Critically discuss the reasons why organisations outsource IT Essay

Critically discuss the reasons why organisations outsource IT - Essay Example This is followed by a critical analysis of the main issues that organizations need to address when managing relationships with their IT outsourcing partners. Organizations base their IT outsourcing decisions on a number of factors; however, the most common reason for outsourcing IT functions to a professional IT vendor is that it enables organizations to focus on their core area of expertise. Heikkila and Cordon (2002) have identified this and other reasons behind organizations’ decision to outsource IT. For instance, outsourcing the IT function frees up the limited capital of small and medium-sized organizations to invest in core competence areas. Firms that do not have skilled IT professionals can benefit from the expertise offered by outsourcing service providers. Despite rigorous analysis of all these factors and effective decision making by the organization, the outcome of the outsourcing arrangement depends largely on how the decision is implemented. Therefore, it is important that the implications of each step in the implementation process are identified and contingencies are provided for in advance to realize the intended benefits of IT outsourcing. Organizations may also be motivated to outsource their IT function because of the value it may add to the performance of some of their core functions. Such organizations may have a critical value for IT but may not possess the skills and resources to extract that kind of value from their IT assets. Davis and Golicic (2010) explain how information systems play a crucial role in the supply chain relationship of some organizations. By making information about market needs and stock levels to partners throughout the supply chain, information systems enable organizations to manage their distribution and transport systems more efficiently. Demand levels can be met more accurately and develop a market orientation. Sundaram, Schwarz and Jones (2007) discuss the motivation underlying organizations’ decision to