Outsourcing and Off-Shoring: Information Technology

Subject: Strategy
Pages: 8
Words: 2465
Reading time:
9 min
Study level: PhD


Every business enterprise seeks a competitive advantage over its market competitors. Market changes and fluctuations creates a certain response that a business deems appropriate to handle or rather tame the changes in a market situation. Changes can involve overhauling of part or whole strategies currently in place. Traditionally, production processes were confined within the mother company in which the process was initiated. Times have changed these methods.

With every new dawn, the word, “information technology” is being mentioned. The word is used with a high degree of contextualization, that is, every professional field embraces its adoption based on whether it is a medical field, business environment, laboratory tests, with the list being endless.

Literature Review

In a nutshell, changes in a market and industry situations often precede a change or triggers an emergence of a new trend. Thus, outsourcing triggered a change in the market and industry situations. Garner, (2004) alleged that Information Technology (IT) business outsourcing and offshoring mass usage in business was as a result of development of web 2.0 paradigm.

As has emerged from studies, the needs and expectations of markets and customers are as distinct as there are customers and markets. Businesses are therefore required to take appropriate action in order to satisfy the demands of a certain market or customer need. Value addition to products has for a long time been used as a means to create a competitive advantage by many a business. These strategies are not enough in themselves, thus outsourcing was embraced, having been discovered to have benefits such as it is a cost cutting strategy besides being a vehicle for enhancing professionalism in products manufacture and service delivery and administration as put by Jae-Nam, (2008).

Having brought forth all that, the question that remains to be answered to this far is the meaning of IT outsourcing. Presently, many scholars have diversity of definitions of IT outsourcing, such as Gibb and Buchanan, (2006) succinctly defining IT outsourcing as a process of transfer of a computer or internet based task to an external consultant or company; the two, that is, external company and consultant may be based in the country of the sourcing company or come from a foreign environment. Most of the tasks that are commonly outsourced are those that need less technical skills (Yeaple, 2006). The tasks that are commonly outsourced are like computer programming and software development. Outsourcing may be needed in instances like a company or organization lacking enough technical and human resources. Other reasons concerns high costs incurred in the initial stages on implementing a standard and functional IT department. Cost minimization and increase marginal revenues is a strategy that many organizations pursue for profitability, thus it is also a reason that companies embraces the use of outsourcing in order( Adeleye, Annansingh, & Nunes, 2004).

Some writers have pointed out that there is a transformation of fixed costs to variable costs when outsourcing is embraced in an organization. Such writers include, (Lall & Narula, (2004), who argued further that an organization is able to manage its cost structure to capably and sustainably manage its marginal revenues, as a consequence of outsourcing. Every company has core competencies which it seeks to sustain to for competitive advantage over other players in the market. As result outsourcing is a management that organizations uses to draw comparisons between investing inflexible market change response or managing core competencies(Cuadros, Orts, & Alguacil, 2004).

Statement of the Problem

IT outsourcing came with its intended gains but it did not entirely remain an advantage. Therefore, the study is geared towards looking to investigate these risks such as the claim that IT business outsourcing sometimes has poorly stated contractual terms that have a demotivating effect on employees leading uncontrollable turnovers in an organization (Adeleye, Annansingh & Nunes, 2004). In addition, IT outsourcing and offshoring has encouraged overdependence on Business processes outsourcing encouraging rigidity in business processes, resulting to lack of flexibility of these processes. It has also been established that, there is an increased threat to homogenous organizations equivalent’ core competencies that are known to create competitive advantages for market and customer service delivery. Gibbs and Buchannan, (2006), ascertain that IT Business outsourcing and off shoring may lead to a substantial loss of an organization’s core competencies. IT business outsourcing and off shoring has a tendency of diminishing brand identity, having a consequence of a sharp decrease in market share formerly enjoyed by an organization before.

