Pros and cons of outsourcing Essay Example | Topics and Well Written Essays - 2500 words

Pros and cons of outsourcing - Essay Example Total outsourcing means the decision to transfer IS assets, leases, staff, and management responsibility far delivery of IS services from an internal IS function to a single third party vendor which represents more than 80 per cent of the IS budget. Millar (1994 cited Greaver 1999) defines four basic types of outsourcing arrangements: General outsourcing encompasses three alternatives: (1) selective outsourcing where one particular area of IS activity is chosen to be turned over to a third party, such as data centre operations; (2) value-added outsourcing where an area of IS activity is turned over to a third party who is thought to be able to provide a level of support or service which adds value to the activity that could not be cost-effectively provided by the internal IS group; (3) co-operative outsourcing where some targeted IS activities are jointly performed by a third party provider and the internal IS department. Researchers discovered that many companies investigated outsou rcing as a consequence of IS managers' failure to demonstrate the value of IS to various stakeholders within the organization. Many different stakeholders (senior managers, business unit managers, IS managers, IS staff, and end users) possessed different preferences, expectations, perceptions, and agendas for IS. Form post-modernization point of view, the enthusiasm for IS outsourcing in the trade press is not unique-any new management trend promises to be the panacea to organizational problems. Through radical change, be it business process re-engineering, total quality management, virtual corporations, etc, practitioners are offered yet another utopia. Such positive press tempts many senior executives to jump on the latest bandwagon, and subsequent research shows that many organizations improve radically (Burnett, 1998). Financial Benefits of Outsourcing Many senior managers cite financial reasons for outsourcing. In particular, senior managers view outsourcing as a way to cut costs, improve cost control, and restructure the IS budget. Many companies expect that outsourcing would save them money. They perceive that vendors enjoy economies of scale that enable then to provide IS services at a lower cost than internal IS departments. In particular, senior managers believe that a vendor's unit costs are less expensive due to mass production efficiencies and labor specialization (Greaver 1999). Another financial rationale for outsourcing is gaining control over IS costs. As any IS manager will attest, IS costs are directly related to IS user demands. In most organizations, however, IS costs are controlled through general allocation systems which motivate users to demand and consume resources excessively. General allocation systems are analogous to splitting a restaurant tab--each dinner companion is motivated to order an expensive dinner because the cost will be shared by the other parties. Participants saw outsourcing as a way to control costs because vendors implement cost controls that more directly tie usage to costs. In addition, users no longer call their favorite analysts to request frivolous changes, but instead must submit requests through a formal cost control process. This results in the curtailing of excessive user demands and thus reduces overall IS costs.

Auditing Theory And Practice Essay Example | Topics and Well Written Essays - 2500 words

Auditing Theory And Practice - Essay Example Maybe owing to your big size, the previous audit company needed additional resources in terms of man and woman power and facilities to meet your needs. When the previous audit company held a meeting with the directors in which their responsibilities and the responsibilities of Krypton were discussed in details. The Audit Company and krypton agreed to the terms of the audit engagement. The terms of engagement which they agreed upon were documented in a form of a letter of engagement. They then discussed and agreed on the basis on which the audit fee was to be computed and any billing arrangements. We then do not understand why this is still a problem yet to be solved The last audited accounts were those for the period ended 31st December 2003. As we conduct this audit, making comparatives to the year 2004, it will make good sense if we first conduct an audit for the year 2004. To determine the implications of the figures, analytical procedures are usually performed on the financial in formation. Analytical procedures consist of mainly trend and ratio analysis with information being inferred from the resulting figures. From the financial statements of the company, the following was established. Ordinarily, a 10.16% increase in the cost of sales should lead to a corresponding decrease in stocks. Yet in this case, stocks have increased by 58.20%. The stock turnover ratio has also declined from 15.60 in 2004 to 10.86 in 2005. The stocks were expected to decrease and their increase might imply that employees could be selling their own goods brought from outside. The audit shall then focus on the existence of the stocks and their condition. In order to ascertain the genuineness of the stock figure, a revaluation test of the stocks will have to be performed to see whether their increase was as a result of a revaluation.