Globalization, Outsourcing & Insourcing: Impact of Technology on Careers
- 0:04 Globalization
- 1:28 Downsizing
- 2:08 Outsourcing
- 4:30 Insourcing
- 5:41 Lesson Summary
This lesson discusses the impact information technology has on careers. Globalization has been driven by advances in technology and has impacted job security and wages. We will specifically look at downsizing, insourcing and outsourcing.
Everyone, I have gathered you here today because I have an important announcement. As your CEO, I have to make tough decisions at times. These decisions are made in the best interest of the organization and consider the effects to all parties involved.
We live in an increasingly integrated society. One in which globalization continues to increase. Globalization is the increasing movement of goods, services and capital across national borders. Information technology has been a driving force of globalization. Advances in software, hardware, Internet and telecommunications have made it easier and faster for companies to communicate with employees, partners and suppliers from all over the globe in real time. Information technology facilitates greater efficiency and productivity and enables new innovations to spread quickly.
One of the costs of globalization is job security. Increasingly, jobs are moved across borders where there is cheaper labor, few environmental and labor laws and weak regulations regarding health and safety. Many jobs in the domestic economy are lost or wages are lowered to stay competitive with foreign rivals.
Unfortunately, we have been affected by globalization. Our company has to remain competitive, which requires some tough decisions and changes be made. We will experience downsizing in a number of departments. Downsizing means we have to reduce the number of employees that work for our organization. We will downsize our sales department, marketing department and finance department. We anticipate cutting 20 to 30 jobs over the next several months. This measure will help us cut costs by reducing redundancies, reorganizing jobs and streamlining our processes to be more efficient.
Additionally, our organization has decided to outsource its IT department in an effort to save money. What does this mean? Well, outsourcing is taking a workplace activity once performed inside the organization and moving it outside of the organization.
Deciding whether or not to outsource was a difficult strategic decision that the company had to make. There are various advantages and disadvantages of outsourcing. IT outsourcing can provide a number of benefits including cost savings, increased technical competence and a competitive advantage. Outsourcing IT can lessen the burden of routine tasks and allow the organization to focus on key IT activities. It can increase flexibility while reducing the costs associated with staying up-to-date on technological advancements. Service providers often encounter more problems and obstacles and will be able to better address issues given their wide array of knowledge and skills. We feel that outsourcing will reduce costs such as operating expenses, increase flexibility, improve management focus and quality of service and provide access to the latest technology.
A main risk of outsourcing is security of information. Information security centers around three parts: integrity, availability and confidentiality. Information should be accurate and safeguarded. Only authorized personnel should have access to the information when the situation warrants it, and only those authorized to access the information should be able to get to it. Once an organization outsources to a vendor, they have little control, if any, on how that vendor handles their information and keeps it secure.
Additional risks could center on quality and consistency. When the organization outsources the IT function, they will lose the level of control they have had with in-house IT. The organization must be sure to oversee outsourced functions and ensure they are getting the quality of service they are paying for. After weighing the pros and cons, we felt it was in our best interest to outsource the IT department.
We have decided to insource our accounting function including tax returns, financial statement preparations and bookkeeping. Insourcing is the opposite of outsourcing. Insourcing involves moving a business function in-house rather than having an external vendor complete the task.
Insourcing may involve bringing in specialists or consultants to provide expertise or training. Currently, our accounting function is outsourced to a local accounting firm. We have been unhappy with their service and responsiveness to our needs. Therefore, we have decided to maximize the potential of our current employees and hire additional talent to bring our accounting function in-house. We anticipate the need to hire ten new employees over the next several months as we make the transition from an outsourced to an insourced accounting function.
We hope that by insourcing the accounting function, we will reduce cost over the long-term, improve consistency and accuracy, secure our financial information and, ultimately, contribute to improving the overall competitiveness of the organization.
Remaining competitive in an increasingly integrated global economy requires us to be flexible and adapt to changing circumstances. Sometimes, we may need to make tough choices. As you learned today, we will be downsizing, outsourcing and insourcing as a way to increase productivity and profits and decrease costs and overhead.
Globalization, or the increasing movement of goods, services and capital across national borders, has been driven by advances in information technology. It has changed the competitive environment and the way in which we must compete. Unfortunately, that requires downsizing, or reducing the number of employees that work for our organization. Additionally, we will outsource, or take our IT function that we currently perform inside the organization and move it outside the organization through a vendor. On a positive note, we are insourcing, or moving our accounting function in-house rather than having an external vendor complete the task.
I know this is a lot to take in and may have come as a big surprise. We will continue to communicate the latest developments to you. Please feel free to contact your managers with any questions or concerns you may have.
Chapters in Business 104: Information Systems and Computer Applications
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