Question

Discuss the risks, benefits, and audit issues related to IT outsourcing

Answer 1

Risks related to IT outsourcing:

1. By outsourcing the IT services, the company relies on the third party's supplies, expertise and the services offered. That means the company has less control over the infrastructure and implementations. Thus, in case if the collaboration with the 3rd party does not succeed then it becomes quite difficult and expensive for the company to understand the existing IT implementation and hire a new IT services provider.
2. In case the company has strict compliance policies, then it becomes a security issue for them to use cloud computing services as in that scenario cloud resources are shared among multiple tenants.
3. It becomes quite cumbersome and the company may face several compatibility issues in case only some of IT services are outsourced and others are maintained in-house.
4. Business perspectives/flow and IT goals must remain in sync in order to have a successful and worthy IT infrastructure and set-up.
5. If the data centers get damaged, then business data can be at stake if regular back-ups are not done.

Benefits related to IT outsourcing:

1. Expansion of IT infrastructure, storage and applying new technology and tools becomes easier for the company to manage as all these are handled by expert and the company just need to think about business requirements and revenues.
2. Better recovery of data and application in case of disasters as they have a backup ready for all the crucial items.
3. External service providers or vendors have all the technical expertise and resources in order to maintain and upgrade all the IT services and set-up. Also. they can help to achieve IT services with better performance at competitive prices.
4. A lot of the company's revenue is saved as IT outsourcing is very much cheaper than setting up in-house IT infra and hire relevant resources.
5. The time saved by outsourcing the IT services can be utilized by the business for further business development and expansion.

Audit issues related to IT outsourcing:

1. Effectively managing contracts and service level agreements with an external vendor becomes a challenge.
2. It becomes hard for the company to decide whether to hire external vendors for audit or recruit an in-house specialist.
3. Costly and time-consuming process.
4. Difficult to implement a transparent and trust-worthy audit process.