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In the style of Amberg and Wiener (2004b),
the benefits of IT outsourcing can
be classified into the following three categories:
·
Financial benefits: Reduction of IT
costs, improvement of cost transparency, conversion of fixed costs, reduction
of capital lockup, etc.
·
Qualitative benefits: Improvement in
service quality, improvement of business processes, guarantee of service
levels, access to technical know-how, etc.
·
Strategic benefits: Improvement in
flexibility, focus on core competences, restructuring of the corporate
organization, insight on innovative technologies, transfer of risks, reduction
of the time-to-market, etc.
Figure: Labor costs in different
countries
With regard to IT offshoring, the reduction of IT costs is probably the most
attractive benefit. Consequently, the reasons why companies relocate their
internal IT services to low wage countries are often cost driven (Böhm, 2003a).
The cost advantage of foreign service providers
primarily results from the lower labor costs in their countries (compare figure above).
Although, the access to specialized
knowledge and IT know-how also plays an important role when deciding on a
particular offshoring arrangement, the cutting of operational costs is still
the most emphasized benefit within companies engaging in offshore activities.
In consequence, a clear business trend towards relocating labor-intensive
services to low wage countries can be observed (Mayer and Söbbing, 2004). Here,
despite additional costs for provider selection, contract management, and
project planning, costs can be cut by around 30 percent in the long run (TransCrit, 2004).
Aside from cost reduction, by implementing
an OSD project, many companies aim
at reducing the time-to-market of a software product (Fischer and Schumacher,
2004). Depending on the location of the selected project partners, the
different time zones can enable both domestic and foreign programmers to work
on the development project for up to 18 hours daily. Albert and Thondavadi
(2004) refer to this particular approach as a so called “follow the sun”
development. Especially, when developing software for products with short
product lifecycles (e. g.,
mobile phones), this can help in gaining a significant competitive edge over
rival companies (Rack, 2001).
 References
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