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Adverse affects of offshore outsourcing in IT industry

Discuss about the Offshore Outsourcing of IT is Dangerous to the Profession.

Offshore outsourcing of Information Technology (IT) is dangerous to the profession and economy and should be severely restricted. According to Yetton,  Scherman  and Krcmar (2014) Offshore outsourcing refers to the practice of hiring an exterior organization for the operation of a particular business in an external country that is the country other than the one where services or products are actually manufactured or developed.

” Do what you can do the best and outsource the rest”-Tom Peters. (Nenonen and Vasara 2013)

As stated by Dongus (2014), there are many business involved in outsourcing including the IT industries. IT industries hire companies from other countries to perform their work. There are various reasons behind outsourcing done such as it reduces the total time taken by the company to perform a work and it reduces the pressure on the workers of the company as their workload is lowered.

“ If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business”-Lee Kuan Yew. (Willcocks and Cullen 2013)

As stated by Gerard (2015), there are both negative and positive aspects of any business so does outsourcing. Outsourcing of IT business has various fatal effects because the programmers and software developers have very less customer interaction thus indicating to restriction of IT outsourcing.

Information technology deals with mainly two types of work one is product based and the other is service based (Gerard and Kerr 2015). This industry deals with the installation and management of different softwares. Software business includes various business models, which either are license based or maintenance based or cloud based. This industry also deals with training, documentation, data recovery and consultation. The size of worldwide software industry is very wide. In 2013, it was estimated to be US$407.3 billion, which was an increment of 4.8% as compared to 2012 (Kerr 2015). It proves that software industry is getting wider all throughout the world. Information security is the major thing, which is taken care of while performing any business  (Doležel 2014). Outsourcing is still at an experimental stage and has not rooted itself yet. It still has to replace old methods in order to create a strong impact. For that, the results, have to be positive in every aspect (Willcocks and Cullen 2013). There are many areas where it still needs to work to get rooted properly in the market.

Risk and confidentiality


According to Cullen (2013) Software industry has a great deal with data security as in this industry, the thing that matters the most is data. Here, the security of data is treated as the primary concern.  Verner ( 2014) stated that a company stores all its relevant informations in the form of data and if anything happens to the data stored by the company, all the private and important information about the company will go viral and this can be fatal for the company. The competitors will know all the company strategies and the company may have to face great downfall regarding its performance in overall market.

“The best companies outsource to win, not to shrink. They outsource to innovate faster”-Thomas L. Friedman. (Kitchenham, Turner and Niazi 2014)

Theft of data can be done through various ways so IT industries need to provide overall security in order to ensure the company that no harm will be cost to their data (Verner, Brereton and Kitchenham 2014). After this assurance only, work is progressed in IT industry.

Adverse affects of offshore outsourcing in IT industry  are

 As stated by Verner et al. (2014) the major fatal result is that own nation companies will not get opportunity to work. As outsourcing is usually done by big and renowned companies, small scale companies of own nation should get chance to tie-up with big companies as it will help them work in a better way and learn various new ways to do the work. Also, deal with big companies will increase the popularity of small companies and this may help them to get more work in coming future. This will be a great improvement in nation’s IT industries (Kitchenham, Turner and Niazi 2014).

Risk and confidentiality-  According to Yetton, Schermann and Krcmar (2014) prior to hiring an outsourcing firm, there are some works, which needs to be done. References needs to be made sure and checked out whether they have no previous bad or negative history such as leakage of information or data and other thefts as stated by Dongus (2014). Outsourcing always has this concern. A company cannot rely totally on the company being outsourced (Yetton et al. 2014). Proper precautionary legal measures have to be taken so that any misuse of sensitive data is avoided.

“better safe than sorry-Dongus.” (Allen 2013)

According to Boussebaa, Sinha and Gabriel (2014) the company always has to be a step ahead for the safety of its information because if data and information is leaked once, then the only thing that can be done is to face the fatal circumstances.

Lack of quality


Lack of quality
-  According to Boussebaa and Gabriel (2014) companies are not very aware of the qualities when it comes to vendors from other nations  . Companies often choose a vendor that does not have proper and efficient development process and thus they lack experience. Boussebaa (2014) stated that companies often do offshore outsourcing as they get cheaper facilities which in turn ends up in hurting the companies financially thus costing them more money. The company should look through vendor’s portfolio and examine it nicely to see what types of work is done by them and the complexity in their work. This provides the company with the idea of vendor’s experience and capabilities (Nenonen and Vasara 2013).

