Outsourcing Risks
Introduction
As on one hand outsourcing information technology has become a trend beginning from the 1990s, this is not a phenomenon that is new. For instance, there has been outsourcing of development of systems from outside via software houses and application packages for several years. In the 1980s, the large facilities “management contracts” gave a signal of an opportune convergence of demand and supply factors. On one hand, the major vendors provided facilities management as well as other outsourcing services and on the other hand, the business managers that were “tired of IS budget growth year after year and sometimes elusive business benefits saw an opportunity to cut IT costs, downsize the IS function, and do to IT what they were doing in other parts of the business – subcontract” (Earl, 2006, p. 1). But it should also be pointed out that outsourcing comes with some risks and challenges. The aim of this paper is to identify the potential risks to a company in various outsourcing situations.
Possible Risks of Outsourcing
Consequences of having information accessed with no authorization can be quite destructive, especially if this information is personal or sensitive. This may happen in a situation where the external storage provider deliberately or accidentally engages in disclosing of information to the outside parties that are not specified within the contract. Moreover, there is creation of new information when stored information is updated or accessed, or when there is making of changes to the equipment within the storage facility. Such relationship and transactional information may encompass the details of an individual or individuals who have had access to the information and this includes; name, location and activities undertaken. Such information requires to be protected from any inappropriate access as well (“Outsourcing digital data storage”, 2014).
In order to avoid or minimize unauthorized use of, or access to, information; it should be ensured that the contract entered into clearly outlines the conditions for the use of and access to information, stressing that; information can’t be utilized for any other purpose other than the purpose that is outlined within the contract, relationship and transactional information that is created via the utilization of information remain to be the agency’s property and may only be used or accessed by individuals whose nomination is carried out by the agency. Moreover, it should be ensured that the storage provider engages in maintaining system audits and logs, and it should also be ensured that the provider is in a position of detecting unauthorized access. Finally, it should also be ensured that the storage provider is able to understand the requirements for authorization and authentication (“Outsourcing digital data storage”, 2014).
While enterprises look for ways to maximize efficiency, one of the most popular strategies has come up – outsourcing part of the business operations to the application service providers. By engaging an application service provider, an organization can be able to receive expert assistance in a certain area while bringing down the level of costs associated with internal specialization. In regard to the potential risks associated with using an enterprise service provider in the processing of the information systems such as human resources, sales order taking or payroll, the main concern here is possibly, privacy.
If another organization is running the hardware which supports your payroll and human resources, technically, they have the capability of stealing that particular information or selling the information other organizations. This is also applicable to sales order. If the outsourced company took your client’s files and whatever they are buying, such information could be sold to the competitors. However, this does not imply that any legitimate provider would engage in doing this. However, it is usually the main concern and why a large number of big organizations carry out this on their own equipment. Contracts are there to offer protection to interests, but difficult to give a guarantee that there was no data that was browsed. Precisely, the potential risks include; loss of control of the corporate image and data, inadequate application service provider security to deal with perceived risks, tampering or compromising with the corporate data, and having exposure of the corporate data to the application system provider’s other clients. To mitigate these potential risks, there is need to ask the application system provider to show adequate maturity to alleviate the “risks of engagement” (Schoenfield, 2013).
There are also some potential risks associated with using a vendor to support a company’s desktop computers. For instance, sometimes, contractors become frustrated when they find out that their project has not been extended and this may cause them to do something with the company’s critical applications or file. In addition, the sales teams of vendors are made up of aggressive and highly efficient negotiators. The company should be very careful in order to avoid getting lured into something that it does not need. When outsourcing these vendors, the company should consider the vendors’ reputation following their working with other companies. There should be clear guidelines to ensure that the vendors do not go beyond particular limits in their operations.
In regard to the potential risk of using a vendor in providing network support, this is dependent on the kind support that is offered. If the vendor will be engaging in managing the company’s firewalls, patches, switches, routers, logging systems and IDS/IPS, then the risk involved here is having the company or a person with the admin login access to the network, who isn’t company’s direct employee. Moreover, in some cases, the company will not be in a position of directly questioning the vendor’s policies or processes for risk management. In case the company needs to carry out the vendor’s practices, it will have to take appropriate measures in order to be able to be guided in reconciling the vendor’s processes or policies with their own.
Conclusion
There are several benefits that are associated with outsourcing by a particular organization. For instance, an organization can be able to reduce costs and increase its profit margins. However, outsourcing also comes with some potential risks such as loss of privacy and exposure of the company’s privacy and sensitive information to the competitors and such information can be used to destroy the company in one way or another. Therefore, it is imperative that any organization identifies the possible risks that come in with outsourcing in order for it to avoid them. An organization should look for the proper ways to mitigate the risks to ensure that its operations are not interfered with and also to be able to enjoy all the benefits that come with outsourcing of some of the company’s operations.
References
Earl, M. J. (2006). The risks of outsourcing IT. Retrieved from, http://sloanreview.mit.edu/article/the-risks-of-outsourcing-it/
Outsourcing digital data storage, (2014). Retrieved from, http://www.naa.gov.au/records-management/agency/secure-and-store/outsourcing-digital-data/index.aspx
Schoenfield, B. (2013). Evaluating application service provider security for enterprises. Retrieved from, http://www.cisco.com/web/about/security/intelligence/asp-eval.html
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