RISK’S AND REWARD’S OF IS/IT INSOURCING AND IS/IT OUTSOURCING A Literature Review and Presentation of Findings Abstract: Objective: To identify the most commons risks and rewards associated with Insourcing and Outsourcing. Method: Online search engine and cross- referencing articles identified relevant studies. Findings: • The Risks associated with Insourcing were found to be Cost and Expertise. • The Risks associated with Outsourcing were found to be Relationship and Management. • The Reward associated with Insourcing was found to be Efficiency. • The Reward associated with Outsourcing was found to be Expertise. Word Count: 1,63 Name: Del Kirwan Student Number: 116222235 Course: MSc Information Systems for Business Performance Module: IS6137: IT Sourcing & Projects Lecturer: David Sammon
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
\cccccccccccccccccccvvvvvvvvvvvvvvvvvvvv
RISK’S AND REWARD’S OF IS/IT INSOURCING AND IS/IT
OUTSOURCING A Literature Review and Presentation of
Findings
Abstract: Objective: To identify the most commons risks
and rewards associated with Insourcing and
Outsourcing.
Method: Online search engine and cross-
referencing articles identified relevant studies.
Findings:
• The Risks associated with Insourcing
were found to be Cost and Expertise.
• The Risks associated with Outsourcing
were found to be Relationship and
Management.
• The Reward associated with Insourcing
was found to be Efficiency.
• The Reward associated with Outsourcing
was found to be Expertise.
Word Count:
1,63
Name: Del Kirwan
Student Number: 116222235
Course: MSc Information Systems for Business Performance
Module: IS6137: IT Sourcing & Projects
Lecturer: David Sammon
Table of Contents Introduction .............................................................................................................................. 1
Keeping IS/IT services in-house can lead to enhanced
coordination between departments for extended periods of time, this coordination is
spearheaded by communication, a vital asset within any efficient business to thrive (Qu et al.,
2010). Qu et al. (2010) & Dibbern et al. (2004) both have highlighted that insourcing leads to
efficient performance through improving internal processes, including customer service,
product development and the supply chain operations leading to an overall efficiency
stability.
The company gains a competitive edge but keep all R&D in-house, making the organisation
more innovative. This innovation is promoted in an insourcing environment and can translate
into other sectors. This could not happen if IS/IT was outsourced as the innovation would be
sourced out of house, giving competitors access in some circumstances (Quinn, 1999) (Lacity
et al., 1996) (Peak et al., 2002)
The use of in-house IS/IT services leads to overall sector development, keeping key resources
such as knowledge and adaptability in-house increases efficiency with a roll on effect to
solving customer issues (Qu et al.,2010). These factors lead to in overall insourcing value
creation and performance (Lacity et al., 1996). Once management has adequately identified
the strategic value of IS/IT to the organisation, as most see the functions of IS/IT as non-core
activities means that the potential efficiency of the organisation may be hampered
(Hirschheim & Lacity, 2000).
9
To summarise the main Efficiency rewards;
• Lines of Communication
• Management Direction
• Customer Satisfaction
• Performance
• Value Creation
Chapter Graphic
Figure 5.1; Chapter Graphic
CompetitiveEdge
Performance
Managment
InsourcingEfficiency
10
Outsourcing Reward
Expertise
Through outsourcing of IS/IT sectors4 organisations tend
to offer contracts to experts in the industries they wish to
grow and improve in, this gives them access to expert
insights which would be difficult to insource5 (Quinn,
1999). The time frame for projects to be completed greatly
increase when outsourced as the expert vendors are
accustomed to such situations meaning deadlines are
reached (Dhar, 2012).
Outsourced firms have the knowledge and access to specialised software/technology which
for the organisation to implement may cost more than the outsourcing contract. Through the
outsourcing relationship, the organisational employee can gain knowledge from the vendor
experts which can be beneficial if the organisation choose to insource in the future (Dibbern
et al.,2004). Through using outsourced experts stakeholders/management in the business
become confident in the functions and stability of the organisation, in turn, this can lead to
more innovation through backing from the stakeholders involved (Peak at al., 2002).
Innovations combined with expertise can help to organisations grow and develop through
means that if insourced may be reached but with a longer period of trial and error with the
lack of expertise which vendors supply (Qu et al., 2010).
