Class: CS551
Instructor: Dr.Lee
Student: Wei Shao
IT Outsourcing Evolution-Past, Present, and Future
Summary:
This article talks about IT Outsourcing from past, Present, and future. IT outsourcing have
been started since 1960s, it more focused on hardware at that time. Because computers were large
and expensive, most companies relied on service bureaus, systems houses, and other professional
firms to provide facilities management services. In early IT era, the hardware occupied more
percentage than software. That was a reason why IT outsourcing focused on hardware on that
time. With the time pass, the IT outsourcing have been changed too. In the 1980s, IT focused to
vertical integration. In the 1900s, IT outsourcing had been changed, not only for contract
programming and specific processing services, but for network and telecommunication
management, distributed systems integration, application development, and systems operation.
We can see from technology development, IT outsourcing from hardware pass to software and
even more. Why does need IT outsourcing? It can bring significant results to IT companies: cost
reduction, effective use of human resources, higher capacity on demand, and better access to
advantage technologies. Of course, to make IT outsourcing success, you can’t depend on one
side, the partnership is very important. We call the IT outsourcing that is partner-based
outsourcing. Today’s IT outsourcing involves a much more services than 30 years ago, with an
increasing number of IT functions being transferred to IT service providers. In the partner-based
outsourcing, it has been divided into two stages. First stage of IT outsourcing evolution as driven
by client self interest, sharp by a hierarchical relationship and dictated by a win-lose strategy.
Second stage of IT outsourcing, marking the beginning of the partnership concept, organization
begin to realize the strategic advantage not just in owning IT, but also in using it in specific ways.
For the future of outsourcing, among the ideas for outsourcing in the era of e-commerce is the
ASP, a company that offers the deployment and management of applications via the Internet or a
private network based on monthly or per-user fees. Asps achieve cost efficiency by retaining
goods and services for specialized organizations and maximizing expertise for specialized
organizations and maximizing expertise and economies of scale.
Critique:
IT outsourcing is billed as a way for companies to trim costs and focus on core business
operations. IT outsourcing has been generated business by sending more technology work to lowcost facilities around the computer companies or IT fields.
Strength of IT outsourcing:
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IT Outsourcing can reduce costs.
Effective use of human resources
Higher capacity on demand
Better access to advantage technologies.
Client site can gain access to the skills when they are required
Outsourcing can allow a client organization to focus on its core business.
Weakness of IT outsourcing:
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Privacy and confidentiality are often cited as a major barrier to outsourcing IT functions.
Entering a long-term contract with a mainframe computer vendor may cause lack of
flexibility for service providers. (e.g. when changing business or technological
circumstances bring a need to migrate to an alternative solution).
If the system failure can shut down critical operations and result in a major loss of client
productivity and may cause serious problems.( e.g Client site is a hospital).
Questions:
1. Is the language an issue in communication? This might bring some difficulty to services
providers when they try to support client site for technical skills.
2. How does services provider to handle the function privacy?
3. Was the time different a hurdle for communication? Some clients might be in other
countries.
Reference:
1. Tom Worthington. Outsourcing and contracting out of IT products and services.
27 July 1997.
http://www.acs.org.au/president/1997/outsrc/draft.htm