Outsourcing Data Storage example essay topic

Outsourcing is defined as "the process of purchasing goods and services from outside vendors rather than producing the same goods or providing the same services within the organization". Outsourcing does not come without risks, but it also has its benefits as well. Gaining services or products from outside sources can be very beneficial, considering the alternative that the firm will have to produce them themselves. However, on main risk that is incurred when outsourcing is that when a firm does outsource, they leave the supply of that product or service in the hands of someone of whom they cannot control, contrary to controlling their own supply. Ethical issues are at hand here, as well as trust issues. As you will see in this paper, many different opinions about outsourcing are present among different financial investors and financial officers.

Management teams and management leaders are the head personnel that weigh the pro's and con's of outsourcing, and this paper will briefly summarize the various opinions, pro's, con's, large benefits, and ethical issues dealing with outsourcing. Popularity among small businesses has grown in the past years, according to the Journal of Accountancy. "Outsourcing is becoming popular even in small and midsize companies. Nowadays, a small business may not have staff members such as a Human Resources recruiter or a 401 (k) specialist in house.

As the Internet transforms the way businesses communicate with their clients, vendors, and employees, many of these functions are being handled by outsourcers". They provide many solutions and guidelines in which to follow. Here is a small sample of them: Decide what's important. If a function is not strategic to your business -- for instance, payroll services or health insurance needs in a recruiting agency with only ten employees -- consider outsourcing it to an expert provider. Don't go halfway. Don't settle for half-hearted measures or intermediaries who manage only some aspects of your business when the more efficient solution is to outsource the entire process.

For example, if the telemarketing employees of a credit collection company only make calls on your behalf but do not follow up with any necessary customer visits, the collection function may be incomplete. Beware of regulations. Make sure your outsourcing partner understands and complies with all the rules and regulations governing your industry and the workplace. This popularity is not just among small or medium sized businesses. Large corporations are using outsourcing in many different areas of their business.

IBM and Compaq computers are using outsourcing to solve their storage problems. Models of this outsourcing vary, and even with these two computer giants, the same is true. "IBM and Compaq are offering distinctly different models, however. Compaq rents storage hardware and software that are kept on the customers' premises. The service is tailored to IT managers wary about giving up control of their storage", (Lelii). Our textbook gives a somewhat detailed look at outsourcing.

One example that is given is with the Volkswagen Company. "VW has completely outsourced manufacturing to a team of carefully selected supplier-partner in a radical experiment in production operations", (Horngren, Foster, Datar; 386). It goes on to describe the format in which they outsource their manufacturing section of the plant. They are outsourced by seven different companies, that interestingly enough, work together as a "tightly integrated team", (Horngren, Foster, Datar; 386). There is promise to this new idea, in the opinion of the authors, but this new technique is still in its startup mode. The future of outsourcing is not necessarily in the products, but rather in the services of firms.

Looking towards the technology side of industry, IT (Information Technology) is the most talked about service to be outsourced. "Now that departments throughout companies are initiating E-business projects, IT outsourcing isn't always orchestrated by traditional IT managers. Others, such as departmental VPs, are hiring outside contractors as a way to bypass internal bureaucracy and get E-business initiatives finished fast. "VPs can outsource almost everything today", says M. Victor Janulaitis, president of consulting firm Janulaitis Associates Inc. in Santa Monica, Calif. ", (Swanson).

Swanson goes on to talk about a disadvantage of outsourcing too many things when she says, "The problem with non-IT managers handling this kind of outsourcing is that these executives may get into the habit of looking outside the company before considering what projects are best-suited for management and execution by internal technology resources", (Swanson). Realizing the possibilities of how outsourcing can become profitable can also lead to the downfall of your firm. If one doesn't look at his / her own firm for the services it provides, it can lead to a complete abandonment of good services. This caution that is referred to by Swanson is affirmed by Tony Scouller. "Outsourcing should be approached with caution.

If you find that something can be done a great deal cheaper outside, ask why. Consider your methods anew. The law insists on redundancy payments for the people doing the job. If a fraction of that cost were invested in new methods, costs might fall out of the business", (Scouller). Regardless of these warnings, businesses almost have to outsource in order to turn a profit.

Most believe, and rightly so, that to make every piece of their product is not just impossible, but unfathomable. Imagine the cellular phone. Nokia Inc. would have to manufacture their own plastic, circuit boards, chips, fluorescent lighting, speakers, and microphones. They would then have to build the manufacturing plant to assemble them, then finally do what they do best, which is advertising by the way, and get their product out on the market. This is ludicrous and most businesses that need outsourcing know this. As I have mentioned, IT outsourcing has been the newest "fad".

Not only is it just new, but it is becoming more and more valuable. "A number of factors have contributed to the solid growth in IT outsourcing in recent years: year 2000 preparations, E-business opportunities via the Internet, the IT worker shortage, and the rapid pace of technology change. In a recent InformationWeek Research survey of 228 IT professionals, 42% report that their companies have become more reliant on outside IT services during the past year. Thirty-three percent report no change, 18% are less reliant, and 7% say they don't outsource", (Ruber, 2).

Looking at this statistic makes me want to become an IT specialist. Look at the demand!! Not only is there a shortage in workers, but the firms who do outsource IT say that it is something that they like. 42% have become more reliant on outsourcing IT specialist. With this problem of a shortage in workers, companies like Schwab & Co. have attacked the problem head on and have helped lead the field in combating the problem of outsourcing and worker deficiency.

