in the market. Consider and answer the following questions which will be the basis of your presentation. With reference to the case study; Explain the concept of IT Outsourcing as strategic IT decision and state 5 key issues.

Answer 1

IT Outsourcing:

As the name suggests, IT Outsourcing considers the decision of roping in external service providers to look after the IT infrastructure of a firm (fully or partially), along side other functionalities like task management, etc if needed. As far as SAVELOAN is considered, the setting up of sophisticated and complex IT infrastructure is necessary as the firm handles sensitive data with regards to savings account, personal details and many more which can't be compromised at any cost. A credible IT infrastructure also ensures that the firm's customer confidence is unshaken. Although this looks like a great plan to deploy as a part of corporate level straregy, as the IT Manager, I need to prepare the management of the company to deal with both sides of the coin. Here are some of the key issues associated with IT Outsourcing that SAVELOAN needs to evaluate carefully:

• Lack of understanding of post processing contract. This can often hamper the relations between the firm and the Outsourcing company. Because of this, the operations are stalled and SAVELOAN might be at a loss, which we can't afford at the nascent stages
• A mutual understanding with regards to the contract signed can be a challenge. Employees from both the party might come up with their own proposal of agreement and often dissent occurs giving no room for mutual understanding.
• Inability to cater to SAVELOAN's demands. Whenever we consider an IT Outsourcing, we have the right to expect the best and why not. We pay the service providers for the job. But seldom there are cases where the service provider falls short by a long margin in satisfying the firm's needs. This can bring about heated debates and in worst cases, lawsuits have been filed.
• It can get a bit costly. So, considering previous point, if we don't wanna have that problem arise, we gotta outsource to an established service provider (Ex. Accenture). SAVELOAN being a new entrant has to allocate a significant chunk of their funds to make this outsourcing happen.
• Trust issues felt by the employees. Last but definitely not the least. A HR manager would best relate to what I'm gonna tell. During an outsourcing, some uncertainty ensues the workplace (as employees wonder why Outsourcing in the first place) and the employees might conclude that SAVELOAN is not the right place to work, ultimately quiting from their job. This causes a manpower burden and for a new entrant like SAVELOAN this could be a serious issue. They need to refill the spots immediately if they want to get the work done. Hence a logistical problem is at hand as well.

These are some of the issues in IT Outsourcing.

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