Essay, 2 pages (350 words)

Outsourcing of IT Department

Outsourcing of IT is an enigmatic process, especially because IT is the company’s lifeblood. However, the company is following a trend that has seen companies in the US outsource 38% of their IT functions to third party vendors (Desai, 2009). One of the reasons that XYZ Company should outsource IT functions is cost since it is one of the most expensive functions of the company, as far as establishment and maintenance are concerned. Vendors with a number of clients are able to; however, operate at lower costs than a single organization would do. Another justification for their outsourcing of IT function is that it will improve performance. The vendor will have more expertise since they face issues that are more varied (Desai, 2009).
In order to outsource the function, however, XYZ Company needs to identify first the need for outsourcing (McIvor, 2012). The company should do an internal assessment on why they want to outsource and whether it is due to failure of the internal staff. Next, the company should recognize the IT tasks that they should outsource and those that must be retained in-house. The company should seek to outsource services that are already mature and available in the marketplace. Those tasks that should be outsourced should be competitive in the marketplace in order to get the best price (McIvor, 2012).
XYZ will contend various costs with when it comes to outsourcing IT functions. The first is the cost of searching for a vendor and contracting (Willcocks et al, 2011). Next, the company will have to deal with the cost of transition, to an IT function vendor, as well as management of the outsourcing effort, which includes monitoring the vendor’s work, bargaining with them, and negotiation of required contract changes. Finally, there are costs with the transition after the company has already outsourced, which may include switching vendors and re-integration of internal IT activities (Willcocks et al, 2011).


Desai, Jimmy. (2009). IT outsourcing contracts : a legal and practical guide. Ely: IT Governance Pub.
McIvor, Ronan. (2012). The outsourcing process : strategies for evaluation and management. Cambridge : Cambridge University Press.
Willcocks, Leslie. Sara Cullen. & Craig, Andrew. (2011). The outsourcing enterprise : from cost management to collaborative innovation. Basingstoke : Palgrave Macmillan.

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