ABSTRACT

Mr John Wong

Chief Systems Manager

Information Technology Services Department

The Government of the Hong Kong Special Administrative Region

The Impacts of Outsourcing to Organization

Information technologies (IT) is a friend and a foe in the business competition battlefield. If we utilise the power of IT well, it help us meet targets and deliver desirable results. Otherwise, our compeititors will use it against us. Going through the process automation era and the distributed processing and personalised usages days, we have come to the intelligent network computing age today. Internet lifestyle, electronic commerce and intelligent systems are the "must" in the future. Well, can we cope with the IT workload?

IT is employed to develop differentiation and gain competitive advantage. Unfortunately, the demand of IT staff, expertise and management skills far exceed the supply of them. The objective to excel is adversely affected by the inability to fully embrace the technology and build strategic applications fast enough to respond to the market condition. To overcome this dilemma, outsourcing to external service providers (ESP) is a viable and practical solution.

Outsourcing has become a regular board room agenda nowadays. It is already practised by many organisations but whether or not successfully depends on various factors. There are critical management issues to be addressed. There are different ways of outsourcing IT work. Outsourcing if not properly done will be our obstacle or failure factor in the next millenium.

For successful outsourcing, it is necessary to plan with clear objectives, realistic expected results, a practical and fair contract, and flexible and collaborative partnering. What are the implications to people in the board room? Is outsourcing a technical, financial, business transformation or other kind of concern, and what difference does it make to the organisation?

As a business strategy, the existing resources and expertise can be redeployed through outsourcing from non-core activities to focus on the core business or new opportunity areas. The contractor's IT manpower and competence becomes our extended capability while bringing in synergy and other benefits. We can proact and respond more quickly and the virtual size of our business easily grows manifolds. What is the associated risk if not? Will there be staff problems?

Outsourcing calls for a modified human resources management structure. Specialised skills and practices are shared with the the ESP to meet business requirements, which may come from anywhere in the world and work round the clock. The overheads of HR Management can be reduced. How do we ensure that the ESPs do possess exactly the kind of capacity, expertise, culture and motivation which match our business if they are just the service contractors?

Outsourcing is not always successful. Disputes, dissatisfaction, premature termination, loss of control, etc. are only the extreme situations which people have made known. Cultural differences and staff conflicts will jeopardise the collaboration and business relations. Failure can be very costly or risk our whole business. Will we be too dependent on the ESPs? How do we plan for the contingency? Will our business be endangered by staff unrest or their abnormal mobility long before the ESPs can take over? How can we align?

It is important that the outsourcing services industry is able to provide the required services and expertise as an on-going and dependable alternative. Monopolies or financially unstable suppliers can do much harm. When a business organisation outsources some of its processes, the knowledge and direct business control of these processes will be gradually passed (or lost) to the ESP. There is little chance of regaining control and competitive edge once the business market is lost. How do we grow together with the ESP market?

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