The usage of IT outsourcing has also been known to have security risks that come with communication networks like unauthorized access to systems information. This security issues have challenged intercontinental application of IT business out outsourcing and off shoring, for fear of hackers, computer virus threats. This drawback has been enhanced further by the discovery of device interoperability between the source and the skill provider. There is also another challenge of an organization lacking enough control over its management of operating costs

Purpose of the Study

The purpose of the study is to establish substantial courses that led to organizations switching IT business outsourcing and off-shoring. Furthermore, there is a knowledge claim that IT business outsourcing and off-shoring has advantages thus the study shall be conducted with an aim of probing into this knowledge claim, to come up with dependable evidence that truly supports this claim. IT business outsourcing comes with some risks, therefore could this risks mean something to an organization that makes a decision to adopt the usage of IT business outsourcing and off-shoring. The usage of IT business outsourcing has some public opinion about its usage, as a result, the study will be conducted with a purpose of establishing the kind of public opinion that the users have, what kind of alternative is it to the use of human labor?

Scope of the Study

The study will cover present and past IT consultants in outsourcing and offshoring, business individuals using outsourcing, consultants or sellers of the technology and the public; in particular, past and present employees of organizations that are using outsourcing.

Research Questions

Many organizations in a modern business environment have adopted the use of IT business outsourcing and off-shoring. Advances in any technology come with intended purposes but other side effects are attached to their usage. IT business outsourcing and offshoring may not be left out since its embrace could be associated with gains as well losses. The public does also have its opinion regarding the adoption and use of IT business outsourcing and off shoring. Another aspect could be the impacts to the public due to its emergence. Thus questions like the ones presented below are often asked:

  1. What has led to the emergence and embrace of IT outsourcing and off shoring in a modern- day business environment, as opposed to former factors that may have been in place before its emergence?
  2. Are there any advantages to a business organization that makes a decision to use outsourcing IT outsourcing and off shoring? To what extend is it an alternative to factors that a business used before?
  3. What are risks or disadvantages associated with the use of IT outsourcing and off shoring? How do they limit the assimilation of IT outsourcing and offshoring in a business environment?
  4. What opinion has the public regarding the use of IT outsourcing and off shoring. Are there any impacts to the public as a result of it use?

Research method and design

Research methodology for this study will be qualitative. The method has been chosen because of its ability to cover a wider area of study besides being cost effective. There are three aspects of this study that are sought after: They include: reasons for emergence of IT business outsourcing, risks associated with its use and the public opinion about its use. As a result, qualitative design was chosen because it allows a proper contact between the participants that are likely to be used in the study. For this reason the process of data collection from the participants will be trustworthy. Besides, the three aspects mentioned above shall be answered well with a qualitative method following the choice sellers of IT outsourcing, the public which shall include past and present employees as well as business people using outsourcing. In addition, this method and design enhances an ethical treatment of participants by attaching consent forms to the questionnaires to be signed by the participants. Besides, this method allows the assurance of participant’s anonymity by exclusion of representing their names anywhere on the questionnaire o during interviewing and questionnaire administration.

Data Collection and Analysis

Interviews and questionnaires will be used as the main tools of data collection. As a result, participants in the interview process will recruit. The recruitment criteria will be purposeful to create a sample of participants for the study. Because this study has a big significance attached to it, we shall take care to recruit participants that are really familiar with IT outsourcing and off shoring. Business people to be covered in our study must actually be the ones using IT outsourcing in their current business environment. Present and past employees shall also enlist as participants in the research process.

To ensure that they actually meet the requirements, prospective organizations shall be approached with a request to provide the contacts of their present and past employees. Pertaining to past employees, the questions asked of them shall be directed to getting information particularly on the impacts of IT business outsourcing on their career; did it inhibit or enhance their advancement? For IT consultants, they must actually be working as present practitioners with a rich experience in the field of about 2 years. If they are working for an organization as IT consultants, we shall still employ a two-year working as benchmark criteria to be made. The two requirements for both IT consultants are aimed at getting up-to-date information about the risks involved in the usage of outsourcing. The concern here is to get as much first-hand information concerning knowledge claims that outsourcing has a security edge risk, thus this selection is the most appropriate (Rubin, & Rubin, 2005).

