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IT Outsourcing and Unseen Risks of the ProcessThe buzz is that it is a win-win situation for both, the clients and the vendors but for that IT Outsourcing and unseen risks of the process must be taken under care very well. Big companies place the burden of maintaining, managing, servicing and upgrading Information Technology operations onto a third party, which in turn helps them in making nice profits through economies of scale. But the recent disaster at WorldCom for Offshore Outsourcing has brought to light questionable accounting exercise at its Information Technology service provider, EDS, and casts uncertainty on the financial planning that have made such overseas agreements viable. The fact is most such overseas business deals demand high upfront costs for many services like latest equipments, network connectivity and manpower, the preliminary years of an appointment can mean huge losses for the IT service providers. To reduce this problem in Offshore Outsourcing, EDS chose, in the case of its almost $6.5 billion and 11-year contract with a private company, to employ percentage-of-completion accounting system. That let EDS rise rapidly by booking some revenue before it was even billed for the transactions. It also helps it in spreading over many years some of the expenses to set up the IT infrastructure and overall facilities. Offshore Outsourcing Company But the recent accounting disgraces bring into question if this method of IT Outsourcing is a perfect way to examine a company's financial performance or some improvements are required? Besides making it complicated to figure out if a particular contract or deal would fetch profit to the company, it places a huge amount of threat at the door of the Offshore Outsourcing Company. And still the question would remain same that can you depend on your overseas service provider? Another question that arises is how longer it can last? EDS examination pulled out of the bidding on an IT Outsourcing deal for a private company worth almost $1 billion per year, quoting too much challenges in taking over a majority of the clients products service providers back-office operations.
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Article Tags: It Outsourcing, Software Outsourcing India, Offshore Software Outsourcing Article Source: http://www.articlesbase.com/management-articles/it-outsourcing-and-unseen-risks-of-the-process-19217.html About the Author:
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