Outsourcing has developed mainly due to changes in the market and industry conditions. There has been a general increase in the levels of competition across different industries and markets. Additionally, the needs and expectations of customers in different markets are becoming more specific and highly demanding on businesses. This has led to a general appreciation of outsourcing as a cost cutting mechanism and strategy to ensure professionalism in delivery of products and services (Jae-Nam, 2008).
This paper reviews the developments in IT process outsourcing with the aim of determining the knowledge gaps and what can be done to address them. It is noteworthy that the paper is for PhD studies and focuses mainly on areas that require knowledge creation with respect to outsourcing of IT business processes.
The increased adoption of business process outsourcing is a result of pressures that businesses face due to increased demand and high levels of competition in various business segments. However, despite the increase in the levels of outsourcing there are various unresolved issues relating to its relevance and efficiency. An area that is defined by varying viewpoints is outsourcing business IT needs. Whereas practices like third party hosting of databases are associated with the development of database systems and IT, they are rare in cases where a business views its data as an important asset (Tadelis, 2007).
Businesses that place emphasis on the privacy of their clients’ information allocate time and financial resources to find a hosting company that can be trusted. This is also the case in outsourcing other IT processes; however, many firms outsource processes that are less critical and that can be handled effectively by a third party. Clearly, this heuristic does not help businesses when they want to outsource businesses processes that are sensitive.
Despite the challenges that businesses face when making decisions on outsourcing, the practice is widespread which indicates that there are some parameters or guidelines that help businesses make decisions on the processes to outsource. Understanding the business environment and the model adopted by a firm is an important first step that helps determine information flow within an organization and the processes that can be improved or be made less costly through outsourcing (Bengtsson, von Haartman, & Dabhilkar, 2009).
Incorporation of risk assessment strategies in analyzing the processes is thus a requirement. However, a review of the existing literature reveals that though there is a general appreciation of risk assessment, no audit or research has been carried out to determine the existence of this practice on the ground.
Strategists and organizational psychologists emphasize the importance of including employees in making decisions that will affect their interaction and output in an organization (Tadelis, 2007). ERP implementation, database implementation and automation of the information system are examples of organization wide efforts where inclusion of employees is widely emphasized. Additionally, outsourcing business information processes is a change process since new entities are introduced in the business model. This calls for the inclusion of change management and may even require additional training (Bengtsson, von Haartman, & Dabhilkar, 2009).
However, no study has investigated the incorporation of training and other change management strategies when making decisions to outsource IT processes. Moreover, in practice it is common for IT experts and managers to be incorporated in decision making regarding IT. This has however been proven faulty for organization wide systems which require analysis of employees psychological ability to facilitate and accept the changes and not just the IT experts (Tanriverdi, Konana, & Ling, 2007).
Such studies are generalized for changes and some specified organizational efforts for instance implementation of a database system and have so far not addressed the inclusion and assessment of employees when planning to outsource information processes.
Evidently, despite the widespread adoption of business process outsourcing there are a number of issues that may affect its implementation and benefit to firms that are yet to be established. Business IT process outsourcing often targets processes that are considered less critical which clearly raises questions on the overall benefits that business gain from outsourcing. Without effective risk taking businesses may outsource processes that are risky which may jeopardize their operations and even affect their reputation.
However, there are gaps in knowledge on how businesses can carry out risk assessment when planning to outsource. Other areas that have yet to be adequately addressed include the inclusion of employees in making decisions to outsource IT business processes and the incorporation of change management strategies when outsourcing IT processes in practice.
Outsourcing information processes within an organization is a risky process though it can also be beneficial on an organization if it is carried out strategically. However, the existence of knowledge gaps on how to assess risks when planning to outsource, the proportion of businesses that actually include other employees and how they go about including the employees in making decisions to outsource and incorporation of change management strategies when outsourcing IT hamper the attainment of the potential associated with outsourcing. Addressing these knowledge gaps through primary research would lead to creation of knowledge that would help firms outsource their IT processes strategically and mitigate the associated risks.
Bengtsson, L., von Haartman, R., & Dabhilkar, M. (2009). Low-Cost versus Innovation: Contrasting Outsourcing and Integration Strategies in Manufacturing. Creativity & Innovation Management, 18(1), 35-47
Jae-Nam, L. (2008). Exploring the Vendor’s Process Model in Information Technology Outsourcing. Communications of AIS, 2008(22), 569-589
Tadelis, S. (2007). The Innovative Organization: Creating Value through Outsourcing. California Management Review, 50(1), 261-277
Tanriverdi, H., Konana, P., ; Ling, G. (2007). The Choice of Sourcing Mechanisms for Business Processes. Information Systems Research, 18(3), 280-299