Fragile customer support- According to Brown (2014), vendors, which do not have good experience in management of outsourcing relationships, fail to deliver appropriate customer care thus reducing the no of customers for the company. Allen (2013) stated that customers also give poor feedback to the companies which avoids the company from getting more customers and thus slowly the quality of the customers gets degraded. A company must maintain the no and quality of its customers. Good reviews from customer’s side id very essential for the company to flourish. If the vendor works with more no of companies and if it is out of their capacity, the companies do not get much attention and thus resulting in disappointing outcomes (Rivard and Aubert 2015). Proper survey should be done before choosing the vendor as one wrong step from the vendor’s side can spoil the reputation of the company (Solomon, Yan and Willcocks 2015).

Hidden costs- On the other hand  Lacity, Solomon and Yan (2015) stated that outsourcing is mainly done for cost-effectiveness or reduction of cost. But during the development period, hidden costs may arise. Hidden cost is mainly defined in terms of account as the expense which is not indulged in purchase price of a machine or an equipment, for example  for supplies, maintenance, upgrades and training. In terms of payment, hidden cost is defined as the cost involved in cash in advance, or the price asked for other measures by the vendor (Norlander, Kuruvilla and Narasimhan 2015). In outsourcing, hidden cost can be said as the cost which arises by the means of unanticipated changes which demand some speedy adjustments. The company must set a clear expectation for both the ends at initial phase so as it does not becomes the victim of these hidden costs and thus the outsourcing remains cost effective that it was supposed to remain (Bertrand and Mol 2013).

Fragile customer support


Cultural barriers
- World is diverse and nations have different culture. Generally, culture is seen as the widest barrier in successful offshore outsourcing. As stated by Schniederjans, Schniederjans and Schniederjans (2015), interactions, understanding, productivity, commitment and comfort is effected by variation of culture. Companies have found measures for it. Till now, two measures have been adopted by the companies which include cultural awareness and culturally compatible resource deployment. Former deals with conducting sessions and workshops at both the ends which means inshore and offshore which is done to make the sides aware of each other’s cultural practices (Yetton,  Scherman  and Krcmar 2014). Latter deals with having local and native people manage the onshore client relationship.

Communication barrier- other than the cultural barrier, communication barrier is one of the major problems that the companies face during offshore outsourcing. As stated by Dongus (2014), vendor and the company need to communicate properly for effective outsourcing.

Political climate- On the other hand Dongus et al. (2014), stated that politics plays a very vital role in any business. Business is highly effected by stability and instability of politics in the country. Changes in government policies can increase the expense thus reducing the cost effectiveness of outsourcing.

The various disadvantages of offshore outsourcing in IT industry has adverse effect on the economy of whole country. It should be strictly restricted as its restriction will advance the economic condition of the country (Verner, Brereton and Kitchenham 2014). As the extra money that the company spends on offshore outsourcing remains in the nation only and the company can use that money is some other business. Economic condition is very essential part of any nation’s development. If onshore outsourcing is done, then the money remains in the nation itself, thus increasing and up hilling the economic condition of the company. Economy is extremely effected by offshore outsourcing especially in the IT industries as it is the evolving industry which needs most attention. If most of the outsourcing done by the industry is offshore, the nation’s money gets transferred to other nation. Thus, offshore outsourcing should be restricted as it has fatal effect on the economy

Offshore outsourcing also has fatal effects on the profession as here, the work is given to clients who belong to other nation thus increasing joblessness in own country. Companies hire people from other nation and people from own nation remain jobless. According to Yetton, Schermann and Krcmar (2014), worthy people from own country do not get proper work and this is a fatal effect of offshore outsourcing on the profession. Workers working for the company may have to dislocate because of offshore outsourcing. Offshore outsourcing complicates the ability of private and public sector management in order to practice control and satisfactory supervision of the company’s own work. If companies continue providing job to employees from other countries then joblessness may increase in the IT sector of own nation thus discouraging students to study IT. On the other hand  Norlander, Kuruvilla and Narasimhan (2015) staed that, students will not prefer IT as their subject for higher study because there will be no job for graduates in IT. Most fatal effect of offshore outsourcing is that nation may lose its leadership in technical field and other nations get more sophisticated in this field. Companies lack in technology as the keys of their leadership moves to other nations.

