Outsourcing IT Servises

Another form of outsourcing is based on salary cost arbitrage that takes place between national economies when a company will seek to contract with another business abroad where the labor costs are cheaper, so that cost savings will be gained in the overall organization. Some companies may establish overseas branches of their company and hire employees directly in the foreign market, but this is technically different than outsourcing on a business-to-business basis. In this context, most companies perform a cost analysis on the savings that can be gained through outsourcing by comparing local salaries and the internal requirements for managing the services with the quoted rate of the outsourcing company for the same work. The labor arbitrage through outsourcing may also include tax savings, a reduced requirement of benefit payments, or lower insurance costs for the company. Thus, in software development and hardware maintenance, the quality of the outsourcing services provided by foreign or offshore companies who provide the same service as local companies is critical and determinant as to whether outsourcing actually makes sense for a business. If the company cannot receive a quality of service from the outsourcing company that they can receive from local employees, it will generally not make sense for the company to pursue an outsourcing business model because the overall operations will suffer if there is a weak link in the organization. However, if the IT services such as medical software programming, computerized physician order entry (CPOE), and hardware maintenance can all be acquired from outsourcing companies in the U.S. or abroad at the same quality or higher and simultaneously a lower cost, then it does make sense to pursue outsourcing as a business model. Because some outsourcing companies are specializing in hiring highly skilled and trained staff for the employment positions, it is also possible to outsource abroad with the same level of quality or higher than local staff, and to save significant operating costs in doing so. Outsourcing can potentially save billions of dollars in costs from within the U.S. healthcare system, but if quality is compromised in pursuit of greater profits or budgetary savings, the people who are being served by the business will not be satisfied or happy. (Rand, 2005) b) What component of IT services in your current organization makes the most sense to target as an early candidate for outsourcing? Why? Our organization is currently focusing on going live with a 50 person, outsourced Computerized Physician Order Entry (CPOE) program that is expected to save considerable costs for the hospital annually while still providing the same quality of service expected by doctors and patients alike. CPOE is ideal for outsourcing as it involves the digitalization of medical records that are linked to a master database of records in the IT department. The core skill required by the outsourcing team is the ability to quickly and accurately transcribe hand-written doctor notes and prescriptions, to archive these documents with the appropriate patient records, and also to forward the transcriptions to other offices within the medical network. In this manner, the skills

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