The use of expert vendors means the outcome of the project will be done to a higher standard,
this is helped through the sharing of information and risk. The burden of risk is shared with
the vendor, the inhouse services lack of expertise when in comparison to the vendor (Quinn,
1999). These experts maybe in a different time zone meaning the organisation can operate
24/7 with no downturn in performance as the vendors are experts in the area outsourced to
them (Peak et al., 2002). The overall expertise gained and utilised through outsourcing to an
expert vendor give the organisation multiple rewards which cannot be overlooked in the
decision process, these rewards translate into multiple sectors and levels of the organisation
(Dibbern et al., 2004).
4 See Table of Interest 1.4 5 See Table of Interest 1.5
11
To summarise main Expertise rewards;
• Experience • Deadlines • Knowledge Transfer • Confidence
Chapter Graphic
Figure 6.1; Chapter Graphic
12
Conclusion
In conclusion, this cross referencing literature reviews gives an in-depth understanding of the
author's findings of the common risks and rewards found with outsourcing and insourcing.
As Kishore et al. (2003) discussed the need for an organisation to evaluate the options for
insourcing and outsourcing effectively is a key component in making a choice for which
option is most desirable for them as seen in this review both harbour risks and rewards. This
review has highlighted the author's findings through cross-referencing articles on what the
main risks/rewards of insourcing and outsourcing which an organisation needs to understand
when evaluating which option best suits them. Not every organisation have the same needs
meaning that following the trend of competitors can be disastrous (Hirschheim & Lacity,
2000).
The above discussion has highlighted the risks and rewards of IS/IT insourcing and
outsourcing. It reviews literature in the area through cross-referencing articles focusing on the
negative and positive findings.
13
References
1. Dhar, S. (2012). From outsourcing to Cloud computing: evolution of IT services. Management Research Review, 35(8), 664-675.
2. Dibbern, J., Goles, T., Hirschheim, R., & Jayatilaka, B. (2004). Information systems outsourcing: a survey and analysis of the literature. ACM Sigmis Database, 35(4), 6-102.
3. Earl, M. J. (1996). The risks of outsourcing IT. MIT Sloan Management Review, 37(3), 26-32.
4. Hirschheim, R., & Lacity, M. (2000). The myths and realities of information technology insourcing. Communications of the ACM, 43(2), 99-107.
5. Kishore, R., Rao, H. R., Nam, K., Rajagopalan, S., & Chaudhury, A. (2003). A relationship perspective on IT outsourcing. Communications of the ACM, 46(12), 86-92.
6. Lacity, M. C., Willcocks, L. P., & Feeny, D. F. (1996). The value of selective IT sourcing. MIT Sloan Management Review, 37(3), 13-25.
7. Peak, D. A., Windsor, J. C., & Conover, J. (2002). Risks and effects of IS/IT outsourcing: a securities market assessment. Journal of Information Technology Case and Application Research, 4(1), 6-13.
8. Pinnington, A., & Woolcock, P. (1997). The role of vendor companies in IS/IT outsourcing. International Journal of Information Management, 17(3), 199-210.
9. Qu, W. G., Oh, W., & Pinsonneault, A. (2010). The strategic value of IT insourcing: an IT-enabled business process perspective. The Journal of Strategic Information Systems, 19(2), 96-108.
10. Quinn, J. B. (1999). Strategic outsourcing: leveraging knowledge capabilities. MIT Sloan Management Review, 40(4), 9-21.
14
Appendix
Tables of Interest
Table 1.1 Real world examples of contract issues, a major outsourcing risk.
(Qu et al., 2010)
Table 1.2 Stage Model of IT/IS Outsourcing
(Dibbern et al., 2004)
15
Table 1.3 Insourcing Archetypes and Classification
(Hirschheim & Lacity, 2000)
Table 1.4 Benefits of Outsourcing
(Dhar, 2012)
16
Table 1.5 Selecting an Appropriate Contract
(Lacity at al., 1996)
17
Methodology
Process Development
Cross-Sectional Review of Literature
This image highlights the key components of insourcing and outsourcing risk and rewards the author found.
Planning Process
This image highlights the plan and outcome of the author completing this review showing the need for change and development.