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Discussion
Key Decision Criteria for selecting IT Sourcing Option
IT sourcing is a process of choosing or acquiring information technology resources from external sources outside of the organization. While traditionally sourcing was a way to reduce costs, companies see it now more like an investment designed to enhance capabilities, increase agility and profitability, or gain them a competitive advantage (Tome, 2018). IT Managers must consider four different sourcing options which are In-house, Insource, Outsource and Partnership. The following are the four key decision criteria that needs to be considered for selecting the appropriate sourcing option
Flexibility: Flexibility has two key factors which are response time and capability which defines the quickness and range of IT functionality respectively. Insourcing or a permanent IT staff, is also a highly flexible sourcing option. Outsourcing exhibits less flexibility because of the need to locate an outsourcer who can provide the specific function, negotiate a contract, and monitor progress. Partnerships enjoy considerable flexibility regarding capability but much less in terms of response time (McKeen& Smith, 2015).
Control: There are two dimensions in this criterion as well: ensuring that the delivered IT function complies with requirements and protecting intellectual assets. In-housing and Insourcing are ranked high for these factors where the work needs to be confidential, proprietary and strategic. Insourcing gives an opportunity to track the development process and lets you keep control over the quality of the work, enabling peak in productivity and helps in reaching your desired outputs (Sadhik, 2019). Outsourcing is the preferred delivery option when the function is not considered the deliverable is well understood and easily governed by means of a service-level agreement. In the case of outsourcing, you're far off the staff working for you, making it inconvenient to trace the quality of the work. So, you lose connectivity with the key members of your project and an opportunity to add flair or tweaks at required sections to increase the quality of the product(Sadhik, 2019). Partnerships are designed to be self-controlling by the membership, and, the functions provided by partnerships tend to be more open ended than those provided by other options (McKeen& Smith, 2015).
Knowledge Enhancement: Capturing or retaining knowledge is a major sourcing decision which weighs in deciding the sourcing options. Organizations consider developing products in-house which would give an advantage of transferring knowledge to IT personnel and business personnel. Some organizations prefer insourcing just the training part while the development can be outsourced. It is not just knowledge development that is the critical factor; knowledge retention is equally important. Whether implicitly or explicitly, knowledge enhancement appears to play a key role in most sourcing decisions (McKeen& Smith, 2015).
Business Exigency: Organizations often get unforeseen or unplanned business opportunities which should be implemented when provided. Since these opportunities are unforeseen, they are not governed or planned for budget and timelines. In this case instead, a decision is made to seize the opportunity, and normal decision criteria are not applicable in order to be responsive to the business. For this scenario, any outsourcing option can be selected depending on which option provides the results faster. The sourcing option could be any of the four but is less likely to be a partnership unless the urgent request can be accommodated within the structure of an existing arrangement. Seen in a resource-planning context, business exigency demands constitute the peaks or pikes (McKeen& Smith, 2015).
Apart from the above factors cost is also an important factor that needs to be considered by IT managers. Saving money on costs is typically the motivation for outsourcing work to another company. Industries such as telecommunications, travel, transport, media, and retail often rely on outsourcing to complete important projects or tasks. Insourcing generally places new operations and processes on-site within the organization. For that reason, insourcing can be more expensive for a company because it often involves the implementation of new processes to start a different division within the organization (Beers, 2019).
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