Business Analysis: Back Sourcing

The term “Back-Sourcing” is defined as the process of bringing IT operations and services back in-house after they have been outsourced once the outsourcing contract expires or terminated for any specific reason. Of course, this may have a positive or negative influence on how such a strategic movement change will affect the innovation and the future of the organization.

There is also an evidence to mention, that the organization whom implementing such a change in strategy are doing it due to low expectations of the level of innovation delivered through the existing bid with the IT services vendors. Such a dissatisfaction in this engagement is due to many reasons such as poor structure contract, negative and disagreement relationship
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- Economies of scale: the economies of scale that outsourcers could get in buying new technology or software licenses are not necessarily better than those gained by the negotiation power of large non-IT firms.
- Changes in the strategic direction of the firm (business strategy): “the change in business strategy will have impact on IT sourcing strategy “(Hirschheim & Sabherwal, 2001). For example, downsizing might lead the client organization to the decision of backsource It functions back again in-house.
- Changes in IT role: one of the motivations that may drive the organization to a backsourcing decision is the change of the positioning and importance of IT in the organization from a “commodity” to a “strategic tool”. This may motivate the client organizations to bring IT functions in-house. (Dibbern, 2004) describe this factor as “Such a transaction brings about a shift in perception on the part of management of “outsource commodities and insource strategic component
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Despite all of their potential benefits, IT outsourcing entails risks that could lead to undesirable results opposite of the expected advantages (Bouchaib Bahli, Suzanne Rivard). capabilities in the long run since there is too much dependency on external sourcing. The major risks related to IT outsourcing are described below:
1. Security and Confidentiality risks:
The vendor can access all the confidential information and any other privacy resources that the organization usually regards as classified and personnel. This is a huge risk issue since it touches the security and the staff rights of the company. To reduce this risk issue, Elizabeth Sparrow (2003) stated that“ Increase difficulties in defending other people’s confidentiality: for example, access to personnel files and customer data.”
2. Loss of Control:
The company that chooses IT outsourcing from an external vendor might lose control on the strategic issues since the vendor is always present and controlling each and everything related to their activity. This will negatively affect the mechanism of advancing through a specific direction in certain cases. “This movement may result from perceptions about the different goals and attitudes of internal and external staff towards service, profits, and survival “(Annette

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