"With an IT workforce of 4,000 and a history of deploying cutting-edge technologies, Schwab has spent years developing an internal training program called Schwab University. Employees can choose which courses they want to take, and the company encourages them to learn new skills so they have mobility across areas of technology. Classroom education includes industry-standard certification courses, supplemented by vendor training in emerging technologies that Schwab is evaluating for future adoption", (Ruber, 5). Moving from one end of the spectrum to another, outsourcing data storage gives us a whole new look on outsourcing. "As the need for storing and backing up data grows, so does the industry. There are many reason to use a data storage provider including saving money as usually a company is only charged for the storage used.

The information can be stored publicly or at a company's site", (Georgia, 1). Instead of keeping all the firms data stored on corporate-owned computer hardware, companies like Storage Networks come in and offer front line storage to subscribers and full technological support. "You don't need to be a technology company like cMe Run to benefit from a storage service provider. As companies grow increasingly dependent on digital information, their data capacity needs are poised to explode. Larger companies have seen their storage needs double every year, according to the Enterprise Storage Group. And the cost of managing each megabyte is $3 to $35 annually.

That means a business with 100 employees and 500 MB of unique data per employee may be spending $150,000 or more per year. By turning to a storage service instead, businesses can slash that cost to 4 to 8 cents per megabyte". (Georgia, 2). Large savings are in store for many companies who choose to invest in outsourcing their data, services, or products. It's obvious why storage and backup outsourcing is gaining momentum.

You pay only for the data storage you use per month. You " ll choose between two basic types of storage service provider: public and private utilities. In a public setup the hardware containing your files might exist at the provider's site, in an Internet collocation center (often used for Web hosting), or at an ISP. In a private setup the hardware and software reside at your business. According to InformationWeek, "Outsourcers can be a viable alternative for companies that want to roll out new initiatives quickly and effectively. Such partnerships make IT initiatives possible without having to hire more talent or invest heavily in revamping or building infrastructure.

The existence of service-level agreements can make even the possibility of failure easier to bear. Yet despite such opportunities, some companies still resist entrusting elements of their IT operations to outsiders". Data outsourcing is not always the best choice, however. Sharing valuable data with a company is risky in itself. "But, Radica ti said, outsourcing directory services doesn't necessarily mean turning over your most sensitive information.

Companies interested in outsourcing directory services, she said, can begin by being selective about what they want to store in an off-site directory. IT managers might want to consider outsourcing information like simple corporate yellow pages and company policies, rather than Social Security numbers and supplier data, she said. Then, as organizations gain confidence with the security of the hosted directory, they can begin to outsource more of their directory services, she said", (Chen, 2). Because of the inherent risks in outsourcing and the rule of thumb, "high risk, high return", outsourcing has its warnings and its obvious monetary benefits. As we have seen and reported, IT outsourcing seems to be at the top of the market. The demand is high and the supply is low, which tell IT specialists where to go.

The outsourcing model has been in the transition and reforming stage the past few years and is now becoming a highly technological asset. Experts in outsource management are the personnel that are being called on to direct the flow of money to maximize productivity and profit share. Not only do outsourcers thrive on well-managed businesses, we have also shown that small to medium-sized businesses are catching on that outside help in production and / or service can be profitable. "As U.S. owners of wireless data devices start forming a critical mass, businesses are beginning to offer their customers basic services tailored for wireless access. While a number of these customer-oriented applications have appeared in recent months, most businesses offering them are hedging their bets by limiting the number of devices supported or the types of services offered. A wireless customer may be able to check a stock quote, but not make a trade; check a bank-account balance, but only if the bank branch offers the feature; or see flight information, but not change a flight", (Turek, 2).

This is just one example of the cutting-edge wireless companies that are using outsourcing in a major way to maximize profits. Companies such as Verizon, IBM, and Microsoft Corp. have used outsourcing in a big way to finance many different projects and bring them to the point in which they are today.

Bibliography

Author Unknown. "Resistance to Outsourcing Continues". InformationWeek, Oct 23, 2000 p 230.
Chen, Anne. "Outsource directories? H". eWeek, Oct 30, 2000 p 62.
Georgia, Bonny L. "Safe Keeping: Outsourcing your data storage is affordable, secure, and hassle free. And it keeps pace with your growing business". Ziff Davis Smart Business for the New Economy, Nov 1, 2000 p 194.
Lelii, Sonia R. "IBM Global Services to outsource storage". eWeek, Oct 2, 2000 p 16.
Outsourcing: make it work for your company. Journal of Accountancy, Oct 2000 vs.
190 i 4 p 20. Ruber, Peter. "Keep The Knowledge You " re Paying For -- COMPANIES THAT USE OUTSOURCERS MUST BE SURE KNOWLEDGE IS BEING TRANSFERRED TO STAFFERS". InformationWeek, Oct 30, 2000 p 176.
Scouller, Tony. "Handle with care - outsourcing can do damage to your brand". Marketing, Oct 19, 2000 p 30.
Swanson, Sandra. "IT Managers Face Challenge From Outsourcing". InformationWeek, Oct 16, 2000 p 52.
Turek, Norbert. "Companies Turn To Outsourcing For Wireless Services". InformationWeek, Oct 30, 2000 p 164.