Outsourcing Trends in IT - Onshore and/or Offshore, and its impact on Business
The Information Technology Industry has grown leaps and bounds over the past decade. The huge growth in the IT industry is due to the demand of technology related services in the global market. There has been a considerable boom in some emerging economies due to its ability to give a qualified supply chain of IT experts at lower cost which can be termed as Outsourcing. “Ukraine’s IT outsourcing sector has exploded over the last 10 years to top $1bn in 2011” (Forbes). This research paper will talk about the Outsourcing Trends in IT, be it onshore or offshore and the impact it is creating on the global business world. The paper will focus on the economies which have developed immensely due to their superior IT skills at lower costs. The paper will answer questions about how it helps in collaborative decision making, whether it promotes ethical practices or not, the impact is has on international business and trade and to what extent. The paper will focus on all these aspects and conclude whether the outsourcing trends in IT have helped changed the business face of the world or not.
How does it support collaborative decision making?
The outsourcing trends in IT have been a win-win situation for the companies outsourcing their IT needs and the companies executing it at comparatively lower costs. The outsourcing can be done onshore to local companies and offshore to foreign companies as well. Businesses are now understanding that outsourcing IT work to competent IT companies will save them the hassles of developing through their own IT team and it is always better to concentrate on the principal business and let the IT companies take care of the rest. The IT systems make the business get quicker and comprehensive data at their finger tips which help in the decision making process. Business owners and managers can collaborate on making business decisions as the IT mechanism helps them assimilate meaningful data as information which keeps them updated with factual data. All these parameters help the business group to analyze their business better and take business decisions. Outsourcing is helping the businesses from all departments and trades to streamline their business work flow into an organized sector where the raw data is captured, processed and output given in the form of meaningful data. These companies do not have in-house IT teams but everyone requires IT services to organize their business and make it automated. “Off shoring and outsourcing will be an enormously growing business as organizations find they have neither the expertise nor finance to develop solutions on their own to deal with some of the issues” (Loh 10). The business managers have realized that spending time and energy on developing data centers is not their expertise and they should outsource to third party vendors who are professionals in their respective domain to do the job. The business owners are concerned about getting the right output at the right time which enables them to make key decisions in business. With a web platform, key personnel of the business are able to share the same information which helps in collaborative decision making.
Does it promote more or less ethical practices?
Marian observes that as more and more firms are focusing on outsourcing, off-shoring managed services or selective sourcing of Information Service & Technology services, there will be a constant impact on the employee ethical work practices and the work environment as a whole. IT outsourcing might not always promote positive ethical practices as company executives might feel that their core areas are being outsourced to vendors or they may have a psychological effect in dealing with it. It is important to do a proper research on the social changes caused due to the outsourcing or off shoring in the work place. There has to be a proper contract in place with the vendors which provides legal clause as to the security of data handled by them. There is also a need to explore the psychological contract between the organization staff where they can stick to the code of ethics in a changing business environment.
In the situation where there is a social change in work culture and practices mainly driven by outsourcing in IT, the psychological contracts can educate the staff as to the need of the outsourcing and offshore of work to third party vendors. Organizational staff might be reluctant to share information to third party vendors but when they realize the benefits accrued out of it will help them understand in a much better fashion. Outsourcing trends have resulted in lesser ethical practices but business organizations have to be stringent in promoting it to give value to the business process. The code of ethics can give a framework on determining work ethics but the practical implementation needs to be closely monitored.
Impact on Internationalization of the business
Outsourcing trends have opened a new and vast dimension of business. With the advent of the internet, there has been a vast shift of how businesses were operated. There is more transparency in business dealings with firms having proper technology to process data, assimilate them and transfer the processed data into meaningful information which helps them make key decisions. With outsourcing of IT work to developing nations particularly, the globalization and internationalization of business has taken a huge step. As per the reports of Dubai Outsource Zone in collaboration with global business research and consulting firm Frost & Sullivan, the global revenues for the outsourcing industry is projected to touch US$479.3 billion by 2016 from US$370 billion at present (DOZ). The massive surge over the last decade has come with better internet infrastructure and the fact that a skilled IT labor from Ukraine or India can do the work at a lower cost with equal professional ability to deliver the output. With an English speaking work force, there has been a remarkable increase in global revenues with companies and vendors having a win-win situation. The impact has also seen a rise in economies for the ancillary industries as well. Not only has there been a rise in jobs in the countries where work is outsourced but also the related jobs, be it accounting, management, human resource, infrastructural companies who are benefitting from the boom and contributing to the world economy. For example Ukraine has grown tenfold in the last decade with a 30-40 percent annual growth from IT outsourcing (Forbes). Institutions teaching computer science and information technology subjects have grown in numbers with a huge number of students graduating every year which contributes to the work force.
It can be concluded from the above discussion that Outsourcing trends in Information Technology has taken the local business to the global world. Not only have companies benefitted manifold from the IT infrastructure and software development to carry their businesses worldwide and managing them effectively, they have also been able to explore new markets and sell their products and services to a global audience. The outsourcing and off-shoring of IT has opened doors in every corner of the globe with a huge revenue generation which has immensely helped the businesses to be a part of the global market.
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