The size of the sample shall be 100 individuals. As mentioned earlier, sample determination shall be purposeful. The sample shall be structured in three parts. Each of the three parts shall cover, 30 consultants, thirty consultants and 30 present and 30 present or past employees of organizations that harness IT outsourcing. The remaining 10 individuals shall be randomly selected from the three groups above targeted for interviewing. The sample size mentioned will be determined by identification of organizations with IT business outsourcing and randomly selecting the suggested number for each category. In the end, the sample will be 100 individuals.

Data collection will vary according to the location of participants. For the participants that are located far away, questionnaires will be mailed to them. However, participants that are in a close proximity will be visited directly by our research team; questionnaires will be administered according to consent of the participants. Besides, probable interviewees will be requested to allocate us time and place of their own convenience. The process is estimated to take a maximum of two weeks. Assumptions during data collection are:

  • All participants shall receive the mailed questionnaires
  • Participants have confidence in the protection of their anonymity thus leading them to give information to the best of their knowledge.
  • Participants in each category are truly in their respective target working capacities.
  • Data collection process shall be adjusted according to arising situations (Houser, 1998. Pp. 38).

Limitations of the data collection process

  • There may be bias in the interpretation of the data collected from the participants (Houser, 1998. Pp. 38)
  • Lack of consistency in the data collection methods due to varied target participants.


Analysis of data will employ the use of charts and tables. There is an assumption that participants will return questionnaires to a degree of more than 50%. This shall be a form of validation of the qualitative design that we employed for this research. Conclusions shall be made with reduced bias by less manipulation of the results of the responses as given from the questionnaires and interviews. As a result analysis will be directed according to the categories of the participants; consultants, business owners and past and/or present employees in the firms that outsource and offshore IT. The basis of this analysis is to get as specific results for the knowledge claims that we are establishing as possible. That is, the risks alleged to be associated with IT business, should be substantiated by the information provided by the consultants in IT outsourcing and off shoring. This shall also apply to other categories of respondents as given in this study. The analyzed data from the sample shall be used to establish the assumed characteristic responses of the population.


Organizations have resorted to carrying out IT business outsourcing and off shoring by pursuing the advantages that comes with it. To the contrary, this process may not be entirely what it brings assessing it by its word value. This research shall therefore bridge the gap of the knowledge claim of the advantages or disadvantages of IT business outsourcing and off shoring. The design chosen will help interact with people with knowledge in this field thus providing required information that will be used to validate the findings. Since analysis shall purely be done using categories there will be little in the conclusions made pertaining to the population at large.

Reference list

Adeleye, B., Annansingh, F. & Nunes, M. (2004). Risk management practices in IS outsourcing: an investigation into commercial banks in Nigeria, International Journal of Information Management, 24, pp. 167-180.

American Psychological Association (2010). Publication manual of the American Psychological Association (6th Ed.). Washington, DC: Author.

Cuadros, A., Orts, V. & Alguacil, M. (2004), Openness and Growth: Re-Examining Foreign Direct Investment, Trade and Output Linkages in Latin America, the Journal of Development Studies, 40.

Garner, A. (2004). Off shoring in the service sector: Economic impact and policy issues, economic review. Federal Reserve Bank of Kansas City, Third Quarter, 89, pp.5-33.

Gibb, F. & Buchanan, S. (2006). A framework for business continuity management”, International Journal of Information Management, 26(2), pp. 128- 141.

Houser, R. (1998). Counseling and educational research: evaluation and application: London: SAGE Publications, Inc.

Jae-Nam, L. (2008). Exploring the vendor’s process model in information technology outsourcing. Communications of AIS, 2008(22), 569-589.

Lall, S. & Narula, R. (2004). Foreign direct investment and its role in economic development: Do we need a new agenda? The European Journal of Development Research, 16, 3, pp. 464-477.

Rubin, J.H, & Rubin, I. (2005). Qualitative interviewing: the art of hearing data. California: SAGE Publications, Inc.

Yeaple, E. (2006). Off shoring, foreign direct investment and the structure of US trade, Journal of the European Economic Association, 4(2-3), pp.602-611.