Jul 11, 2017 Others

Does the outsourcing of IT services, including software development and hardware maintenance, make strategic sense? Why or why not?

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Responding to Peers

INSTRUCTIONS:

PLEASE RESPOND TO THE TWO CLASS MATE POSTS SEPARATELY BELOW THE QUESTION.



Module 8 DQ 1



Does the outsourcing of IT services, including software development and hardware maintenance, make strategic sense? Why or why not?





1, Re:Module 8 DQ 1

The start of the Internet has changed the way companies operate. More than ever, a good strategy is required to remain distinguished among other companies. The Internet has not only brought about new challenges but it has brought about many new opportunities, new economic benefits. However, the Internet has made strategy more important than ever. Internet technologies have made it easier for companies to coordinate with suppliers, which have lead to “virtual enterprise”. This means the business was created from purchased products, components and services (Porter, 2001). Through outsourcing, companies can lose control over elements of their business.

Companies face inherent risks when outsourcing. However, there are also risks and cost associated with insourcing. There needs to be a strategic framework, using the options available for outsourcing. When combined, core competency and extensive outsourcing strategies provide improved returns on capital. Also lower risks, greater flexibility and improved responsiveness to customer needs at lower cost (Quin & Hilmer, 1995).

Outsourcing of IT services is a good strategy for today’s competitive business. Development of software that is specific to your business can be expensive but has proven to be a cost saver in the long run. Having your own IT people could be feasible in a larger establishment and would be beneficial for productivity because it should lessen downtime.

References

Porter, M. E. (2001). Strategy and the Internet. Harvard Business Review, 79(3), 62-78

Quinn, J. B., & Hilmer, F. G. (1995). Strategic outsourcing. Mckinsey Quarterly, (1), 48-70.

















2, Re:Module 8 DQ 1

Does the outsourcing of IT services, including software development and hardware maintenance, make strategic sense? Why or why not?

If it were rational and efficient, companies would outsource everything, except their unique core competencies. Most supplier markets are imperfect and risky, for seller and buyer, with price, quality, time, and other key dimensions. Outsourcing holds unique costs such as searching, contracting, controlling, and re-contracting that may exceed in house costs.

Managers should ask three questions to ensure outsourcing is right for their company:

1.) What is the potential for obtaining competitive advantage in this activity, taking account of transaction costs?

2.) What is the potential vulnerability that could arise from market failure if the activity is outsourced?

3.) What can we do to alleviate our vulnerability by structuring arrangements with suppliers to afford appropriate controls yet provide for necessary flexibilities in demand?

The amount of control the company wants to have on its various parts depends on whether it is outsourced. Where there is low vulnerability and less desired control, a company is more likely to outsource. Strategic outsourcing can lower long term direct costs and leverage key competencies.

With outsourcing, management can lose critical skills or develop the wrong skills, lose cross-functional skills, and/or lose control over a supplier.

(Quinn & Hilmer, 1995)

Unless the company is based around technology, outsourcing IT services would not have any effect on a company’s core competencies, and may be a good idea to allow professionals in this field tend to a particular, sensitive, and delicate matter such as IT. Strategic outsourcing spreads the companies risk for component and technology problems across many suppliers, and reduces the risk of investing in programs, updates, etc. With outsourcing companies gain a whole new perspective of the other company and their knowledge base. Any decision to outsource is a major strategic decision to be made, and needs to be made with clear thoughts and research to back up the decision.

References 

Quinn, J. B. & Hilmer, F. G. (1995) Strategic outsourcing. McKinsey Quarterly (1), 48-70. Retrieved from https://lc-grad2.gcu.edu/learningPlatform/externalLinks/externalLinks.html?operation


CONTENT:

Responding to peers Name: Institution: Response to Classmate 1 I appreciate the way you have tackled this question. Indeed, you have displayed you have a good grasp of concepts regarding outsourcing and in-house development of IT services such as software development and hardware maintenance. However, I totally differ with you on the aspect that companies can lo

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