Mitigating the IT Risks Involved in IT Outsourcing

Abstract

Outsourcing is an arrangement whereby the delivery of one or more internal processes or services of the company is performed by third-party companies, commonly referred to as a vendor. IT outsourcing, in particular, has been a growing approach widely accepted as a strategic move so that businesses could have more focus on their core competency. The purposes of this study were to take a deep dive into the reasons that drove companies to take the path of outsourcing, more specifically on the IT side of outsourcing, to identify the IT risks involved, and to identify the ways in which these can be mitigated. The sought objectives of the study were attained by reviewing the existing literature and with references to other researches. The researcher referred to secondary data and existing literature, which were then be analysed and synthesized. The findings from these resources gave an understanding of the forces and benefits that drive businesses to outsource their business process: improved focus on core business activities, increased efficiency, controlled cost, increased reach, and greater competitive advantage. These benefits are associated with risks which include risk on selecting the right vendor, loss of control and know-how, confidential risk, hidden costs, and exit barrier, which could be mitigated through careful planning, adequate control and observance of risk management processes. To sum it up, the paper presented the details essential in understanding the nature of IT outsourcing that can provide information that could help businesses to position themselves strategically.