Outsourcing is a popular concept in the enterprise world: For decades, companies have been outsourcing tasks in other companies in order to benefit from better prices or even access to expertise that they do not possess in house. In recent years the advent of globalization has opened new horizons to outsourcing, through enabling enterprises to benefit from outsourcing services all over the world. Nowadays, outsourcing is primarily a vehicle for accessing global talent, rather than a way to perform activities at a lower cost. Moreover, the IT industry is offered with an unprecedented number of different outsourcing choices such as delegating software developing projects to other companies, running entire IT services (e.g., e-mail, billing, marketing) on the cloud, buying and using software packages (e.g., Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) applications), as well as developing and operating private or hybrid cloud infrastructures. This wealth of operations enables enterprises to diversify their outsourcing decisions and select the outsourcing modality that suits best their business objectives. Nevertheless, despite its expanded use, outsourcing is not a panacea. There are advantages and drawbacks to each outsourcing decision, as some tasks are much more appropriate for outsourcing than others. In order to plan their outsourcing tasks appropriately, enterprises need to understand the pros and cons of offshoring different IT-related activities. Understanding these pros and cons is particularly important when planning to outsource 100% of your tasks i.e. when considering an “all of nothing” offshoring value proposition.
Offshoring IT tasks comes with some clear benefits for enterprises, which form the main motivation behind outsourcing. These benefits include:
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There are also several arguments against outsourcing enterprise IT tasks at scale, in particular:
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In this context, enterprises should attempt to balance and resolve the trade-offs that are associated with an outsourcing engagement. In this trade-off resolution attempt, they should take into account the following factors:
These criteria can be used to scrutinize and weight the benefits and challenges of an outsourcing decision. A 100% offshoring of key activities may not be always possible, as it is very likely to trigger some of the drawbacks of outsourcing. However, enterprises are likely to selectively outsource some of their activities, in order to benefit from cost efficient access to global talent. Managers are expected to weight the benefits and the costs prior to taking their decisions.
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