Hidden costs


As stated by Lacity, Solomon and Yan (2015), offshore outsourcing should be restricted as its restriction will have many advantageous effects. The nation’s economy will be maintained as the money will remain in the nation itself other than going in other nations. Also, the profession will be promoted in the nation. People in the nation will get encouraged to choose IT as their subject of study. It will also help the company to develop as the company will not have to waste much money and the money can be used for various other works. The company will not have to face the problems which arise due to unstable political condition in other countries. Entire concentration of the company will be on its work, which will give it much time to focus on the quality of the product. Thus, the quality of the product made by the company will get much enhanced.

According to Nenonen and Vasara (2013), restriction of offshore outsourcing will be beneficial for the economy of the country, enhancement of the profession, popularity of the course and great help to the profession as it will save company’s time as well as money.

Conclusion

Hence, from above discussion it is concluded that outsourcing is a good practice. There are many benefits of offshore outsourcing but it has more fatal results affecting the economy as well as the profession. Information technology deals with mainly two types of work one is product based and the other is service based. This industry deals with the installation and management of different softwares. Software business includes various business models which either is license/maintenance based or cloud based. Offshore outsourcing in IT industries has many fatal results, which point to its restriction. Its fatal results include discouraging students towards the course as there would be no vacancy left for IT graduates in the company. A company cannot rely totally on the company, being outsourced. Proper precautionary legal measures have to be taken so that any misuse of sensitive data is avoided. Offshore outsourcing should not be further encouraged as it effects the economy. So, it is relevant to restrict offshore outsourcing for better results.

References

Allen, J., 2013. Materials Experience: Chapter 6. The Immaterial of Materials. Elsevier Inc. Chapters.

Bertrand, O. and Mol, M.J., 2013. The antecedents and innovation effects of domestic and offshore R&D outsourcing: The contingent impact of cognitive distance and absorptive capacity. Strategic Management Journal, 34(6), pp.751-760.

Boussebaa, M., Sinha, S. and Gabriel, Y., 2014. Englishization in offshore call centers: A postcolonial perspective. Journal of International Business Studies, 45(9), pp.1152-1169.

Brown, F., 2014. Outsourcing Law Firm Libraries to Commercial Law Library and Legal Research Services. The UK Experience. Australian Academic & Research Libraries, 45(3), pp.176-192.

Crow, G.B. and Muthuswamy, B., 2014. International outsourcing in the information technology industry: Trends and implications. Communications of the IIMA, 3(1), p.3.

Doležel, M., 2014. Towards elimination of testing debt in outsourced IS development projects: a view from the client side. In Information System Development (pp. 135-146). Springer International Publishing.

Dongus, K., Yetton, P., Schermann, M. and Krcmar, H., 2014. Transaction cost economics and industry maturity in IT outsourcing: A meta-analysis of contract type choice.

Dongus, K., Yetton, P., Schermann, M. and Krcmar, H., 2014. Transaction cost economics and industry maturity in IT outsourcing: A meta-analysis of contract type choice.

Gerard, A.F. and Kerr, T.A., 2015. Emerging Zones of Legal Ambiguity and Lethal Violence: Deaths in Australia's Offshore Detention Centres.

Lacity, M.C., Solomon, S., Yan, A. and Willcocks, L.P., 2015. Business process outsourcing studies: a critical review and research directions. In Formulating Research Methods for Information Systems (pp. 169-251). Palgrave Macmillan UK.

Nenonen, S. and Vasara, J., 2013. Safety management in multiemployer worksites in the manufacturing industry: opinions on co-operation and problems encountered. International journal of occupational safety and ergonomics, 19(2), pp.168-183.

Norlander, P., Erickson, C., Kuruvilla, S. and Kannan-Narasimhan, R., 2015. India’s Outsourcing Industry and the Offshoring of Skilled Services Work: A Review Essay. E-Journal of International and Comparative Labour Studies, 4(1).

Rivard, S. and Aubert, B.A., 2015. Information technology outsourcing. Routledge.

Schniederjans, M.J., Schniederjans, A.M. and Schniederjans, D.G., 2015. Outsourcing and insourcing in an international context. Routledge.

Verner, J.M., Brereton, O.P., Kitchenham, B.A., Turner, M. and Niazi, M., 2014. Risks and risk mitigation in global software development: A tertiary study. Information and Software Technology, 56(1), pp.54-78.

Willcocks, L. and Cullen, S., 2013. Intelligent IT outsourcing. Routledge.

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